I got to hear Ross Greenwood on his Money News program on radio on Tuesday night. He was talking about consumer confidence and discussing this against the latest retail sales data.
It appears consumers are confident but not spending. Greenwood’s discussion was most interesting – and encouraging to retailers to look for answers.
It seems that every newsagent I talk with has the same answer when I ask them how business is. Flat is the common response. While a little digging uncovers some of the green shoots I talked about in the January – March newsagency sales benchmark study I blogged about, it is the overall feeling of flat trading which is concerning most.
We know from countless business gurus that sales are flat, the best response is to promote the business. This is what we are doing. We are actively promoting our newsagencies outside their four walls through professional flyers, posters around shopping centres and connecting with community groups.
In store, we are working harder than ever to make the offer look appealing, fresh and enjoyable. We are also brining in new lines to drive sales efficiency.
While we would be doing most of these things regardless of the current economic climate, we are doing them with greater commitment.
The areas of our newsagencies which are responding best to the external marketing and internal changes are: Ink, gifts, books, lotteries and magazines. Yes, magazines. The first couple of months this year were rough but since then we’re travelling well. I think this is because we are obsessive about the category.
It is easy to let the flat retail situation sap your motivation and lure you into a lazy funk about the business. We are having more fun chasing change and finding opportunities which work.
How can you say that retail if flat when uncle Kevin is saying that the economy is booming after the GEC? He and the reserve bank state that they needed to keep jamming us with rate rises in order to keep the country under control because we are making soo much money.
Just Kidding
like a lot of retailers we are going through hell at the moment just to keep things ticking over. It’s good to see that even the big end of town is hurting with the admin of Clive Peters ( this is after they and the other large chains made all the extra money out of the double round of stimulus handouts that seemed to miss smaller retailers).
Maybe we should bail out these big retailers like we did the banks and the motor industry after all small business are doing great under Rudd.
We have looked at our fin yr to date and if we stayed to our core lines (mags, papers, lotto, cigs)we would be down in trade about 30-35% as it is we are only down 5% as we have introduced a great deal of new lines that when things improve should see us ahead of the game. We keep pumping the core lines but we are also actively pursuing new revenue. We are seeing a lot more browsers, as people read mags and paper headlines instead of buying.
Small business does not always have the easy option of walking away when things are tuff like the big boys seem to do because a lot of us have our life saving and homes tied to our businesses, maybe someone in Govt should understand this before we offer $$$ to the big end of town.
Well put Luke. A financial commentator said yesterday that interest rates must keep rising because of the booming commodity prices. I fail to see why small business must be further gouged by the banks because coal mining companies are making billions exporting to China. I must be missing something.
“It’s the economy stupid” Quote from Bill Clinton.
Yeah it doesn’t make sense that small business is punished when it is by far the biggest employer in Australia. It would seem that until they (the Govt) actually see the damage that they are doing (such as employment falling) they will continue believing their own B.S.
I wouldn’t get too carried away with bagging the big end of town and that they are favoured. They recieved no more stimulus than we did. As for the mining companys the super tax will have more effect on retailers once imposed than any other group. Look at it that the Govt is anti business even if it is not intended the result is they are anti it because they just don’t understand productivity equations.
everyone in retail or wholesale business are saying bad , but property price keep rising like there is no tomorrow. for example semi in my ‘ average working class’ suburb for 270 sqm worth $1.2 million. wow i can buy alot more in USA
It seems that small business is quick to forget basic economic concepts. The RBA (who’s decision to raise interest rates is independant from the government) doesn’t raise interest rates with the intention of hurting small business. They do it to ensure economic stability.
Unemployment is a lagging economic factor. Its hard to use it as a guide to measure the immediate state of the economy. However unemployment is actually trending downwards – http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0
I agree with Graeme re big business not receiving any more stimulus than we did. But we live in an area where the economy is completely dependant on mining and I don’t see that the resources tax will have a massive effect. Mining companies still need employees to operate. We’re still going to be the “go-to” country for natural resources (our abundance of these and our proximity to the asia-pacific region guarantee it). The new tax will force mining companies to become more efficient and productive (something they are currenty not that good at) and that may or may not translate into a small number of job cuts.
We are living in a two tail economy, yet the RBA is still living in the past and relying on increasing rates in stopping spending which in turn effects retail spending. Yet it has done nothing to dampen the mining boom or commodity prices that is causing the economy to speed up. House prices are rising because of the lack of affordable housing in the capital cities and little else.
My point is why should small retailers bear the negative effects of trying to slow the economy, while the big end of town keep speeding it up through record commodity prices or banks that are turning billion dollar profits while getting Govt protection.
The resources tax will dampen the econominc growth derived from the profits of mining companies. The RBA is aware of this in their decision to increase interest rates. Interest rates adjustments effect far more than just retail spending. All business that have liabilities affected by interest rates bear the negative effects of trying to slow an economy. Thats just part of being in business.
Yes, the major reason for rising house prices in Australia is that demand currently outweights supply. Raising interest rates is by far the most effective way to reduce the demand for housing and work towards bring the housing market down from its currently inflated state.
The truoble is the number of hours worked is at only 30 hours per week per person ,there in lies the trouble and untill this turns around thing will be a little slow. Giilard new work laws are also moveing people from full time to part time ,less hours less money .I have noticed a little up lift with the turning of the polls,what is need is Little Kev to go and then i thing you will see a good lift in trade
If one area of the economy is causing it to race then that area should be slowed not everything around it to make up the balance.
The resource tax is 2 yrs off at best, yet we ahve known about the boom for decades and have done nothing to temper the beast. Minerals are finite and once they are sold off they cannot be regained. Small business should not be treated the same way.
Just a thought here. Why dosent uncle, fluffy Kev, also slap a 40% tax on the banks.
They seem to be making Super Profits too??
Now this would be sure to fill the Governments coffers with extra cash to splurge, or pay OFF the enormous foreign Governtment DEBT our nation will be saddled with over the next 2 years.
This idea might be slightly off centre, and i am not sure what flow on effect it might have on small business, but it would certainly put the cat amongst the pidgeons.
Cheers
Chris
Reserv
Jarryd,
It is a little unsual for you to agree with me, however i also in the past have agreed with your views maybe a fault of mine is to accept what I agree with with out comment and only address the other issues. I take that on board.
The issue here is Mark’s comment about promoting one’s store, a comment that I could not agree more with and without being condesending (a word for a Greek coming down the stairs)marketing arms provide the tools for this.
The BIG retailers Harvey Norman, Myer, David Jones, Bing Lee and yes, the failed Cl;ive Peeters all push a marketing plea for attention. Substance is what you have got. It is the resultative success of good marketing.
If you’ve got the goods and services and you market it well then you should suceed.
In this, I agree with Mark that this is not the time to slack off, it is very much the time to be confident and put your best foot forward as there are many retailers out there that are not doing so well.
My recent dealings with Banks reveal among many things that retailing is not just flat it is down.Newsagents are doing better than most. Recent dealings with ATO is that audits are being stepped up in small businesses I know of 5 newsagencies that are being investigated right now regarding the G,P’s. in their Profit and Loss accounts.This is aside to the many that have not paid their GST for YEARS! I believe the ATO has got it wrong with the P&L’s it happens to be the recorded practice in accounting methods that is wrong in most cases it is not the newsagent.
Anyway I am getting off the subject Marketing is simple not expensive and absolutely necessary in these times It needs to be constant and in keeping with yout own stores profile and customer circumstance. But it needs to done.
I agreed re one area of the economy. But I still think that there are enough other reasons to slow the rest of the economy. The last thing we want is an economy growing too fast when comming out of a downturn. The global economy is still fragile and we need to ensure that we don’t place the Australian economy in a position where it could be severely affected if we see another global economic downturn.
Chris,
Strong, profitable banks are one of the cornerstones of Australia’s strong (and resiliant) economy. Without them we would not have weathered the GFC as well as we did. I find it strange that small business would complain about other business turning a strong profit – isn’t that what we’re all in business for?
As for our national debt – going into debt is exactly what we should have done in an economic downturn. Economics 101 says you go into debt in a downtun (and use the money to work againts the downward economic forces) and work towards surplus in a boom (when the extra money is rolling in).
Graeme,
I couldn’t agree more re the necessity of marketing in these times. A harmonious external message and internal image are essential in both getting the customer instore and keeping them there.
Like Mark, we’ve had a rough couple of months with mags. We’ve changed that over the last month or two and have another few major chages to the category planned over the next two months.
More attention to giftware (and less conservative buying) has helped us achieve a huge sales increase in this deparment.
We’ve also levereaged the significant incease in customer numbers that has resulted from us handing back our delivery runs (that no one else has taken on) with both major internal operational changes and a renewed compulsion to always make sure our offer is, as Mark put it, fresh and enjoyable. We thought this might decrease our sales efficiency (basket size) with customers only comming in to purchase a newspaper. It hasn’t – our basket sizes are actually up!
Our sales weren’t where would liked them to have been the first quarter of this year so we stepped it up and are seeing great results. We haven’t done what I would consider a huge amount of external marketing (in part because of our position in the local market) but we’re planning on changing that post June once we complete our internal changes.
We “survived” the GEC (if we have in fact done this) because of our commodity exports to china and asia, not because of the banks that refused to pass on all the RBA interest cuts when the first occured and now are posting billion dollar profits at the expense of home owners and small business. The yanks got into trouble because the Govt did not control the banks greed for profits but sat back and watched it unfold over decades.
China is running at double digit growth and everyone seems happy to sell to them, but Aust is not allowed to move above 4% growth without the RBA jamming us with increases. To say the RBA works independent of the Govt is debatable to say the least.
Wasting our surplus on the failed insulation scheme as well as the faulty school hall projects and cash handouts is not what stopped us from going into a full recession. A lot of businesses will remember the last “reccesion we had to have” and for those that are too young to have lived through one cannot understand how damaging it is small business. Not every business is in a mining area, not everyone has customers that are taking home $100,000 plus incomes thanks to the mines.
If you read my first comment we have changed our focus and are doing OK, but our customer base is hurting and have less disposable income so this has been passed on to retail. The Harvey norman store here has had the worst fin yr since it opened once the hand outs stopped, and even though a lot of people have new plama TV’s and computers they cannot afford to feed and cloth their kids because they are struggling to make repayments or rent. We are not in a boom area and are losing skilled labour to areas that have inflated wages thanks to mining, all we get is the slow down without the increase. But we have been here before the boom and will be after, it’s called owning a family business, and working hard, nothing to do with uncle Kevin he is just another idiot trying to make life hard for small business while keeping big business happy.
Applause to Luke.
Nor are we in an area benefitting from mining.
And the workforce seemingly no longer lives around here, because the last 18 months have seen their work dry up with the construction industries on the GC.
Like Luke (and so many others), we are still in the process of ‘surviving’ the GFC, because it’s far from over in this area.
Tourism is not the primary earner here. It’s construction. And with the workforce either not working, or having moved away to chase work, all that leaves us (collectively) is the handfuls of cash-strapped holidaymakers from southern climes who choose to at least stay in Australia, and the community, predominantly pensioners.
So, until things pick up again, all we can do is keep smiling and hang in there. As for opportunities for lateral thinking in terms of broadening our core business, there is time to work on that, and we are. Tempting as it sounds, I’d stop short of finding an old bus to signwrite and park on the nature strip, tho. 😉 😀
Keep the doors open Y&G, and keep fighting the good fight. Boom and Bust periods come and go and things do turn around eventually. Good to see you can still keep a smile and positive attitude, as we all must do, after all the customer does not care if we go broke or not they simply want us to fill a need and if we are not open they will simply go elsewhere and the world will keep turning.
Yep. Very true.
With the stories we’re hearing from up and down the coast, we’re feeling pretty fortunate, and refuse to tempt fate by whining. Particularly when so many of those stories are about doors closing forever on a daily basis – some more spectacularly than others.
The upside of all this is that reps are no longer bullshitting, and are finally admitting they’re not doing as well as they’d been trying to lead us all to believe. A great leveller, in broader terms, and the arrogance factor has come down a peg or two. Amazing how the engagement becomes more ‘real’ and a bit of respect is appreciated, when the swaggerers aren’t flying so high.
Yes the profits from mining commodities played a big part in Australia’s survival of the GEC. But the banks also played a major part. Our more conservative/controlled lending market meant that out banks were not put in the same position as those in countries such as the US. Their big profits (which they are completely entitles to make – risk and reward are the name of game) help buffer any downturn they received (or may receive in the future). The figures do indicate that government spending (including cash stimulus) also helped buffer the projected downturn. A country can’t weather a major global economic downturn, such as the GEC, as well as it did from the profits of the commodities sector alone.
China is a completely different situation to Australia. They’re only an developing nation and large growth is part of that.
To call china a developing nation when it has been doing business for thousands of years is short sighted. There was a China pre communism for those that seem to dismiss it. Compared with it’s history of trade we are the developing nation with our piddly little 200yrs. It will also become the worlds leading economy in the near future (Aust Fin review), all on the back of growth.
The deregulation of banks allowed them to introduce new fees and change fees as they saw fit. This is what deregulation is – letting the market decide and in turn allowing private/public banks to post huge profits. When our industry was deregulated, allowing other outlets to sell what was once newsagency exclusive products, we were not and are still not allowed to charge as we will/need in order to cover basic costs such as home deliveries. We should all applaud our industry reps for the great deals we have ended up with even years after our industry deregulation.
I could seriously just do my whole business/economics course by reading this blog.
The developing nation label isn’t really related to a country’s economic history but is more a reflection on the stanard of living enjoyd by its citizens. Generally the argument is that developing countries forgoe the overall high standard of living enjoyed by developed countries in order to move more quickly toward being a developed country.
Aaron, what’s interesting is the queries I get from undergrad, grad and even MBA students who come across this blog in their research. At least two substantial queries each week.
For all of our faults here it’s an open discussion about our particular business channel. Your contribution is a terrific part of that mix.
I would have thought after the collapse of the so called developed world we wouldn’t be so quick to judge others. We all ran cap in hand to India, China when the banks and shares went belly up but pocket economist still assume our status is more developed. China/India is growing when he rest of the world is flat if not in reccession, who is developed and who is kidding themselves. But it must be hard when those who define economics where the ones that were caught with their hands in the till.
Keep in mind that such catch phrases as 3’3rd world and ‘developing nation’ were all the rage during the ‘red under the bed’ era. Looking to China and India for a lowering COGS is good business sense but makes up a fraction of what is needed in this country.
I agree with Mark put some effort in mags and you will more than likely lift in sales. My only question is that can that same effort be placed in another department in the store for a better return? and if so does that then take us away from being a newsagent. I have also looked for a number of ‘new’ lines into the store. Some were great others need more work but the labour and concentration required for mags, lotto, papers etc makes it very difficult without spending 20 hours a day on the shop.
With Europe shakey, oz dollar falling and a RBA that is clearly off the mark I would suggest that new plateforms, or efficentcies are needed for newsagencies to survive. Last comment but the falling dollar could be the saving grace for the GC but is it too late.
Brad, I have always though of a newsagency more of what a business feels like rather then what it sells more of. We have run our newsagency since 1989 and have made a lot of changes to keep pace with customer needs. We still offer the so called core lines of mags, papers, lotto, cigs and stationery but we are making more money out of new markets then the older ones. I still call myself a newsagent even though I gave up my delivery runs yrs ago because they were costing me money not making it. Some say if you do not deliver then you are not a newsagent only a subby but who cares it’s what the customers think that is important. If they come to you beacausse they think you are a newsagent then great.
When the local Dymocks closed down we bought into the ABC franchise and we make more out of this department then papers and mags combined at the same GP%. It takes up about the same space and is less work ie orders, returns stock. We also stock books, ink and all of which are more profitable then traditional lines. It’s not to say the core lines are not important and we will always try and carry the core lines and work hard to promote them but you need to have a profitable business first and foremost.
Business need to find what is missing within the community they are a part of and look to fill it.
New taxes distort productivity and investment and reduces incomes which flow to industry.
ANF and other industry groups need to position themselves for next election.
@Luke;
Let’s say you start off with a newsagency, and over the years you adopt new products, etc etc. Over the years you lose or cut all the old/traditional core newsagency items. Are you still a newsagency? (Assuming same shop, land, etc. Just whats inside has changed. ie; the stock)
sorry last comment (#29)was supposed to be under Aaron. forgot to change the name in the box.
Yes , when the economies of the developed world collapsed its created a higher demand for China and India. But the standards of living in developed countries was still far above that of those nations. That their economies are bucking the trend during a GEC is a clear indication that they are a developing country. Its just a term used for statistical convenience.
I agree with Luke – your a newsagent if customers think your a newsagent.
I don’t think that introducing other departments takes away from being a newsgents at all. If the right sort of new department (something like ink, gifts or books) is introduced it can actually boost customers perception of the store by making you more of a specialist in that area. Ink compliments stationery, gifts compliment cards and book compliment magazines/newspapers.
The key to being able to introduce new departments successfully is to implement more efficient operations that give you (and those team members that you should be delegating to) more time to focus on business building rather than the menial day to day stuff.
We’ve also a supermarket and have just introduced automatic ordering for over 5000 lines. We estimate it will save us in excess of 15 hours per week. So we are now in the process of allocating that time to things such as properly managing promotions, remerchandising and research. The last one is particularly important – there needs to be adequate time to managers to research everything from what is happening in the industry to new products and concepts.
Great discussion; just to put a dampner on things; Senior Economist attached to banking sector has told my Accountant to expect a 1% increase in interest rates over the next 18 months, regardless of the economy or inflation.
Regarding Rudd and Gillard…..they haven’t got a clue when it comes to small business; not one member of their front bench has any private sector experience or experience with running a business…..now that’s scary.
Answer to Renee of Aaron’s question, When your customers first walk through the doors do they perceive your business to be a newsagency or do they think you are something else like a chemist, convenience store or record shop? I’m not talking about the regular customers I mean the out of towners, we still get the visitors pulling up because they knew the newsagency (us) would have the things they were after even though we offer so much more then papers and mags. Some retailers loose the feel of the business by cluttering the message customers are getting when they first walk past the shop or enter through the door. We overstepped our mark a few yrs back and were getting people stopping at the door and asking were we still the paper shop? so we reconfigured the entrance to better reflect who we are and customers were no longer confused.
As I stated in my comment we still offer the so called core lines but we have added to and taken away from these as the need arises and to continue to make money. Some of these changes have been forced onto us some where done with an eye to where we want to be in the future, I am a career newsagent as were my parents, while change is important it is still a great industry I could be digging holes for a living or laying tar.