I have heard recently of a newsagent permanently offering 10% off magazines as their poijt of difference strategy. This is bold step because of the slim margin, 25%, and that they are in a shopping mall with a high floor space cost.
While the magazine club card we run effectively offers a discount, the 1.5% cost is nowhere near as expensive as a 10% across the board discount – plus it requires the customer topurchase anabove average quantity of magazines over 8 weeks.
I would be interested to hear what other newsagents think of a permanent 10% discount off magazines? Is it an appropriate point of difference for a newsagency?
My argument against this is that newsagencies provide an excellent point of difference to other magazine retailers.
- Easy browsing.
- Excellent range.
- Putaway service.
- Friendly and knowledgeable customer service.
- More convenient location.
- Great opening hours.
Maybe I am wrong but permanently discount magazines is like you are saying you cannot compete on these points and that price is the only unique selling proposition. My view is that price is no USP at all.
A newsagent doing this would have to increase magazine sales by 60% to make the same net profit as before the discount. Very difficult to imagine an increase like that is achievable.
A discount on an already slim margin with all the work involved to get it? I wouldn’t do it. It basically devalues the product, sends a message to the supermarkets that in order to compete they will need to discount (and they can afford it)and it introduces that crazy discount mentality around calendars, diaries and Christmas cards.
We need to be the go to place for magzazines for the points Mark put across and not lowering to just price advantage.
Whoever the Newsagent that is doing this is perhaps excercising their prerogative, in my view it is counterproductive and bound to hurt the both the Newsagent and the channel.
Spot on Shaun
A magazine selling for $10. G.P. $2.50
dISCOUNTED BY 10% = G.P. $1.50.
First example x 10 copies = G.P. $25
Second example @ 10% discount you will need to sell 16.67 for every 10 you sell now.
Which is what Shaun says 60% more. Hey, we’re complaining about low margins already This is a no brainer or one desperate cash flow starved operator or somebody that hasn’t done their sums. I agree that the best way is by promoting them as Mark illustrates here.
We all know how gossip is but maybe he is just running it as a promo say for a week to boost up a customer base . If that is the case it is something i would look at . All mags 10 % for one week only it would be sure to grab some new traffic . I know Mark said it was a permanant idea but as i say gossip has a way of changing as the story gets passed on
We are already being forced to do this with subagents.
Forced to provide a ssubagency service and allow our customers to walk in the door of another business and then purchase other products from the subagent like ciagettes, drinks, sweets. Perhaps this newsagent thinks he ccan bring customers into his business and then add on sales. You hhave to get the customers through the door somehow.
carol
thats a fair point you make, but we dont have to staff and pay the other overheads of the subagent…..
i wouldnt do this type of promo. womans day is $4.the customers know this 52 weeks of the year. what are they going to do with the 40c they saved…. phone a friend?
Peter – first they would have to find a phone box that worked!!
phone boxes that work are around. just go into the newsagency and ask them.
Basically on a permanent basis it is a 20% mark up on purchases or a Gross Profit Margin of 16.67% of Sales.
Closest to that is cigarettes at recommended retail.
$4k per week in Sales would have to be $6k per week to make the same money.
The sub agent example whilst valid to a point that it is a discount and it is supposed to be for business you could not get if you didn’t have one. The sub agent does not change your marketing perspective with your own clients.
It is well known that consumers do not respond to % off sales anymore unless it is 50% or more off
With rent, staff costs for mags, depreciation of the fixtures and the cost of the money tied up in the returns system magazines are at the very best a marginal proposition in terms of profitability. For many they already generate significant losses each year but unfortunately they dont yet know it. I didn’t until I did my sums. We are retail only so I do not know how subbies change this, if at all.
IMO, permanent 10% off mags is suicide.
The key reason I wrote this blog post was to draw out comments such as those posted here. Keep them coming. Plenty of newsagents are reading and information in the comments will help some make good business decisions.
Peter you may not have overheads to service your subagents but I arrive my mags, sort and pack them for delivery, print delivery dockets, and deliver mags. I pick up returns, scan them and pay for dumping the old mags, print a statement and send it, then wait for payment. Have you done the sums on those costs. Mean while the service station sub just up the road is getting customers that you have through their doors that you want of come through yours. I now make my cards, stationary, shoes, souveniers my focus. We all have to look at other options.
I have just reworked my 09/10 sales figures for magazines considering expenses such as wages, rent on the space taken up, depreciation of the fixtures and interest on the average monthly value of outstanding returned stock.
I received 1700 different titles over the last FY.
The top selling 50% of titles accounted for 96% of unit sales and 92% of GP and $ sales.
My magazine department, which is vigorously managed, ran at a net loss of 10.5% of sales, meaning if I look at the category as a whole it costs me $4.42 to sell a New Idea or Womans Day for $4.00.
Publishers AND distributors need to take heed, and urgently. The category as it is is not sustainable. This exercise was done as part of the rationalisation of my magazine department. I am taking away 40% of it and dropping the bottom 50% of titles.
This is, in part, what happens when there is greater importance given to mass market representation of titles in supermarkets and P&C stores who only deal in the top performing titles. Buyers in those outlets are denied the opportunity to browse the niche titles carried by newsagents and the majority of stakeholders lose out. The antiquated distribution model we are lumbered with is the greatest culprit.
Those that have the power to make a difference to this seem to be indifferent to it.
Glenn this is why I am updating the cash flow study. In the Tower software there is a facility which does exactly the enelysis you describe. It lays out the results month by month and providesa graph showing the ebb and flow of cash flow relating to magazines.
Newsagents need to get this data and understand what is happening in their magazine category, and i think that unfortunately too many don’t. I knew magazines were not performing but was unsure how to measure the problem until i got some pointers from a conference i attended.
I know of 2 newsagents who recently did their numbers and both were losing in excess of $25,000 per annum in their magazine category and not aware of it.
Newsagents having ultimate control over their supply is THE most critical requirement for the channel as we all know it to survive. Far more so than the reward programs and the extra commissions on additional sales that are currently being offered. Whilst welcome, they do not address the issues currently choking our industry.
Glenn I am gathering this data right now. It will be irrefutable data which can be used by the channel.