I was discussing the magazine supply model with a representative of a magazine distribution business recently who was arguing that full retail real estate costs should not be apportioned to the magazine department as if it were a profit centre of thee business.
The argument was that magazines pulled in traffic and that this presented newsagents with an excellent opportunity for other sales. It was put that the full rent for the magazine space should not be applied to the magazine department cost centre because of this traffic pull.
Maybe, just maybe, prior to deregulation and the direct supply to petrol, convenience and other outlets this argument about traffic may have had some merit to at least consider. Today, definitely not.
More than 50% of magazines are sold outside newsagencies. While they do generate traffic, this has declined considerably since deregulation.
My newsagent sales benchmark data shows that magazines are sold alone around 50% of the time. That is, around 50% of people purchasing a magazine purchase other products at the same time.
While I accept that the efficiency of magazines is very much up to newsagents and their retail skills, there is no case to argue that magazines are effectively a loss leader for newsagents. Rent and labour costs are too high.
It is entirely appropriate that the magazine department operates as a cost centre. This is why it must stand or fall on its results. It is why I will continue to factor in retail real estate costs when I undertake magazine title cash flow analysis.
To magazine distributors and publishers who say that an assessment of the profitability of a title should not include the cost of retail space occupied by the title – I say you are wrong. Walk in my shoes for a year, pay the rent, labour and other costs. You will soon see that while magazines are important, they MUST pay their way … every title must pay their way.
In too many Australian newsagencies, there are magazines which are not paying their way – they are riding off the coattails of top selling and profitable titles.
I am concerned that lack of attention by newsagents, publishers and magazine distributors to this will irreparably harm the newsagency channel. We all need the magazine department to be a good profit contributor to newsagents.
Which is exactly why we slashed our shop space by 75%.
Yep, 75%. A shitload of crap titles went west. Best thing we ever did.
For magazines, that is. What we came into this store with was what decades of distributor control had turned this shop into.
It was up to us to reclaim that space and make it pay its way.
Loss leaders in a newsagency Magazines, papers, lotto so where are the profitable items or are we expected to survive on lss leaders.
Ted , get into Printing , gifts ,Stationary Books ,ink, the ideas can be endless you already have foot traffic with all these so called loss leaders so take advantage of that and add more items to each sale .
Mark
I know you are an optimist, however from what I have read, seen and heard this problem is as hard as solving the Middle East Peace process.
I would love to sell more magazines and stock a larger range but a business can only absorb so many due to cash flow problems.
No one can or will give an inch, New Publishes keep coming, New Magazines keep coming, Distributors need to distribute anything that a publisher want distributed to make a dollar and Newsagents keep sending supplementry magazines back.
I sure dont know how publishers make money but the bad magazines still get through. I know I have to make money by not stocking as many magazines as I once used too. . A question is are their too many magazines availiable for the amount of customers to buy.
Is it that people have not as much money as they once had or is the digital age already affecting the buying trends of customers.
So many questions and I dont have any answers.
Thanks Shaun. It was meant as a tongue in cheek post
If the distributore see it this way they should buy the space from us as well us pay us our margin on magazine sales. I bet they would not wear this not inconsiderable cost in the interest of increades titles on our shelves.
With a capped margin and promotions of magazines used in other channels it is absolutely essential that every magazine pocket returns a profit.