Check out how one UK newsagent is dealing with the issue of declining margins:
Dear Customer.SUNDAY EXPRESS:
There comes a time in life when one has no other option but to put pen to paper, such time has certainly arisen.
Over the recent years the National Publishers have continually cut Newsagents terms whereby the normal profits of 28% have dwindled alarmingly in some cases today to a low 21%.
Even Wholesalers like Smiths News have introduced a carriage charge of £50 a week to retailers simply because Publishers have screwed their profits to a bear minimum and the carriage charge to us retailers is now the wholesaler’s main income.
However, the situations slowly worsen and the reason for this letter to you is to bring to your attention of the latest underhand methods of the Sunday Express boss Richard Desmond.
Desmond decided that when the News of the World went out of business he would reduce the selling price of the Sunday Express to ONE POUND (from £1.35p), in an effort to captivate the News of the World readers to his publication.
That’s fine, Mr Desmond can do what he wants with his own money, but the shock every retailer faced last weekend when Desmond informed all retailers by letter on Saturday morning he was taking 7p of Newsagents profits per copy to minimise the lost revenue!
Newsagents all over the Country are up in arms with the obnoxious attitude by this money tycoon, to make this decision without consultation with the retailers is simply unacceptable and many newsagents are refusing to handle the publication what’s so ever for this reason.
What will happen in the future no one seems to know at this time, but whilst we appreciate your custom and would never point the pistol at your head, it would be sincerely appreciated if you would pick an alternative Sunday Newspaper for the immediate future?
Should you still wish to continue with this publication please note in line with other retailers the Sunday Express will carry an additional 10p surcharge until Mr Desmond comes to commonsense and reimburse the retailers with the original profits.
Thank you in anticipation of your support,
Regards,
Brian Webb.
I like it !!!!!
Actually we have the same issue in this country. We accept to do low margin work for newspapers ( eg Teachers for free, Harry Potter giveaways etc).There is not even enough margin for cost recovery. Through our efforts they get to improve circulation . From improved circulation they get more advertising revenue (in anycase their main game). Ergo their revenues go up , our nett profits go down. We need to take more control of our pricing. We are new. We do not understand how they can control delivery fees. We should decide what our delivery fees are on the basis of profitable cost recovery. (of course that would affect circulation and advertising revenue) But why is that our problem.
MR HARTIGAN/MR FAIFAX are you listning- this is your faithfull hungry slave calling ineed more money to eat
Great letter! Straight to the point and well presented for the average customer to understand and explains the situation well I would think.
Unless I misunderstand the letter. Does this mean that he has increased the sale price by 10p ?
As retailers can we opt to put a surcharge on our papers?
I would think so Rowan. My understanding is that all prices are only Recommended Retail Price and that and as such we can adjust either way. Country and interstate prices are allways dearer so Iexpect we can charge more. The issue is would we lose most of our sales if were dearer than say the supermarket around the corner.
Being only a subby for papers I have no idea of the ramifications contract wise though.
We cannot charge more for papers or magazines than what the distributor authorises, which is the cover price.
Interstate papers, as well as country newsagents, may charge a freight allowance as advised from the distributor.
If a newsagent decided to charge an extra 20c for the Sunday Age for example, then they would be in breach of contract, and could ultimately lose their contract.
@ dean , while it may be true people can lose their contract, but what are they going to do if everyone does it? cancel everyone’s contract?
here we go again…. we are not allowed to “collude’ remember ……
From my memory of high school legal studies, a contract condition cannot be enforced if that condirion creates a breach the law. It would be interesting to know if policing the RRP is a breach of law or if the contracts are written in a way that protects the RRP.
Is anyone out there an expert in in this area of the law??
Brendan, contracts are also not supposed to result in a small business losing money, but we are forced to lose money every day on home deliveries by our newspaper publisher contracts.
Um..some years ago I met Mr Hartigan and found him to be a man of integrity. We had an issue with Sunday papers and it was resolved in a week, and that included a call to my home phone from him to follow up. From that point in time I pledged to do the same for his product as he actually cared about our issue. As we have said for years…allow us to make a profit..and the rewards to the publishers outdo the efforts the pony tailed marketing gurus anytime. We in the Riverena have been blessed with a H/Sun Harry Potter and a Telegraph Harry Potter..same stuff starting a week or so apart. No need for further comment as I grab another bottle of red….
This will form a great template for the impending letter I will be sending to my customers, asking them to switch allegiances from the DT to the NH.
I operate on the basis that the majority of my customers are intelligent & rational people. Accordingly, they should understand that I cannot afford to keep delivering a product that has not increased in price for 9 years, not to mention the fact that it arrives many hours after it’s main rival each morning, holding up the whole delivery process.
Once I explain that I have made numerous attempts over many years to improve the situation with News Limited, I feel they will be happy to change allegiances. The alternative for them will be nothing delivered at all.
The revolution is at hand.
Brendan,
In Australia a supplier can set a maximum retail price, they can not however, set a minimum retail price. This cannot be altered by any contract. There are a select few situations that arise where this is not the case, but they are rare and would probably never come about in the case of newspapers.
Shayne,
I think the term you’re looking for is “misuse of market power”. Unfortunatly it is a grey area of trade practice law and someone would have to have the resources to take on either publisher if they could prove it.
Gary,
I thought all retailers operated on the basis that most customers are stupid and irrational people…? 😉
Only delivery customers LOL