Overall newsagency sales decline. 61% of participating newsagencies reported a decline in revenue. Of those reporting a decline, the average was 7%. Of those reporting growth, the average was 4%.
Traffic. Customer traffic was down for 58% of newsagents recording an average decline of 1.8% in the number of transactions.
Basket depth. 54% of newsagents reported a decrease in basket size (items in the basket) with an average increase was 2.5%.
Basket value. 53% of newsagents reported an increase in basket value – with an average of 3%. While newsagents are selling fewer items, they are selling more expensive items.
Product mix. Traditional newsagency lines – newspapers and magazines – suffered the most. This is concerning since these two product categories have been important traffic generators and have been central to the habit based nature of newsagency traffic.
Discounting. There has been a decline in discounting by newsagents. In 2011, more than 70% of newsagents notably discounted. In 2012, this figure was down to 30%.
There is good news in this benchmark study for some newsagents. Those who are working on their business, expanding product range, chasing margin and chasing new traffic are more likely to see basket value (especially) increase.
This newsagency sales benchmark study is based on an analysis of sales basket data from more than 150 newsagencies – city and country, shopping centre and high street, banner group and independent. I have looked at basket data for October through December 2012 and compared this to the same period a year earlier from the same businesses.
Benchmark results by key departments:
1. Magazines. 86% of newsagents reported an average decline (in units) of magazine sales of 7.3%.
Breaking this out some newsagents reported declines approaching 20% while others were in the low single digits. This is one of the worst trading quarters for magazines in recent history of this benchmark study series.
Weekly magazines and many high volume monthlies reported the most significant decline. Categories where newsagents face little or no competition for a reasonable part of the range reported growth.
We are facing a moment of truth in this data:
Newsagents who want to stem the decline of magazine sales need to work harder on the department.
Magazine distributors who want newsagents to maintain their specialisation in magazines need to offer a more equitable magazine supply model. Most newsagents I have spoken with report no decline in the cost of stock to match the decline in sales. If this continues, many newsagents will retreat from magazines altogether.
2. Newspapers. 73% of newsagents reported an average decline of 5% in newspaper sales. International newspapers remain relatively strong as do local titles in rural and regional situations. Targeted news product fares better.
3. Greeting cards. 64% of newsagents reported an average 3.5% revenue growth. Of the rest reporting a decline, the average was 8% with some as high as 25% – this is a serious problem for newsagents with declining card sales.
4. Stationery. 61% of newsagents reported an average decline of 6%. But like any average it is not accurate in that the worst decline was 32% and the best 1%. This is concerning.
5. Ink. 46% of stores participating in the study separate ink sales data allowing further analysis. 59% of these stores reported ink sales growth of 5%.
6. Gifts. 75% of the newsagents in the study have a separate gift department. Of these, 82% reported year on year growth. In 15% of newsagencies with a gift department, gifts accounted for more revenue than greeting cards.
7. Calendars. 77% of newsagencies with a separate calendar department reported growth of 9% on average. This is excellent for a 60% margin department.
8. Tobacco. 70% of stores with tobacco products reported a decline.
9. Confectionery. 58% of store reported an average decline of 2%.
10. Toys. More newsagents are in toys this year than last. 95% of stores with a toy department reported growth.
Shopping centre newsagencies are vulnerable with traffic from core lines falling significantly. Landlords will need to demonstrate flexibility to help these businesses navigate the retail and print media disruption at the moment.
Newsagencies continue to be good businesses to own. They respond to attention. There is good evidence of this in individual store performance data I have seen.
The best type of newsagency to own today continues to be the one where you have the most control over what you sell. This is more likely to be in a high street and / or regional situation. That said, smart newsagents are taking back more control over what they sell and the price they sell these goods for.
We create our own luck, now more than ever.
I appreciate the time given by the newsagents who shared the sales data for this study.
ABOUT THIS STUDY
This study is based on sales data collected from more than 150 newsagents across Australia. These newsagents represent five banner groups as well as independent operators.
The only common thread among the newsagencies is that they all use the Tower Systems newsagency software. Around 60% of newsagents with a computer system use Tower Systems.
I have eliminated data from businesses where I knew that unique local factors impacted on the sales data.
Mark,
Whilst not a direct retailer but a wholesaler of Magazines to retail, the data above is damning.
In SA we have been looking at magazine distribution in Delivery Only where at 3 medium to large Newsagencies have been combined.
Your survey looked at sales, we looked at sales versus direct costs. We all use XIT, we all receive magazines in time to go out with the morning newspaper subbie runs. Yet we all struggle to make any money let alone a ROI in magazines.
I spend 16 weeks per year on magazine management for a negative cash-flow. If I truly wanted to make more money and free up resources I should “dump” magazines as a failed experiment. (37.5 hrs per week x 16 wks = 600hrs – we spend about $140K PA on magazine purchasers)
The Distributors must come to the party and accept that if they really want magazines in every corner store and milk bar etc than they will need to pay.
If they don’t want to pay, they should also come and say so.
Regards
John
John this a a problem with a deregulated market and another reason I have said for years that we are half pregnant. Our competitors and some suppliers have got what they want in deregulation. Newsagents have not.
As long as we are left sitting in a pre-deregulation world of scale out and agency fees the longer we remain uncompetitive in business.
Successive newsagent representatives have failed to have this appropriately addressed and the one who represented newsagents when this happened has left a damning legacy.
The rule of unintended consequences. Im not sure of what portion of the newspaper and magazine market is conducted through the sub-agent and home delivery channel…. would it be half, two thirds??
With exclusive retail rights and the revenue that flowed from it, newsagents either knowingly or not, carried out the subagent and home delivery distribution business for free on behalf of the publisher.
In deregulating the retail market, newagents continued to provide the free service, but with ever decreasing cash inflow from retail sales of publications the overall profitability of the channel has been squeezed to breaking point.
Now with T2020 and the total separation of retail and distribution, the cross subsidy has disappeared and the real cost of the supply chain is being uncovered. Distribution agents like John@1 are questioning whether to actually be in magazine distribution at all and at least one major distributor has walked away from magazines all together.
So has deregulating publications retailing delivered the growth in circulation anticipated by publishers or simply split the market. After all there was already a newsagent in every strip and shopping centre. The issue certainly wasnt one of access to the product. Do publishers get better profitability by retailing through supermarkets? Questionable at best. In removing the home delivery and sub agent distribution subsidy, have publishers rendered this channel un-viable in its current form and therefore either terminal and on the way out, or likely to be far more expensive for either the publisher, the customer, or both.
In my opinion, deregulation has proven a classic own goal which unfortunately happened to run smack bang into the tsunami of the digital publishing revolution.
Im running as fast as I can for higher ground, but like the bad dream, I dont seem to be making any progress.
From what I can see of deregulation as a whole in recent years it has suited Big Business to the detriment of Small Business.
British rocker Billy Bragg said recently that free market forces have failed, harming communities and small businesses.
Nice touch Mark. Billy Bragg loves to get amongst it. He also said “It’s just as well the free market didn’t run the London Olympics – otherwise it would have really gone tits up.”
And this pearler more recently
“If you leave everything to the free market, you get horse meat in your burgers”
On the 4th October, I wrote this on another thread
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“In addition, the digital thing is also being driven because the current Distribution model is not sustainable for print magazines. I doubt very much if T2020 consolidation of Distribution Newsagents will help with the issues that magazine distribution has.
If the majors are hoping for this, I think there will be disappointments.
There are already big holes where distribution by Newsagents does not happen.
Why, because the income earnt does not balance out with the amount of effort that has to be put in by Distribution Newsagents.
From my own experience of declining service by a carrier, I am led to believe that the majors cannot afford the true cost of print distribution. Therefore it becomes unsustainable and a race to the bottom.
Retail Newsagents themselves may well benefit from this in the future as magazine distribution spread is shrunk to exclude smaller shops and to be more centralised in Newsagencies and Convenience stores as well, of course, as Supermarkets.” – end quote……..
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I agree with John and James that with wages being brought into the equation with T2020 type amalgamations taking place now, the true costs of magazine distribution is being exposed.
In my opinion, Newsagents have been subsidising the cost of supply for the benefit of Big Business Distributors and Publishers for many years.
The problem is – will they want to pay the true cost of supply now? Bauer could possibly and understandably have been blindsided on this, unless they had a master plan going into the purchase.
Moving forward, Unless costs are covered and there is reasonable money to be made in it, I doubt it will be a choice by Newsagents who amalgamate rounds, as I believe they will dump magazine distribution out of necessity.
Dennis
The rule of unintended consequence. I like it.
I am sure this is right as is 7 day trading and allowing the big 2 to take over the grocery/fresh food industry and free trade.
Consequence – small business pushed out suppliers pushed out and farmers pushed out apparently for cheaper prices for the consumer.
The wheel turns and the big guys no longer want to manage mags and papers because there is no profit and we end up with a niche market for newsagents? unfortunately it is now much smaller than when it was when allowed to go to the big guys. Small Bakers are now making a comeback after disappearing completely perhaps it will be butchers next and then newsagents. I am just not sure that I have the time. so will just have to reduce the mag space and move on to something more profitable and less time consuming. A shame for the publishers.
Mark, just on your stationery numbers. Was this due to seasonality (presume this was 4th qtr), or was it the deflationary market we are in at the moment with big branded lines being replaced by almost generic branded products?
Wally, you must read macrobusiness.com and catallaxyfiles.com as I do.
There is a huge amount of doom and gloom about, fear of the future, and a lot of excitibility because of threat of change which is upsetting. Also, we are in pre-election mode.
I am focusing on keeping all my wonderful customers coming back to see me, regularly, like clockwork, by having consistent customer service from all staff.
Also, I consistently shop in the other small businesses in my town now, on principle. I tell my customers that I do this and WHY (eg, I know what’s in my sausages lol, and if theres’ a horse in there, the “Tom Brown the Butcher” will be accountable, ‘cos he said it was beef !!)
Excellent list of items to look at Mark, I am inspired.