I am against supermarkets and any business associated with supermarkets. getting access to the sale of lottery products.
It’s important I start with that statement as what I say in this blog post will cause some to say that is not my position.
The Daily Telegraph story published yesterday – Survival is a lottery for our newsagents as ticket sales opened up to the big players – has fired newsagents up.
While I say kudos to NANA for getting excellent coverage for the story, I note that the story is not new and that the story as it has been told is not the complete story.
The 2015 sunset for current lottery arrangements in NSW has always been there. The Tatts requirement for shop first has always been there. The Coles Express trial was reported here in October last year to move beyond trial. Smart politicians will challenge newsagent representatives with: nothing new here, why have you not planned knowing there was a sunset? Newsagent representatives ought to have a believable response.
The report is The Daily Telegraph missed what I think is the biggest challenge facing lottery agents, the growth in online sales. This is something I have written about previously. Today, online sales are estimated to account for 10% of Tatts’ revenue.
The migration of the purchase of lottery products from over the counter to online will grow. It is disruption to the over the counter model not unlike the disruption being experienced by newspaper magazine publishers and newsagents in relation print media except that Tatts retains its income. Indeed, it makes more out of online purchases than over the counter purchases. Publishers are not in this position.
So, add online growth to the challenge of a far more competitive market and the infrastructure cost of doing business and it is natural newsagents are concerned. But none of this is new.
Any newsagent in NSW saying they will have to rethink their business plans should the current protection be removed is confronting this issue too late. The time to adjust your plans and your reliance on lottery products for traffic and income was in 2010, when the five-year protection arrangements were put in place. Harsh as it is, it’s the truth.
NANA is doing what any association should do, raising awareness of the issue and calling newsagents to act to maintain the status quo. To achieve that, however, NANA will need to get the State Government to decide for small busies and against Tatts and their own state interests. Successive NSW state governments have put their interests and those of big businesses ahead of the public and small businesses. Look at bus tickets and the cuts to newsagent commission. Many representations by newsagent representatives failed to protect this important stream of revenue for our channel.
Despite all their lip service during election campaigns, we have not has a state or federal government seriously committed to small business for decades.
For NANA to have any hope it needs every newsagent involved, committing time, money and gathering signatures on the petition. I am as skeptical that newsagents will support such a campaign as I am that the State Government will act and protect small business newsagents.
I’d love to be proven wrong. So, that’s my challenge to newsagents: prove me wrong. Put your time and your money where your mouth is on this issue.
However … plan for a business without lottery products because even if a campaign is successful, the success will have a sunset. Plus, online sales will grow and some of your customers will migrate. Good business planning is all about planning for every contingency. The report in The Daily Telegraph today is about a battle. The war is what’s happening online.
The risk to your business if Tatts products do go to supermarkets is a risk for you to own. It’s something you could have insulated your business from between 2010 and now. No matter, you know now – it is time to act.
At the core of your consideration here is the type of newsagency you want to have. I think this comes down to a choice between: being a convenience business or being a destination business. That is a conversation for another day.
One reason I write at this blog is to provoke newsagents to engage more actively in their businesses. Hopefully, this post does just that.
It will be interesting to see what commission Tatts give the Supers….
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You mean what commission the supermarkets will demand? If Tatts go with the supermarkets give it 5 years max and the supermarkets will demand a higher commission level or threaten not to sell their products which will put Tatts in a position of no power as they will have burnt all their bridges.
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I see your point that newsagents should have prepared for this in their business plans but when you are in a shopping centre with a major and you are negotiating your lease I don’t think any of us would get a major reduction to cover this loss or even have any bargaining power until after April 2015.
Even then it will be like magazines, a slow decrease over the years not a sudden massive loss. Will mean owners working harder and less goodwill (if we have any left to loose).
The newsagents that rely on lotto paper cigs etc will be hit hardest I think and for those small shops it can be difficult reinventing their busineses as a lot don’t have the passing trade anymore because of the majors killing off strip shopping.
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Jenny this is why they have to create businesses that are not reliant on passing trade. Tough but doable.
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I don’t have a problem with the supermarkets selling lotteries but put them on a level playing field. I bet they won’t be made to do the shopfits that Tatts are making the newsagents do.
The loss in revenue from this move will be felt through the community, we will have to cut wages,sponsership of local sporting teams and local events.
We have been evolving our business for a number of years but I think this will still hurt. We will survive but the pie is still the same size but the slices are getting smaller.
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ted the experience with 7-Eleven and Coles Express already is that they are not required to do the fit outs nor are their staff required to do the extensive training.
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I wounder if magazine publishes still think it was a good idea of going into supermarkets…just seems to look so uninteresting filling up space,lost lonely and trashy.
And I wish the ACCC would not exist, waste of space.
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Ed if they don’t they will eventually.
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Hi Mark
is it true that tatts are exiting 7 /11 in nsw ?
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#6- Mark thats the point I’m trying to make, put us on a level playing field.
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Lotto will be giving ground to the majors on a range of fronts, no shopfits, no training, better margin.
BUT
The big one will be the variety. I cannot see the checkout staff selling anything other than quickpicks. They wont sell store syndicates, they wont do the more complicated transactions. They don’t have the time. If it takes more than 2 button pushes to sell they wont be interested.
I wonder if Lotto realise what a hit that will be to their bottom line?
Further it leaves the window open for engaged agents to retain the bulk of their customers. It will mean more work and more proactive retailing but the opportunity will still exist.
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Hi Andy,
That happened back at the end of June.
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Andy, yes, I mentioned this in May: http://www.newsagencyblog.com.au/2014/05/27/7-eleven-pulling-out-of-selling-tatts-lottery-products/
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Agreed Ted.
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The money that any supermarket could make from lottery sales will be a drop in the ocean compared to the billions they already make. The only reason they want lotteries is to get people in the door and stop them patronising small business. Thats the only reason they have newspapers and magazines now. Thats why when there is a fruit and vege shop nearby Coles/Woolworths will send a person over to check prices and undercut them until they put the competition out of business. Then they can charge what they like. Coles/Woolworths cant stand the idea of $1 being spent somewhere else. They already get about 80c from every dollar spent in Australia
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I don’t think it is just up to NSW to stand up and fight against lotteries in Nationals, every state/territory should be united on this issue. Open up the discussion, what is the general publics opinion, maybe its time for us to find out and pass onto the politicians, and not be speaking as one business owner but as a group. I agree money does talk when it comes to both our state and federal politicians, but I am sure there are other associations out there who would be very concerned….we as newsagents have a great reputation for selling lottery products within the gambling regulations and guidelines – cant see the same service or diligence happening in Coles or Woolworths!
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Shayne,
Hate to be a pedant, but I think they get 80c of every $1 spent on groceries. Not across the board.
Otherwise, yes, that’s what they do.
Unless you are the ACCC then apparently they are really nice retailers doing nothing nasty at all.
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Maybe not that high across the board Brett, but when you think about the brands owned by the big two – Bunnings, Masters, Officeworks, Target, Kmart, Dan Murphys, BWS, Liquorland, Caltex, Coles Express, Big W, many others I’m sure – Then there’s the insurance they now offer as well as all the poker machines they own. Cant they just leave us alone with our lotteries? no of course not they want that too. Rant over, just really makes my blood boil.
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Shayne,
I hear you – its unhealthy for the economy too.
Id like to see the signs changes. e.g Bunnings – a division of Westfarmers or Masters – a division of Woolworths.
I think that exposure would allow shoppers to avoid the majors if they choose to do so.
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Tatts are under pressure to grow their earnings after their modest FY13/14 result (-19% on FY12/13) – ie increase revenue (ie sales via WW & Coles + new products) or cut costs (margins + support O/H).
Lotto products being sold via the major supermarkets may benefit newsagent outlets; it will lift the profile of Lotto in general and potentially appeal to Gen X who are under-represented in Lotto sales.
We can only hope for a level playing field (fit-out costs + margin + training)…
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If Coles and Woolworths do not have to have a fitout, how about a refund of our fitout costs ??
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Max the fit out cost is something that should have been pursued when Coles started with tatts a year and a half ago. Sadly, no one tested it in court.
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The way I see it there never has , is and never will be any level playing field.Our newsagents association is a paper tiger ,thats not intended to be disrespectful but at the end of the day they dont seem to pack much punch.
I have to agree with Mark our biggest problem has been the push by Tatts to migrate its members to online.Which shows their lack of respect to the newsagency channel in the first place ,encouraging agents to push players club memberships then encouraging members to do all their lotto online to save them the “inconvenience of going to an agency”
If Tatts is to go to the supers it will only be to pick up the impulse sales a supermarket could generate using the same sort of setup as the 7/11 or coles express models
If the local newsagent cant cop the 25 odd thousand shop fit that will be their own choice and Tatts will have covered their obligation by giving them the opportunity to get on board..Should the agent decline the committed Tatts member
can always play online and any lost player revenue should be made up at the supermarket counter.
Calculated gamble Id say !
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Going into the supermarkets now may actually be a very dangerous path for Tatts. Their lease on NSW Lotteries is 40 years so their planning needs to take into account the longevity of any decisions.
Moving into the majors creates an almighty shift in negotiation power – becoming reliant on Coles and Woolworths is not a sound long term strategy. Dealing with just two big firms would put Tatts in a much less flexible position than it currently holds when dealing with newsagents who hold comparatively little market power.
Also, it has to be taken into account how many add-on and complex sales will be lost if they were to only offer a basic product range. I suspect it would be significant.
Any short term boost in sales could easily be offset by a downturn in sales that results from the closure of newsagents that find themselves unviable.
I doubt that putting lotteries into supermarkets would make it more appealing to younger generations. There are many factors for their aversion to lottery products and I don’t think location is a significant one.
From a public policy perspective it’s certainly not healthy to see market power to concentrated so heavily in two companies. Any action that can be taken to mitigate that concentration should be considered by the government. Its certainly not in their long term interests to sustain the existence of political actors which such immense power.
Yet another outcome resulting from the failure of the industry to get behind a single unified representative body with a focus on lobbying.
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This might be a dumb idea, but why doesn’t the newsagents associations or newsagents themselves look at creating some kind of fund where we each contribute $5000-$10,000 and purchase a stake in Tatts corp?
Im not sure how much would need to be raised to make us a major stakeholder but it would certainly give us a voice and a chance to control our own destinies rather than leaving it to the government, Tatts or the courts if this is a viable option.
Just a thought…
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Looks like a wise decision by Adrian Gaskin to sell out to WH Smith.
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Jarryd,
I think this is the first time I have agreed with you !!!
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Lets see how good NANA are now… time for them to stand up…. or they will loose a few members one would think!
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Surely some of you have to acknowledge its time for a sea change. Even blind freddy can read the writing on the wall.
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As a Newsagent who is against IGA for Lotto (and also my biggest sub agent), supermarkets do not put the time into lotto with the standard lotto terminal. It is to staff intensive for them. Where lotto is installed in supermarkets the lotto terminal a lot harder to service as is usually a fair way from the tills. I see one lotto to serve 5 POS positions. It is not convenient and easy to work unlike most newsagencies.
Install lotto and printing software on the POS Computers and this will change all that (though probably not very likely).
I do not believe the big supermarkets will give lotto the same attention as most lotto agents do today. I also agree with Jaryd’s comments.
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Our customers are fighting for their turn to sign this petition, it’s a shame our government members don’t get to witness this and listen to what people really want.
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Way off topic, just doing my subscription updates – Telegraph is offering TEN CENT Sat & Sun Digital Bundles.
The dumb thing about this is customers are cancelling their already low $2.50 bundle to start the 10c one!
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What about all the suppliers who deal with newsagents. They must contact their local members as well. They are going to be affected just as much as us. If 50% of agents go broke how many suppliers will go down as well. How would a company like Bauer who does support the Big supermarkets fair if they could not sell in Newsagencies as well?
Our suppliers should be coming out publicly in support of newsagents.
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Have newsagents missed the boat perhaps?
A few years back when the duopoly chased liquor and gambling (read poker machines) the only option available to them was to buy up hotels. In many instances throughout Tasmania they were buying up pubs that had bottleshops attached and then leasing the hotel side of things back to the publican. Then in NSW they were purchasing big pubs so they could get hold of poker machines. I think from memory they were doing this in Victoria until a few loop holes were closed. Over the last few years here in QLD they have paid exhorbitant amounts of money buying pubs so that they can expand off premise bottleshops (a bottleshop can only exist off of a hotel licence). I know of one regional hotel that Woolworths paid $24 million for.
Whilst not an ideal situation at least publicans could sell up and get something out of the deal (some doing extremely well obviously).
Maybe the “small business restriction to operate lotteries has in fact actually hurt newsagents…….I mean imagine if the only way for the duopoly to get lotteries was to “buy out” the nearest newsagent?
Dont get me wrong, I want to see the industry not only survive but to thrive but if the bigboys want our product then they should pay for it…..not just have it handed to them from greedy governments.
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Great article, and plenty of valid comments and opinions which are worthy of attention.
It baffles me how little respect there is for newsagents by suppliers and so-called partners whose business is totally reliant on a successful newsagency industry.
Perhaps if on a specific day every newsagent turned off the lotto machine for a day, Tatts could then see how much Tatts need newsagents.
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Spoke to a Bauer editor recently, he commented ‘we’ve been told that supermarkets will be our saviour’. I know in our small town we provide 1000 magazine pockets, if we go down the geniuses in senior Bauer management think they’ll do better with the 30 pockets at our local supermarket? Stupid doesn’t even start to cover it.
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Good editorial lays out a balanced arguement for the reader to consider. It subsequently fosters healthy debate through rational response. This is not a good editorial. It is written to produce fear and uncertainty through emotive language.
The editor concludes by saying that he has written this editorial to provoke newsagents to engage more actively in their business. It has only induced fear and suspicion.
Lotto is an integral part of a typical newsagenciy. It will be so looking forward. My business embraces Tatts as a partner and will do so while I own it. Tatts must be allowed to develope a business model to allow it and us to grow. My increase in earnings from lotto products over the past few years is testomy to Tatts innovation in pricing and product development. Online is annoying but it is a fact of modern life. We have to live with it.
As a leader in our industry and an editor you have a responsibility to give steady direction. You have not done so here.
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Well written article Mark. The associations seem to be failing to lobby effectively. Also I don’t see the groups like Nextra and Newsexpress being effective in the lobbying dept. Perhaps the groups can help their members in other ways; BUT it seems that after reading your article and searching for answers myself, that answers to individual situations will be highly specific and carefully tailored to individual newsagencies. i am not just talking about Tatts now but the other weaklings in the mix, papers and magazines. Mark do you think the Buying Groups are in a position to help more with things like the reinvention of their members, or do you think members should be attacking their own issues on an individual basis?
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What article did you read Gary. Not this one.
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Gary the blog post I have written is factual. Newsagents who do not run their businesses to serve future needs will fail. The growth of online sales of lottery products in Australia has been missed by most newsagents. Just as the Coles Express trial has been. Continue to ignore them at your peril.
The days of the old style newsagency: papers, magazines, lotteries, cards, stationery is over. Those businesses will not be sufficiently profitable to stay as is. That’s a message I have been widely sharing for close to ten years.
Sure fight on the Tatts issue, but do not lose sight of bigger picture changes impacting your own business way outside of the Tatts issue.
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Bruce, marketing groups don’t have a lobbying remit but they do and should on providing members with options for a brighter future.
Speaking from a newsXpress perspective (of which I am a Director), the focus has been on new traffic and new revenue streams for years now. There are engaged newsXpress businesses future-proofing their businesses: gift sales of over $100K, plush sales of over $50K,toy sales of over $50K. All excellent GP. All generating net new traffic.
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See today’s DT page 19 more about Tatts approaching the supermarkets not the other way around.
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Also check out Short and Sharp page 45 more comments about newsagencies.
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Thanks Mark. Wouldn’t I love Toy sales over $50k, Gift sales over $100k and Plush sales over $50!! I am working on it though.
How many newsagencies outside the large shopping centres could achieve these figures? The vast majority of newsagencies would need to look for other answers in addition to these areas I think. Radical moves like shrinking their shop size to reduce rent, becoming a tobacconist or a coffee shop, changing shop openng hours, cutting wages. That is why I am questioning how helpful the groups and associations really are. It seems to me that most newsagencies need much much more in the way of change rather than just improved buying price and range. They need rent negotiations, marketing positioning etc. Most need a radical overhaul into the future.
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Bruce I know of newsagencies in towns with populations of 2,000 or so where they are doing $100K plus in gift by focussing on products people will travel to chase. Access to these products, the business strategies to leverage them as well as shop fit, lease and business planning is where a good group can help. It’s happening with engaged newsagents.
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Shayne, my experience is that the big supermarkets dont always try to beat independent fresh food stores nearby. In my area, there is a Coles with a butcher next to it. The butcher is cheaper on any number of products than Coles is. There is also a Woolies a bit further away with a fruit & veg place nearby that has any number of items better and/or cheaper than Woolies.
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In relation to a comment made by Mary Carlton from Mascot (DT 20/11 Pg 45 Short & Sharp) – Wouldn’t you just LOOOVE to meet Mary!
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Jonathon
Our two major shopping centres in suburbian Brisbane, Coles and Woolworths do their best to ‘strangle to death’ the fruit shop located next door to them by undercutting them.
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We do over 50K a year in gifts! Its up over 20% on last year and with the introduction of 2 new suppliers I expect it to go closer to 100K this fin year. This is with a gift store only 5 shops away that has over 15000 likes on facebook. And with 100k equalling 50k in gross profit I ain’t complaining. Especially as it is such an easy category to manage and it’s all under my control. No supplier dictation
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Chris this is excellent encouragement. Newsagents can compete easily with independent gift and toy shops.
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I am happy too with how gifts are travelling for us Chris. We are on a very similar track to you by the sound of it. Just worried for the maybe 3000 ozwide or so who maybe won’t get over the line with range diversification.
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Gotta love gifts!
We have done $73 in gifts today – and we have not even opened yet!
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Not sure if Im alone here but my biggest decision is should I or shouldnt I go into more debt for a shop fit.
We have been diversifying since we purchased our newsagency and at present are around 70% homewares and gift shop 30% newsagency.
From a business point of view I would be better of waiting till the shopfit cutoff then unplug my terminal and box it up at which point stationary ,mags and newspapers would go to free up valuable space for more profitable stock.
Goodbye newsagency , sorry loyal customers.
What do ya do?
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Pat it’s a complex question. The best change you can make is the change you do for yourself at a time of your choosing rather than reacting to situation affecting your business.
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Yeah I know , this may just be the excuse we needed the fallout would be massive,small town no newspapers or lotto (unless coles get it ) for about 20ks
still copping flack because I got sick of working 40 hours a week before the shop even opened for 0 profit.so I stopped delivering papers
I can go back to working for wages wife can work normal hours and the kids get to
have normal parents again.Its a lot to think about
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Pat,
Sell up get out and get a life. I did and found a whole new world waiting for me.
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Yes, sometimes the best change is to get out. For others the best change can be within their business but shedding unproductive work and products.
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Pat, when you stopped your home deliveries did you keep your territory? That would certainly make my life easier but I also don’t want the supermarket across the road to get papers, that would diminish my traffic.
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Jason if that’s the only reason, let go of it. Newspaper traffic is not commercially valuable traffic unless you drive those whoppers to purchase good margin products. Close to 80% of the time this is not the case in newsagencies.
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No more paper run for me 🙂 so far 2 weeks and loving it . A few complaints and also a few happy customers that called to say thank you and that they understand .
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Jason the super market will get papers wether you want them to or not you have no control over that even if you are the supplying newsagent
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I have studied my sales and over 90% of newspaper readers in my shop don’t buy anything else. They have the right money and walk in and straight back out. That is why I do not spend anytime marketing to them. I don’t mind them buying their paper from me but I will spend my time and assets marketing to my more valuable customers.
On the Tatts subject, is anyone else out there concerned that NANA is negotiating for us. I am a little concerned as their track record is less than desirable.
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Andrew last time we had a break in we got a rough valuation and not worth half what we paid ,was quiet naive when buying (family) just went along for the ride assuming all ok (oh hindsight ) and after this weeks tatts coverage would be worth less as a newsagency.
Jason yes kept my territory only because there is a coles across the road and a caltex way out on the edge of my territory.Fairfax brushed me so I sub to another agency in the big town.
Shaun how good did it feel that first morning, no more paper run, thats life changing
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Tottaly different business now ,loving it
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Not different as I’m money but different as in life ,not waiting for a customer to abuse me every time the phone rings ,stress levels are down I might even be able to have another crack at quitting the smokes .
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I sold my run six years ago and wrote here several times about the fundamental change it made to the business and the benefits which flowed. retail and distribution are two different businesses requiring different skill sets and different attention. One is highly regulated and the others far less regulated.
Well done Shaun.
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Jason,
I sold my paper run but kept the subbies for mags – they are two different things entirely
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I also kept my subbies for magazines ,no effort and in my own time
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Kept no sub agents. Went for a clean and liberating break.
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My husband and I are nearly 2 years into our ownership. What annoys me with the current situation of Tatts is that neither the previous owner or NSW Lotteries (when we were on the Lotteries Course in Sydney) bothered to mention we would only have limited protection. We have extennded our lines since taking over and will get through but wish honesty had prevailed in the first negotiations. With a child with chronic juvenile arthritis and husband with rhuematoid this is stress I don’t need. We operate in a small remote town and our customers are supporting us.
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I feel for you Trish. The vendor and their broker should have disclosed this as should have NSW Lotteries when they reviewed your application. If there is any help I can provide let me know.
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