Further to my post Saturday about the low cost Tatts fit out at the On The Run convenience stores in South Australia, check out the magazine department in this same outlet.
This is competition folks, serious competition.
Convenience outlets usually focus on a small range of no more than thirty titles, top sellers. This location and others like it from this group have a far bigger magazine over, one that competes on range with local retail newsagencies.
Newsagents with businesses competing with On The Run locations need a comprehensive strategy for effective competition – this is a chain out for your everyday business given not only their magazine range but their lottery products, greeting cards as well as stationery.
I’m not writing this to scare you. I am writing this to better inform newsagents that convenience is the channel targeting us even more so than supermarkets. Each of us needs to reflect this in our own business planning if we are chasing the same convenience shopper.
Mark, one of the sites I supply with both newspapers and magazines used to have 364 pockets or (9) bays filled with a solid range that may well have concerned some Retail Newsagents.
OTR are now re-furbishing and re-configuring their outlets. I’m not sure if they intend doing the lot or just some.
Only 3 magazine bays (33%) made it into the re-modelling (done less than a year ago in the site I supply to). Those bays were also pushed further back into the shop. Plush toys and other more profitable lines hang to the sides of pockets.
This was a smart move by Peregrine Corp as for too many years too much space was allocated to low margin magazines and too much wall-papering was being done resulting in a lot of unprofitable work for both Peregrine Corp and Distribution Newsagents.
I can say that it certainly hasn’t been a disaster for me to now only supply 3 bays worth as the move weeded out both over-supply and poor sellers.
This program is way more aggressive and ruthless in respect of magazines than just culling a few pockets as some Newsagents have been noted as doing.
OTR are a very professional in their presentation and service offerings and are very strong competitors who tend to wear down other similar outlets. They are very strong pullers of traffic.
Over the years, one can see OTR’s have put in considerable effort into raising standards of staff, (I mostly see night shifters in action) however there still is quite a range in quality of staff at some sites.
I doubt that the 2 major magazine distributors would take much heart from this move by such a powerful convenience group given they are paid by the amount they lug around the country, rather than sales.
Dennis you were happy with the Peregrine contract?
That’s a good question Mark and one that would probably need a cut lunch and a water bottle to get it all out.
I think the ‘contract’ you are referring to is the Service Level Agreement that was put in place many, many, years before Network Services regurgitated it, on behalf of the ANF (who were gifted the original draft copy of it), in a half-hearted and ultimately failed attempt to appease Peregrine Corp after ‘Managing’ Newsagents rejected Networks plea to accept something less than 12.5% for magazines sold in OTR’s.
The original SLA (and the later NW modified one) was/is merely a piece of paper that has no legal basis. I should qualify that by saying I never signed the NW formatted agreement, because I already had one in place and didn’t see the need to change it.
It was originally a useful tool that set out parameters for in the main, timely payment by Peregrine and timely deliveries by Distribution Newsagents. It was largely ignored by both parties, but it did serve the purpose of stopping Peregrine Corp from nagging on about increasing their slice of the margin every six months or so. At least it worked for me. I took my part of the so-called ‘agreement’ relatively seriously, but not so much as to lose my sense of humour over it.
So I guess I am happy that relative peace reigned for 5 or 6 six years before the inevitable happened and Peregrine looked again to get a better slice of the action. Why wouldn’t they. I think that nowadays it’s possible they view magazines as still having some value in pulling some traffic into the sites, but not much else.
No doubt Peregrine will try again and again for better margins until they succeed (if they haven’t already), irrespective of contrarian arguments, because that’s what they do. For my part, magazine are less of a concern these days and I am diversifying in order to protect against the dwindling income that comes with reducing magazine sales. And all that unnecessary work that comes with getting heaps of mags one can’t sell.
There, just made it as the last drop of water slides past the collar.
Interesting. I’ve seen a contract handed out recently that I would not sign as it binds you to performance outside your control.
I firmly believe that mags will soon be dumped by servos and supermarkets, by soon I mean within 10 years as volume and profits continue to decline. The space will be used for higher margin product. The duopoly will be ruthless with this. Mags will shrink back to newsagents as specialist retailers for a while but many will just vanish. I don’t blame publishers for getting their product out to whoever will help flog it. Ultimately there will be a major shift in the supply model that will include firm sale. It’s not rocket science, just a question of timing really.
To be a contract Mark, it must be something relatively new. Bet the devil is in the detail 🙂
I have heard more than one Distribution Newsagent say if Peregrine go direct with NW, then they will close their NW account and dump magazines as have many already.
In some instances, Peregrine accounts are worth less than 10% of Newsagents accounts with NW, begs the question as to whom is more important to NW, Dist NA’s or Peregrine. Be a lot of big, big, black holes in the reach of magazines in Metro Adelaide to fill if some NA’s felt wronged and acted accordingly.
Personally, I don’t mind servicing Peregrine and they get exceptional service from me that is almost as good as my top subagents receive.
Interesting times indeed.
Mark,
are you able to share what you have with me, or at least some detail of that contract you have seen?
Hate to die wondering.
Dennis I’ve emailed you.
Thanks Mark,
I have never seen this before.
I concur, I could not/would not sign this for the reason you pointed out earlier.
Very interesting development. It’s a serious document and has teeth unlike the home-grown Service Level Agreement I referred to above.
Yes. Network and Gotch had not seen this agreement until I showed it to them. They are perplexed. I am going to write about it here in the next few days.