A discussion with a newsagent elsewhere this week about selling NSW Transport Opal card top-up has prompted me to revisit this topic of being an agent versus a being a retailer.
Regulars here will know my views – I see no upside in being an agent … margins are low, converting traffic to other purchases challenging and the demand on your labour diverting you from being a retailer.
So why are newsagents attracted to agency business? I think it’s the love of traffic and the belief that any traffic is better than no traffic.
The risk with good low margin traffic is that it keeps you busy and this can take your eye off the real focus of the business – being the best retailer possible, generating genuine value of your business.
Work for the sake of work adds no value to a business. Low margin work, where you’re making 2% out of which you have to pay overheads and for which dedicate valuable retail space is not smart.
But I understand why newsagents are drawn to agency business. With newspaper traffic down, magazine traffic challenges and lottery traffic flat, attracting shoppers for other items can be seen as an easy move. When you are asked two or three times a day if you have the tickets or other agent product you will feel pressured.
What is it worth? In newsagency basket data I have seen for city and suburban businesses, 80% and more of the time people purchase transport tickets they purchase nothing else. Okay these people may think of them business when they do what another item, I doubt it. Transport tickets are about convenience and convenience shoppers shop for convenience more so than loyalty.
The counter is where you see the real conflict. Transport ticket and other low-margin agency product sales require attention at the counter. Customers purchasing them tend to be impatient. So you need to ensure the counter is maintained.
If the customer in front is purchasing a $100.00 gift item which needs to be boxed, the transport ticket customer will be frustrated at waiting a couple of minutes. Likewise, the customer interested in the $100.00 gift item may walk away when confronted with a line of four or five people buying transport tickets.
What you do, whether you sell agency lines like transport tickets or not, comes down to what you stand for, your Unique Selling Proposition. If your focus in on high margin repeat customer business for which you achieve good word of mouth support and are known regionally, what role do transport tickets play … are they not in conflict with your mission?
If you have a track record of converting low-margin traffic into more valuable purchases then it’s an opportunity to consider. But you need to be honest with yourself about what your business achieves, you need to look at your data and have it speak to you about what you are really doing rather than what you think you are doing.
If you are not good at converting low-margin traffic to other purchases, get out of it and focus on being a professional retailer. Chase a USP. Drop it right. Get known in your region. Build a business for the long-term based on your retail prowess and not based on being convenient.
My goals with this post are to acknowledge the challenges, provide food for thought on the question of whether to take on low-margin agency business and to open the topic for discussion.
Footnote: just because my view is against agency business for newsagents does not make it right. Every business owner gets to make this choice for themselves based on their circumstances. That is the strength and weakness of our channel of independently owned retail businesses.
I like reading your blog Mark, but can’t help but think I’m Bill Murray in the movie “Groundhog Day”. The same issues over and over again with no different outcome.
Peter I agree there are some topics I revisit. I try and open a different door to get people thinking.
if you stop selling them , people are still coming to your store asking for them, becuase they know newsagents sell bustickets. unless you put a big visible sign ‘no bustickets sell’ here
We have had more requests for them recently (from older customers only).
I don’t sell them, I don’t need to and don’t plan to, its just hard sometimes saying no to customers when you have been a newsagent for so long, you feel obligated.
2% commission is an insult, gov’t is just preying on small business owners who work long hours, but while these convenience stores and newsagencies accept it no one will ever get a better deal.
No buses here ,but when do we say hey that ℅ is not enough ,we accept 3or 4℅ on phone credit so what’s the difference
We got sucked into the Bill Express drama many years ago and have a long memory. As a result we have gradually changed.
We stopped selling bus tickets 7 years ago.
We stopped handing out Tax Packs and all other ATO related products 6 years ago along with selling stamps.
We stopped selling cigarettes 5 years ago as we could not compete with Woolworths pricing.
We stopped delivering newspapers 4 years ago.
We stopped participating in Back to School sales two years ago.
We stopped selling phone credit last year.
We have NO intentions of being a Parcel collection agency.
We have done these things to reduce the number of time wasters in our store and give our gift and card purchasers the time and attention they deserve.
Our business has grown and profits have grown by dumping services and concentrating on as Mark has said “being a retailer”.
Amanda this is a terrific list and time-line. Thanks for sharing it.
Chris, yes, the channel is more diverse than ever. This is where groups can play a role, unifying a group of newsagencies to have at least some consistency.
The newsagency shingle is defined in the mind of a shopper by the worst business trading under the shingle they have visited.
Yes Amanda, you have described my business over the past five years. Except we still do BTS. As much as I would like I cannot dispense with the $100,000 plus in BTS stationery we turnover each year. It also links us to the community for the rest of the year.
I now describe my business as a token newsagency selling papers and mags only as a service to our customers rather than contributing to the prosperity of the business. There will come a point in the future where I am forced to make a tough business decision and cut these loose also.
Chris you are spot on. This leads to confusion for the customer. Unfortunately this is the path to survival. We have not chosen this path. It has been forced upon us by our industry partners.
We have to move on from the public service mindset of the past and learn how to make real money by being smart retailers.
Getting rid of Venuetix and Ticketmaster 2 years ago was one of the best decisions we made. Selling football tickets for AAMI stadium was chaos, making about $2 a ticket.
The system was forever breaking down resulting in being on the phone to Ticketmaster half the time.
The ticket customers would block the way for other customers without caring a bit and the abuse/rudeness to staff because we could not appease their wishes 100% was regular.
We worked out that with extra staff hours to run it we were losing money. There was rarely a value added purchase to warrant the traffic.
We also stopped classified ad calls around the same time because Newscorp would take up to 30 mins. to answer a call. More staff time wasted.
We do Advertiser account payments but they are always on the radar to go next. They were to go but we can now scan the barcode so it is quicker.
We also do metro cards and recharges only because of the volume each day and it is quick and easy to do. There is rarely a value add sale with these as well.
We have also no intention of ever being an agency for anything else.
I agree that Agency customers rarely purchase other product, as with Newspaper customers, but they can fit with some business.
Mark,
We have an agency business that returns a nett .0018% over the last 6 months (1.7.14 to 31.12.14) Yes – that right no mistake in the decimal point or the zero’s, its called Magazine Distribution, we are currently #40 on the Connections program. WE ARE NOT allowed to join any program promoted by G&G or Pacific Magazines.
If we can’t make money from magazines god help the retailers out there. The advantage we have is that we can clearly identify our costs and income – whereas in Retail (costs) I suspect its a little harder.
Gotch & NS can longer hide behind the 25%/12.5% model. Why do we still run this section of our business – some misspent loyalty Magazines.
But this can’t last forever.
I have sent the background numbers to Network and ANF – if this doesn’t make the ANF have Magazines as the number priority in 2015, my best guess is there will be no Distribution of Magazines to 80% plus of the subagent market within a couple of years.
Think about it, G&G and NS all
Distribution Newsagents accounts down by 80%. What will you tell your Publishers?
Think about that editors not in 80% of subagent retail outlets in a couple of years – but then again maybe we’re all mugs and editors want digital and they are happy to use and dump us?
Its very close to decision time for us – I’ll give until 30.6.2015.
ANF, NS & G&G you have 6 months to show the distribution network you support Magazine Distribution or oversee it’s collapse.
Its completely in your hands, because once the domino’s start to fall, there will be no stopping.
John
The only low margin work we do is parcel point (never took off as we hoped but I probably do it to spite Australia Post) and computer based Touch sale which we don’t bother to promote but are easy to do perform while at the counter. I want to get rid of gift cards, my wife doesn’t (but I’ll win that one soon). Our time is better spent on good margin activities.
Chris, I would think that any business distributing or selling newspapers qualifies as a newsagent and all the other stuff is optional depending on your individual situation. Even within a group there are differences but in my experience the benefits of being branded under a banner with other businesses that have a recognized look and to the large part similar if not totally identical product range works well.
John, the problem is the ANF has had similar numbers, facts, for many years and done nothing, not even tried from what I can see.
John, Why can you not join any other program? Isn’t the business in your control?? Join whatever program you want, Nexus etc. Anyone has any issues you tell them where they can place those said issues.
Ultimately you own your own business and no-one but you should make the business decisions for your business.
Brendan- that would then include petrol stations, supermarkets, corner shops, even Taronga Zoo as newsagents. There needs to be a much stronger point of difference for the newsagent jingle to have strength.
The Pacific Magazines Nexus program was developed specifically for retail newsagents with programs aimed solely for use in promoting this retail businesses. The program as developed has no component of value to distribution newsagents.
I was involved from the outset participating in trials and am thrilled with the traffic value of the tools available. It’s practical and not about earning points for redemption. It’s solely about growing my over the counter sales.
Chris,
As we are not a Retail Newsagent, but supply to them – Nexus and Pacific don’t care about the customer (magazine reader) who walks into a subagent to buy magazines.
They totally ignore the Distribution Newsagent channel.
G&G will not tell us our ranking for magazine sales – probably an embarrassment to them, as they will allow Retail Newsagents without anywhere near our sales as members.
We have approached G&G, seeking benefits for readers who purchase magazines though subagents we supply – not interested.
So if you’re an publisher out there reading this, sleep well tonight knowing G&G don’t want to maximize the sale and display of your magazine in the Newsagent Subagent Network
John
John there is nothing in the program you could use. Neither Gotch nor Network offer a sub agent marketing program of sales driving value. I suspect that’s because they focus on supermarkets, petrol, convenience and newsagents.
John,
@post 5
http://www.newsagencyblog.com.au/2015/01/08/check-out-the-subscription-offer-in-this-magazine/
The problem of Distribution Newsagents being ignored rests with Bauer & Gotch. If I were a member of the ANF I would not have an expectation that they can achieve any progress here. Witness the past 20 years or so.
I strongly suggest the major distributors do not know what to do about the problem, so choose to ignore it.
In SA we have assisted the major Distributors reduce costs by using centralised depot drops wherein up to 10 Distribution Newsagents operate, saving in some cases, the costs associated with up to 9 separate and additional drops to NA’s homes for just one depot in Adelaide. John, I and a couple of others were the Distribution Newsagents who brought about that cost saving initiative, which first flowed through to Cochranes and then it should have flowed through to Bauer/Gotch. That new cost saving procedure should now be standard practice across Adelaide.
What did we get in return, Jack S***.
So the 2 zero’s after the decimal point in Johns figures is accurate and should lead to a better understanding as to why Dist NA’s who pay wages or put a value on their own time are dumping magazine delivery, leaving Bauer/Gotch with backfilling issues to fill the black hole delivery areas.
Still they do nothing to address this serious issue.
It is the same story with newspapers. I have a subagent who sold 5 heralds and 2 fin revs a day! Not worth it for me so I cut them loose.
If you are not making any money from the agents you deliver to John then make the sensible business decision and cut them loose. Why work for no money! GG and NDC should pay you a fee to subsidise the money you are saving them in distribution.
Yet again this throws a light on the fact that there are so many definitions of what a newsagent is that how can we all be covered under one umbrella.
The distributors are closing accounts or changing terms of accounts (to a fee for service or a once a week drop) for small newsagency accounts. Distribution newsagents need to act likewise. Retail newsagents need to do the same for titles that are not paying their way.
The biggest issue is that 25% margin, coupled with the inadequacies of the distribution model, does not enable the category to be profitable for the vast majority of newsagents.
Where John @ #12 has done his numbers, I suspect many have not and therefore do not appreciate the true gravity of the magazine category. I did my numbers firstly in 2008 and it was costing me roughly 8% of my magazine turnover to sell magazines, so to sell a magazine for $5.00 was actually costing me $5.40 to do. At first I did not believe the result, but that’s what it was.
Check your costs (floor space cost, staff cost for managing magazines, counter staff costs allocated proportionately to magazine sales, returns costs, fixture depreciation, opportunity costs on the money you have tied up in magazines you do not need – ie overdraft/other opportunities you could do if you had the free capital and so on) and the results are frightening.
Based on this I slashed my magazine space and things got better, but to this day I do not believe I make a real profit by having magazines in my store, but I feel as a newsagent I need to have them.
I shared this information with all the major publishers and distributors at the time, and the only ones to take real interest and show a genuine desire to influence change was Nick Chan and his team at Pacific. If history is any indication as to the future I have grave concerns for the future of magazines in our channel.
Glenn looking at costs needs to include a detailed assessment of the economic value of the traffic magazines generate. Without them many newsagencies would see gift and other sales fall. We are in a period of transition that takes considerable retail skills to navigate.