Does your newsagency rely on too much traffic, GP or revenue for a single product category? By too much I mean more than 30%?
30% is a figure I have come up with, based on years of working with newsagents affected by categories which dominate their business falling into decline.
Tobacco, magazines and lotteries are three categories which can account for more than 30% of revenue, GP or traffic.
Any category accounting for more than 30% of revenue, GP or traffic presents you with a risk as it is a big hole to fill if something happens to the category – such as a store nearby getting lotteries or tobacco sales crashing following tighter regulation. While it is easy to blame these external factors, I blame any retailer for allowing too much of their revenue to be dominated by a single product category.
Take a look at your data – any computer system should provide you with the percentage breakdowns for basket penetration, revenue and traffic. Look at your data and act on any category accounting for 30% or more. No, don’t cut the category – work on other areas of your business to dilute the impact of the above 30% categories.
Act now, own the situation and your actions.
Hi Mark
would not about 80-90% of newsagent have lotto at more than 50% of revenue?
Andy, I have adjusted the post slightly for you. I did talk about traffic and revenue as the measures. I’ve added GP. Any business with any measure above 30% I suggest working on it to reduce reliance.
We hear of another Newsagency closing just about every day now.
We looked at many Newsagencies 5 years ago, and ended up purchasing one without Lotto, as it was by far the better choice for income.
What struck me at the time, of those for sale with Lotto the income was all from lotto and all other departments were non existent or very poor. In fact the shops themselves reflected this, that the Newsagent was not interested in other areas and was just taking the “easy “income.
Obviously there are many with lotto that are good retailers, but many are not willing to put in extra effort for various reasons.
Some of these Newsagencies may generate a wage but will not also support payment of borrowing money to finance the business, so they are unsaleable.
Mark, I agree with the sentiment, I like to measure return on inventory invested against the revenue of the category and plot them on a matrix.
The categories that are high revenue and high roii are the hero categories that get all the focus and off location displays.
High roii low revenue is the opportunity, but don’t kill the goose by over investing in the category. Stock turns are a must.
Unfortunately magazines are a high revenue category in decline with very poor roii. The majors know this and that’s why they only carry a select range and leave the long tail of slow selling long shelf-life products to the newsagents.
I agree these categories need to be managed whilst you grow others around them. If you can’t alter your margin you can still improve your roii by managing your stock-turns and inventory holding.
In regard to commission categories they don’t tie up stock, so make the most of them while you can, but don’t rely on over rely on them.
That’s why I always look at my retail business separately from my commission business. Both need to stand up.