I have created a magazine overhead cost calculator for newsagents to use to easily calculate your cost per magazine pocket.
Enter four data points in the the unshaded cells and the calculator will reveal the monthly and weekly cost per magazine pocket in your newsagency.
I have settled on four three data points as a result of decades of work with newsagents on this issue. The three data points are:
- Your total lease cost including rent, outgoings, any landlord marketing levy – all costs associated with your retail space.
- Percentage of floorspace allocated to magazines.
- Your number of magazine pockets – include all pockets. For example a waterfall of six pockets for a title counts as six and not one.
- Your labour cost managing magazines: arrivals, returns, magazine specific management – plus time and or fright costs on returns. It is essential you include a market price cost for your time.
The purpose of the calculator is to make you informed for when you consider changes in your business. With rent increasing 5% annually and labour increasing between 2% and 4% annually and your magazine gross profit return in decline, as it is in most newsagencies, managing space is the best option you have to manage your situation.
My advice is get accurate figures into your calculator so you know your weekly and monthly cost. Next, start to look at titles. For example, a monthly magazine selling two copies a month and generating $3.975 in gross profit is loss making in the example I have used. The calculation does not factor in opportunity cost – the value of the best alternative use the space.
This calculator is particularly useful in assessing the value of long on-sale titles that are usually pushed to newsagencies with delayed billing.
To any publishers who say I am writing about this to turn newsagents against magazines I say the facts of the data speak for themselves. My goal here is for newsagents to be informed. Being informed is critical to any business person to make decisions appropriate to their business.
Completing the spreadsheet and assessing pocket allocation can help newsagents alter how the display magazines. For example, in my own case, I have several sections where I place six titles where previously there were two – thereby reducing the overheads associated with the titles while not reducing the range I carry. Indeed, this decision is the one I expect most newsagents would make on first go round with the spreadsheet.
Another use of the spreadsheet is to inform publishers of the overheads associated with magazines in our retail network. If could be that a stocking contribution is all that is needed for us to carry some titles that otherwise me might cut as a result of this analysis.
My understanding is that some magazine publishers pay stocking contributions or some similar pocket based fee to some other retailers – giving them a competitive advantage over our channel.
I’d be happy to talk and or work with any newsagent using the spreadsheet.
This spreadsheet is something practical the ANF could have done for newsagents. Instead, they took the lazy approach and agreed with the publishers to a supply trial that has not considered available data to better understand the current situation.
In the sample you can see the costs as calculated for one of my newsagencies.
Mark, I have access to Microsoft Excel, so this should be accessible to me. However for those without MS products, this might be portable to a Google Docs page?
If you don’t have, or don’t want to pay for, MS products, download a program called Libre Office.
This is a FREE program that can do everything MS can (and possibly more), except for email (outlook)
If you tweak it the right way, it can even automatically save documents in MS format….
Keen to hear if the spreadsheet is useful.
Subaru,
Have you found a way to permanently increase the font size in their spreadsheet?
Thanks
John
WOW! It costs me $4.44 p/m ,per pocket.
@1072 pockets I am loose around 1k a month or put it another way 480 of my pockets are loss makers.
Mark, I am guessing this sort of information is what the MPA is talking about when they talk about their pillars and educating us to be better retailers.(joking)
Armed with this info, plus stock-turns and return on investment comparisons versus other categories in our stores, will ensure we are using activity based costings, not emotion when making ranging decisions.
Bill plus sell through rates. I have a separate project on this front with a group of newsagents and the results are fascinating. This spreadsheet is in part about educating newsagents and also about putting on the table a discussion about magazine related cash flow.
I hope this isn’t a stupid question but what
should the benchmark be for mags to be viable in our business.
e.g. my weekly mag pocket cost is 1.81
and the monthly is 7.84
June while I have a benchmark on magazine performance, at the pocket level, it really depends on your sales. Your $1.81 a week cost is okay if you are achieving a GP of, say, $2.00 or more in that week from a pocket.
That said, I think your number reflects a higher than necessary floorspace allocation for magazines as achieving a GP of even $1.81 per pocket to cover your costs is pushing optimism.
I have just run the numbers for another business and their weekly pocket cost is $1.27 and only 15% of the magazines they receive generate sufficient gross profit to pay for the space and labour costs.