Miranda Ward writing at mUmBRELLA has represented newsagents well in our fight with supermarkets on magazines.
I am pleased to see this quote from me as it is a message publishers need to get.
“Supermarkets treat magazines as a commodity. Newsagents continue to range the category as specialists. That has a higher cost for us yet we are not respected for this.
“The MPA needs to reconsider its focus on newsagents as the specialists as the current situation is a band aid approach that does not serve them or us well.”
While the current MPA newsagent only competition is good, it is not a strategy to revitalise magazines in our channel and for all Aussie publishers. No, to do that, we need to be respected for the specialists we are – as I have written before. If publishers do that, newsagents will reinvest in the category and, I expect, the dangerous sales decline of recent years will slow.
The current promotion is a tactic. What is needed is strategy. The MPA is not currently demonstrating an appetite for developing a strategy with and more newsagents.
Conversation starter.
What if magazines were on a scaled margin.
Top 50 magazines were at 25% margin
magazines 51 to 100 30% margin.
101 and over 35% margin.
I still argue for 50% margin, firm sale, we choose the quantity.
We know how many we sell, we no longer worry about returns. No longer worry about oversupply.
The size of the print run no longer dictates their revenue, its the number of sales so massive runs are no longer required. The trucking companies can gain other trade from the trucks no longer needed for returns.
Our data will help us, we don’t need to be scared of this.
Hi Richard, I think the problem is more complex than the nominal margins. Margins are dependent on the sell -through rate because we only get the nominal margin for the magazines we sell to customers; we receive only the wholesale price-nil margin -for remainders that we sell back to the publishers.
As an example, using the MPA’s proposed sell-through rate, 55%, and, for simplicity, using a $100 parcel, your revenue would be:
55 X 1.333 = 73.31 (Sold to customers)
45 x1 = 45.00 (Returned)
Gross markup = (118.31/100)-1=18.31. This equates to 15.49% realized margin.
A nominal rate of 30% at 55% sell-through rate would equate 19.08% realized margin.
A nominal margin of 35% at 55% sell-through would equate to 22.85% realized margin.
I think it is important not allow ourselves to think that when we sell all our New Ideas or Woman’s Days we are earning a higher margins than the nil sales magazines: since we aren’t allowed to choose individual titles we are buying a parcel of titles and our margin is related to the whole parcel not individual parts of the parcel.
I like Brett’s idea of firm sale; we choose the tiles and quantity; 50% margin. We could have 41% unsold copies and still earn as much as under the MPA proposal. However, it’s not going to happen because the publishers have devised a method of gaining a benefit by oversupplying (82% in the MPA proposal). This means we finance the printing and delivery for supermarkets as well as our own channel.
Hi Henry, with respect, I think you’ve made a couple of errors in looking at the problem.
First “we receive only the wholesale price – nil margin – for remainders that we sell back to the publishers” is wrong. Newsagents “sell them back” to the Distributor, not the publishers. Furthermore, the Distributor’s “reason” for newsagents being charged for them upfront is supposedly “honesty”. What doesn’t work with being supplied 20, selling 18 and returning 2 mastheads? IMHO the only thing achieved by newsagents having to pay for every copy they receive is it gives Distributors access to large amounts of newsagents’ cash they don’t need to have.
Second “the publishers have devised a method of gaining a benefit by oversupplying” is wrong. Publishers are only paid for copies that are sold. The only possible results of oversupply are:
* gross wastage of paper and ink
* gross wastage of newsagents’ time, effort and money
* gross wastage of publishers’ money
Conclusion? Those publishers who don’t keep a tight rein on their print runs clearly do not care about losing thousands of dollars every issue which also causes unnecessary problems for newsagents.
Henry and AFTC, I think you are both right here. There are publishers with a model based on circulation rather than sales, a model that hurst newsagents. There are also publishers that are authentic publishers that rely solely on sales and that supply fairly because of this.
AFTC,
Your comments are true for a perfect world, one which you may have ethics and follow. However after years of reading about oversupply on this blog it should be clear to you that most publishers do not care one bit about the perfect world.
I read in the MPA Trial documents somewhere that it only costs a few cents for extra copies once a print run is set.
Newsagents are therefore open to abuse from publishers oversupply, which puts us at a disadvantage to supermarkets due to falling return on investment in magazines and labour and return costs.
In any well run business, the decision will be reduce the product not giving an adequate return.