The April – June quarter was tough for core products sold through the newsagency channel. In addition to the continuing decline in print media sales, this quarter’s benchmark results reveal a troubling downturn in lottery revenue as well as card revenue.
Here are the headline numbers by key product category:
- Magazine unit sales declined 11%.
- Greeting card revenue declined 4%.
- Lottery revenue declines 4%.
- Newspaper unit sales declined 12%.
- Gift revenue increased by 11%.
- Toy revenue increased by 16%.
- Stationery revenue declined 8%.
These are not good headline numbers. The bottom is falling out of the historic core of the newsagency channel. This will not be news to many as it continues a trend we have seen in this benchmark study for several years.
The above percentages reflect the overall performance of the 181 newsagency businesses in this benchmark study. It includes stores from a range of banner groups as well as independents. There are large businesses and small. Some are in shopping centres while others are on then high street. The cross-section is broad.
What is concerning is the pace of decline, especially with magazines as the decline had slowed recently. Looking more closely at the data, the decline is in the volume categories. Fringe categories such as special interest titles are doing well. Indeed, some segments show terrific growth.
Newsagents need to manage the overhead cost of newspapers and magazines. Labour, space and capital investment needs to be kept in line with the gross profit contribution of these categories. Busy work relating to newspapers and magazines should be eliminated.
The decline in greeting card revenue is a surprise. The reported percentage of decline, 4%, does not read well. However, like all the above data points, it is an average from the entire data pool. There are stores experiencing decline above 20% with others reporting growth above 20%. There is a clear correlation between stores with strong gift sales and card performance – in this case card revenue is stronger.
GOOD NEWS.
The good news is the performance of businesses playing outside the traditional space. For example, the newsagency with $25,000 in toy revenue in the quarter, reflecting growth of 18% or the newsagency with $45,000 in gift revenue and year on year growth of 22% of the newsagency with card revenue of $47,000 and year on year growth of 22%.
There are many good news stories in the latest study results. However, the good news will be overshadowed by the performance of the majority. It is challenging, some days, to know what to do or say to cut through with newsagents who are not engaged.
Too many newsagents think growth will come from categories close to what they have done historically. For example, too many get into cheap social stationery thinking that is competitive with Kikki.K or Typo.
My experience is the best growth comes from turning away from traditional lines and traditional suppliers and going with products and price points you would never have considered for a newsagency business. I see this approach working well in the benchmark results in businesses of different sizes and in different situations.
OVERALL PERFORMANCE DATA.
- Customer traffic. 78% of newsagents report average decline of 5%.
- Overall sales. 53% reported an average revenue decline of 3%.
- Basket depth. 61% report a 2% decrease in basket size.
- Basket dollar value. 63% report a decrease in basket value of 3%.
It is in the overall business gross profit numbers where the differences in businesses can be seen. 62% sit in the traditional newsagency GP performance band of 28% – 30%. 7% sit below 28%. 20% sit in the GP band of 30% and 35%. 7% sit between 35% and 40%. The rest, 4%, have a GP of more than 40%.
GP is a function of what you stock and the type of shoppers you attract to the business. Buying is where it starts.
WHAT IS DRIVING THE DECLINES?
Close to 80% of the businesses in the benchmark reported a decline in traffic with the average decline set at 5%. However, just over half reported a decline in revenue. This is because plenty are selling higher priced items, usually gifts. This softens the blow of the decline in legacy products.
I think the traffic decline is being driven by a decline in interest in legacy products on which traditional newsagency businesses have relied. I have said for years it is crucial newsagents have a strategy to drive net new traffic. Relying on legacy product to sell new products is not a plan. You need to source new products and to use these to attract people to your business who would otherwise not have shopped with you.
HOW TO RESPOND TO TRAFFIC DECLINES?
Any newsagency business can be successful, regardless of location and situation. This is truer today than at any time in the past thanks to what we can see being achieved online – not only in newsagency businesses but through other retail channels.
The key to success is to not run the business as a newsagency. That’s is, to not obsess about legacy products. Focus on new traffic products. Focus on price points you would usually say would never work in your business. Buy products you think will never work. Be radical and through discover what is possible in your business.
I urge you to ask yourself daily, what have I done today to reach a new shopper, someone who does not know we exist? This is what successful businesses in the benchmark study are doing and doing well.
DOES THE NEWSAGENCY CHANNEL HAVE A FUTURE?
I ask this every quarter. My answer remains – Yes! Absolutely. If you are prepared to shrug off what has been traditional for a newsagency business, stop hoarding, embrace change and embrace social media – you can have a bright future. The transformation from traditional to the new world must be urgent and dramatic.
AGENCY IS OVER.
My opinion remains – there is no upside in any agency parts of the business. People saying they are proud to be called a newsagent are entitled to their view. History will show that era is behind us.
OPTIMISTIC.
I am optimistic for my own newsagency businesses and for the businesses of many newsagents. Indeed, I have opened a new outlet the last few months. It does not look or feel like a newsagency. The numbers are terrific.
WHY I DO THIS STUDY
My interest in the study is as a newsagent and as a supplier to the channel through Tower Systems and through newsXpress. I want the channel to grow for selfish reasons and because it has been my life since 1981. I am invested.
BENCHMARK GOALS.
I am often asked for benchmark goals newsagents ought to aim for. Here are some benchmarks I have developed in my work with newsXpress and through Tower Systems:
- Gross profit: this is the goal gross profit for all product sales not taking into account any revenue or costs related to any agency business. The traditional newsagency average sits at 28% to 32%. For a newsagency focused on the future, the goal has to be at least 45%.
- Ratio of Gift revenue to Card revenue: 50% minimum. The goal ought to be 100% or more. If you do $100K a year in cards, target to do $100K in gifts, or more.
- Revenue per employee – $250 an hour minimum not including agency revenue. This is a contentious KPI. If you think it is not for you, work the numbers back and see what your number needs to be based on each labour hour in the business.
- Revenue PSQM $4,500 – $8,500 depending on country vs. city / high street to shopping centre and depending of product mix. Higher GP lower revenue required.
- Overall revenue mix percentage targets: Cards: 25%; Gifts/toys/plush: 25%; Stat: 10%; magazines/newspapers: 20%; other: 15%.
- FLOORSPACE ALLOCATION: Cards: 25%; Gifts/toys/plush: 25%; Stat: 8%; magazines/newspapers: 15%; other products: 15%; office/back room / counter: 12%. It’s rare you make money from an office or store room.
- Mark-up goals: Stationery: 125%; Gifts 110%; plush: 110%.
- Occupancy cost: between 9% and 11% of revenue where revenue is product revenue plus commission from agency lines. Location and situation are a big factor in this benchmark. For example, a large shopping centre business will have a higher cost than a high street situation.
- Labour cost: between 9% and 11% of revenue where revenue is product revenue plus commission from agency lines. Labour cost should include fair market costs for all who work in the business. (See above).
Mark Fletcher.
Email: mark@towersystems.com.au Website: www.towersystems.com.au Blog: www.newsagencyblog.com.au
M | 0418 321 338
Footnote: I founded Tower Systems in 1981. That company now serves in excess of 1,750 newsagents as customers with its newsagency software. In 2005, I joined newsXpress. That newsagency marketing group now serves 243 retail businesses with a traffic and revenue growth strategy.
Hi Mark
With the gift revenue is that 45k per quarter?
If that is the case i need to address our gift dept
Yes Andy it is – $45K in gift revenue in the quarter. It is all about not seeing your business as a newsagency.
Wow, this is as bad as watching the nightly news. I’m a little curious, however, as to whether these figures are exclusive to “group” agencies, or do they include data from independent operators too. My advice is this…BE DIFFERENT. We changed card companies last year, because we got sick of “having the same crap as Coles, Target & Kmart”, & really sick of dealing with the idiots at Hallmark. It was, by far, the best decision we made for our business. We’ve had a 12% increase in card sales, with the average spend going from $3.97 to $5.07 just by dropping those ugly $2 cards offered by Hallmark. Fathers day, last year saw a whopping 39% increase on the year before, & Xmas cards were 26% up on the year before.
Our paper sales are also up, around 3% & Tatts is up around 2%.
We’ve also thought outside the box when bringing in new lines & when buying some of our traditional lines as well.
After discovering that there was a craft group in the area, I introduced a small craft section, last year, to coincide with the annual BH&G Knitting & Crochet mag, including wool, knitting needles & some gorgeous little “Bits & Bobs” tins & jars, & some sewing/knitting baskets, & it ALL sold. The craft wool ran out the door at $3 a ball, but the baskets were the big surprise at $45 each, & it was a success again this year.
What pays for us is our customers…get to know them…& I mean REALLY get to know them. Find out what’s popular with them & jump on it. Pick a couple as your “favourites & do little things for them…complimentary photocopies; a free $2 scratchie with their Tatts purchase; a couple of lollies for the kids/grandkids for behaving while mum/dad/grandparent shopped; little things like that leave an impression with people & before you know it you have yourself some free advertising. Great, personal service is a VERY RARE things these days; in fact any service at all is rare in a lot of establishments these days, & I believe great service is what will bring people back to our channel, along with smart buying. GNS is NOT the only stationery supplier, you know 😉
Don’t be restricted by your suppliers. Look for new ones, there are SO many out there just dying to do business with you, & you’ll be surprised by what you can actually get & what you can actually sell. Look at what your competitors are doing, then do it better. Our local post office sells scarves, but they were all black, grey & bleak…SO…I bought some gorgeous coloured scarves, at bargain basement prices, $2-$4, & sold them at $15-$23, (half of what the PO were selling them for). They paid themselves back after selling the first 12 scarves; & out of 78 scarves, I have only 12 left after just 3 weeks. Not bad in my books, & if I have to reduce the rest to 50 % off, I’m still making something on them. But buy smart…especially when buying cheap. Don’t just fill your carts with anything, think about it carefully & look at the product & seriously consider the price you could sell it for & whether YOU, yourself would pay that. In regards to gifts, I rarely re-stock things. I might bring in a different design in an item, but I rarely repeat it & I’m finding that customers are now buying more stuff on impulse, rather than taking the risk of it “not being here next week”.
Do Many newsagents do that or just a few?
Sal as I note in the report and hove noted for the 15+ years I have been doing this, the data includes independent newsagents as well as members of four banner groups, city and country, shopping mall and high street.
This latest benchmark report should not surprise anyone who has been following the reports.
There are many successful and growing newsagency businesses. Success does not come from one move or one range. It comes from broad, radical engagement in the business, relentlessly.
Plenty Andy. But they have been working on it for years.
Andy, join the newsXpress group and your business will improve tremendously, like mine has.
I assume where you’ve written “indecent” you actually mean independent?
I’m just curious, (again), about your stats, (sorry, I like stats). Where does this data actually come from or how do you have access to it?
How many retailers were surveyed, & of these how many were part of a “group” & how many were independent?
I’m just curious, because, as an independent retailer we’ve never been asked by anyone about how our business is travelling…just sayin’
Yes, independent Sal, as referred to in every such benchmark report I have produced.
The data comes, as I have outlined in the studies for fifteen years, from newsagents using the Tower software. Tower has more users of its newsagency software than all other software companies combined. As of right now, around 51% of all retail newsagency businesses use Tower.
The benchmark pool changes for each study and includes, usually, more than 10% of the Tower customer pool.
back when newspaper and magazine audits were published, my study would publish numbers weeks ahead of theirs and my results were often line ball with theirs.
Join a marketing and management group – you will be asked and help provided.
There is one word “Recession”.
The underlying performance against 2016 might be understated. 2017 included Easter whereas in 2016 Easter was wholly in previous quarter. Suggesting cards declined more than 4%.
For many 2017 included fidgets, affecting gifts and toys.
Fidgets helped us!
Easter is not a big enough season in most businesses to impact the result too much.
On fidget spinners there may be an impact if people located it in gifts.
Peter, not recession. It is structural change that we have seen coming for 10 to 15 years. Smart operators planned for this.
They were in gifts until we sold-out “fad only”, but good while they lasted. Thanks for sharing insights! Certainly helps to set some benchmarks to drive a sustainable business.
Mark.
I agree Easter is small, only 1.5% of cards in quarter for me. But if replicated elsewhere , cards sales were down 5-6%year on year.
In the next quarter colouring book sales will figure. This will be the 2016 quarter where early adopters made hay before the magazine industry trashed the craze.
All small effects in big scheme of things, but important when identifying trends in categories.