RETAIL NEWSAGENCY SALES BENCHMARK: JULY – SEPTEMBER 2017 vs. 2016
New product categories key to helping newsagents overcome collapsing magazine, newspaper and stationery sales.
The July – September quarter continued the tough year for traditional products in Australian newsagency businesses.
The gap between businesses enjoying success and those challenged increased.
The traditional newsagency has no future. That is, the business with newspapers, magazines, lotteries, stationery and cards. Quarter after quarter, the performance on those businesses continues the trajectory of declining traffic and revenue, which can only end in closure.
At the other end, businesses that have diversified into products that are not traditional in range and price point for newsagencies are more likely to (but not always) find success.
Business closures.
Before I get into the benchmark results, I want to address another data point, store closures. It looks like 2017 will end with between 400 and 450 newsagency business closures. The number is difficult to tie down given there is no one place all newsagencies are registered.
The question is: – is this rock bottom, is the closure number for 2017 the worst we will see? Only time will tell. I suspect 2018 will be an equally tough year. I say this based on the number of newsagency business owners who refuse to dramatically alter the course of their businesses, expecting traditional suppliers to bring the change necessary to turn the business around.
The reasons for closure vary from financial trouble to lease costs to retirement to in ability to sell and no will to keep running the business.
Business performance data do not lie. The best performing businesses in the newsagency channel, which includes businesses some would no longer call newsagencies, are those trading away from traditional categories. These businesses still have some of the traditional categories but they do not rely on them at the core of their businesses.
Business closures can be avoided, if there is will, early will, on the part of the business owners. There are plenty in the channel who can provide real help. The key is to ask.
Benchmark headline numbers.
Here are the headline numbers by key product category:
- Magazine unit sales declined 13.5%.
- Greeting card revenue declined 4%.
- Lottery revenue declined 2%.
- Newspaper unit sales declined 12%.
- Gift revenue increased by 13%.
- Toy revenue increased by 12%.
- Plush revenue increased by 14%.
- Stationery revenue declined 11%.
The above percentages reflect the overall performance of the 173 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.
What is concerning is the pace of decline of what were once core traffic generation – magazines and newspapers.
Newsagency businesses that are not engaged with a net new traffic strategy are heading for trouble.
Newsagents need to manage the overhead cost of newspapers and magazines. Labour, space and capital investment must reflect the gross profit contribution of these categories.
Stationery was a challenge this quarter. Looking more closely at the data, it is the higher volume business, OfficeSmart type volume business, where there are challenges.
That card performance this quarter matches the previous quarter is a concern. Looking at stores reporting growth, one factor is how cards are managed – active management by the business, as opposed to the card suppliers, is key. The card department is no longer a department we can expect to work without management support.
GOOD NEWS.
Yes, there is good news.
- One store achieved $58,000 in everyday and higher end plush sales in the quarter, up 20% from the same quarter a year back.
- A suburban store grew plush to $17,000 in the quarter, up 30% on 2017.
- A regional high street store grew gifts to $38,000 in the quarter, up 22% on 2016.
- A small country town business entered toys earlier this year and in the July – September quarter tracked $4,900 in sales in a category in which they had no presence a year earlier.
- A suburban newsagency entered the games category this year and booked more than $8,000 in revenue from games in the September quarter. That is 100% new business.
- Plenty of businesses reported gift revenue growth of 20% or more. These are city and country businesses, high street and centre.
Looking more closely at the businesses enjoying growth, it comes from hard work in the business, relentless hard work.
OVERALL PERFORMANCE DATA.
- Customer traffic. 75% of newsagents report average decline of 6%.
- Overall sales. 59% reported an average revenue decline of 3%.
- Basket depth. 66% report a 2.5% decrease in basket size.
- Basket dollar value. 62% 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. Of this latest dataset: 64% 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, 2%, 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?
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.
We can grow sales of legacy products by bringing people into our businesses from other reasons. Once in-store some will buy papers and magazines.
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 has changed – not in the form Australians identify as a newsagency.
AGENCY IS OVER.
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 businesses and for the businesses of many newsagents.
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
Thanks Mark. I fully agree with your analysis on our channel.
But for the solutions to overcome the decreasing in-store traffic, bring in new categories can be the magic bullets for certain type of shops, but not for the whole channel.
I read an article analyzing Chinese “new retail” concept stores and future retail solutions. The takeaway is
1. Omni Channel and O2O implement is the requirement. and Mark, you had start some of the implement with Tower System and newsXpress group.
Other implements innovate the supply chain and logistic operations in national, state, area, and store level.
2. Customer management is the focus of retail operation, to find new customers, communicate to the customers, increase customer stickiness and lifetime customer value. The article provides case studies on new POS systems in China and their implements in new concepts stores.
One concept store, http://www.freshhema.com, has many storeperson manage a WeChat group of 200 customers. They has quick response to the WeChat group, on business hours.
I haven’t fully understand the article, and has very little knowledge on the change. From my initial thinking, our stores has built to retail, and focus too much on products, and our POS technology has very limited functions on customer management.
Although it is sad to see those 400-450 newsagents close the doors, I see what is happening in the newsagency channel is similar to what has occurred in the book industry over the past 5-10years. Now we are seeing better quality book stores pop up with additional revenue streams.
For me, I see opportunity.
Many of those 400-450 newsagents were poor retailers. There are now opportunities for better retailers to make a quality business out of one that has failed.
Its a sobering set of numbers not just for newsagents but for suppliers that rely on them.
I find it interesting that you report lottery sales have declined 2% given tatts reports (both public and private) shows growth of 4% over the same period. Any reason for this large variance? Perhaps your survey is not representative.
Jim it is hard to say if it is representative without a deeper dive into the benchmark data and into the Tatts store transactional data.
Tatts aggregates all sales. It therefore captures new store openings and closures. Whats your methodology?
Jim, it’s as I have noted in the reports for years. I get data from a changing mix of businesses of all types and multiple banners and independents. I look at the reporting quarter from the current year and data from the same period a year earlier. Each analysis includes between 150 and 190 stores. The analysis is always on a same store basis – i.e. no tainting by store openings and closings.
Sure, but how do you arrive at the 2% decline for lottery sales? Is that the median decline of all stores? Is it the mean decline of stores that reported a decline only? I’m not sure what to make of the number.
It is the average result for lottery sales for the stores that report lottery sales through their POS software.
So if 50% of stores report a 2% growth and 50% of stores report 2% decline you get a 0% average?
That could be why if larger stores are growing their lotto the dollar amounts would be higher IE a 5 million dollar store putting on 2% would be more then a 1 million store losing 2%?
My math is bad so excuse me if im wrong here
Michael the calculation is based on all data, not the average of groupings.
A core goal of the benchmark is to have newsagents look at your year on year comparison data, for their own store. This is what matters most: how you are doing and what you are doing to attract new shoppers and guide the relevance of your business into the future.
Tatts growth includes online and non newsagency sales. Marks shows Newsagency only so the difference in the decline to overall increase in what tatts is declaring may simply be due to the migration away from newsagency to other lotto selling channels ?
Michael the tatts figure of 4% growth is purely network sales not online. That wld include non newsagency outlets, which typically represent the bottom agents in the rankings.
My point is the benchmark study is understating lotto sales performance. The other categories seem to fit the anecdotes better.
Jim, it is dangerous to assume non newsagency outlets typically represent the bottom agents in the rankings. There are plenty of exceptional, growing, non newsagency outlets. In South Australia, for example, you have the On The Run network about which I have written here several times.
All I know about the results in the benchmark is that they represent the data provided me.
Hi Mark, thanks for sharing this information.
In Ireland we just don’t have access to such benchmark studies or marketing groups. Most Newsagents became Convenience Symbol Stores.
The following Q3 results are from my own store, Town Centre High Street Location, and might be of interest to others, just to give a Global perspective of the industry.
Southern Ireland (Not part of the UK)
Newsagent Q3 JULY – SEPTEMBER 2017 vs. 2016
Magazine unit sales declined 20.64%.
Greeting card revenue increased by 2.4%.
Lottery revenue declined 10.22%.
Newspaper unit sales declined 14.8%.
Gift revenue increased by 179.8%
Toy revenue increased by 26.3%.
Plush revenue increased by 158%.
Stationery revenue declined 13%.
I have been reshaping my Store’s future with a lot of help and advice from the posts and comments found here.
Regards,
Justin
Whilst I can appreciate the tone of the report, I find the selective quoting of numbers on differing basis undermines my confidence in any particular number.
EG :why are we informed that 59% of the 173 participants have an average revenue decline of 3%. We are not informed how the other 41% performed nor whether the % revenue for all is above or below 3%
We also have the section on gross profit, to my understanding the 173 did not provide profit numbers nor cost percentages. Some other source of data has been used to make the GP statements. Are they relevant to survey, maybe, but their inclusion should be caveated as such.
The sales falls for magazines, papers and stationery are shocking. If unit sales of magazines are down 13% from existing outlets and 450 or 10% close in the same period, then units sold through newsagents fell 23% in the period. Think about that number, Gotch is reporting sales to the publishers sales declines of 23% year on year with 2018 likely to be similar. This is cliff edge stuff, it is not sustainable and the same applies to newspapers and stationery distributors. No wonder you have dropped your ‘every newsagency can survive’ mantra.
Colin, what I quote in the report has evolved over the years. It takes considerable time to collate and assess the data. I have pulled back from some detail that people were not responding to.
Mark, if you do not dispute my observations on the report, this is tantamount to agreeing the report is misleading. My first point on revenue decline is not to be dismissed. If traffic is down 6% and average spend is down more than by each customer 3%, then sales revenue must by definition be down by more than 3%, the decline would be 9%. If it isn’t down by 9%, then the numbers quoted are meaningless and inaccurate.
The 20 – 25% decline in magazine, newspaper and stationery sales in the channel warrants a discussion in its own right. All newsagents need to be asking themselves, with 10% of the competition withdrawing, why are sales in these categories still down 13%. The withdrawal of 10% capacity is masking the true size of the issue facing newsagents.
Another point also comes to mind. If there is a 13% decline in numbers of magazines, newspapers and stationery then why isn’t basket depth and dollar value up. The fact it isn’t suggests these revenue losses are being replaced by items of lower value. Again, the numbers quoted do not identify or address this conundrum.
Maybe reality is just too shocking to report ?
Colin don’t read into me not responding to your various twists and turns as having the meaning you claim.
There has been a discussion in declining newspaper and magazine sales here at this place for the last thirteen years as well as the various sessions I have run. It is up to newsagents as to whether they react in their businesses.
You also seem to link the closures and the sales declines in the benchmark report;. There is no link given that I am reporting on a same store basis, as I have noted in previous comments and in successive reports.
Your assumption about cause and effect re declines and basket depth is misplaced. There are plenty of newsagents who are selling less in volume but for higher per item prices and higher per item GP.
There is a shift occurring in the channel, as I have noted over successive reports. One can no longer apply newsagency business assumptions to the numbers reported.