I have been assisting a newsagent over the last two weeks in their lease negotiations. Their landlord, a well-known national business, is insisting on an annual rental increase of CPI + 2% and a similar increase on their mandatory marketing fund contribution. For this particular landlord the increase being sought in new lease agreements is more than in recent years – a consequence of the Covid years I suspect.
The landlord refuses to consider that a significant portion of what is sold in a newsagency, even a newsagency that has transformed from the traditional, comes from products over which the retailer has little or no control on the sale price. Indeed, plenty of products in any Australian newsagency have experiences price suppression over the last five years, making newsagents worse off in real terms.
While the person representing the landlord locally appears to have no wriggle room on the annual increase, they have some capacity on the base rent. It’s not enough though to make this tenancy viable from my perspective, especially when you take on board the restrictions in the lease permitted use clause.
Through the retailer, I have provided the landlord with comprehensive data on product price history to support the request for a fairer approach to the annual rental increase as well as evidence of a typical ‘newsagency’ today to expand what is covered in the permitted use clause. They appear to be unswayed by the evidence presented.
Talking about the situation with a leasing consultant last last week, they commented that they, too, had noticed a toughening of position by several major national landlords in their negotiations with small business retailers.
I mention this today to people who stop by here, newsagents, suppliers and landlords, to encourage them to understand the pressure newsagents, especially those in major shopping centres, are under.
I ask that suppliers consider this when setting your product prices and determining the gross profit your wholesale model permits for retailers. Your decisions impact the capacity of newsagents to pay the lease cost hikes set by landlords.
I ask that landlords treat newsagents differently to other retailers who do have more control over their priced. Plenty of suppliers will back up what I have shared here.
I ask that newsagents actively consider the value of being in a major shopping centre. The value has diminished over the years. Better opportunities outside exist in many situations. If you are not happy with a lease, don’t sign it. If you have any concerns whatsoever about your capacity to fulfil the obligations of the lease, don’t sign it. If your lawyer on reviewing the lease recommends against it, don’t sign it. There are many other options.
With overheads (insurance, power etc.) up by 10% and more and the retail award expected to increase close to 5% again this year, newsagents are having to increase their sales by more than 5% and increase their overall business gross profit by one or two points to not fall behind let alone move ahead.
In my work with the newsXpress group of 200 newsagents, the key focus right now is about:
- Maximising the gross profit on every item over which they have price control.
- Maximising shopper visit efficiency (from a deeper basket each visit).
- Maximising shopper value: bringing the shopper back sooner.
- Maximising stock turn and thereby maximising return on inventory investment.
- Maximising return on labour spend: by working on operational efficiency.
Back in the day, when our channel was a government protected monopoly, these things did not matter. Opening the shop door in the morning was all we needed to do to thrive. There was plenty of business to cover parts of the business that were not performing well.
Today in newsagency businesses, every supplier, every product, every staff member must perform. There is no slack to cover failure. (Suppliers take note.)
Also today, newsagents must play further afield, further away from what has been traditional for newsagents. Fashion, coffee, greenlife, licenced product and online are all areas of tight focus for our community. We especially like exploring products people might never consider offering in a newsagency.
It’s hard work every day. It’s what we signed up for, all of us in retail and in this channel.