A blog on issues affecting Australia's newsagents, media and small business generally. More ...

Author: Mark Fletcher

The plight of major toy retailers could benefit independents, like newsagents

With Toys R Us in the US set to close or shrink dramatically and some other national retailers in the same or closely related space reported to do the same, opportunities could rise for independent retailers, like newsagents.

While the major pain for suppliers to national retailers is in the US, the impact will be felt worldwide.

Suppliers are drawn to national retailers as there is one the head office to deal with. However, a crash of a national business can have far more of an impact than the crash of a single retailer. The downside is the cost of managing many smaller accounts is higher.

In my opinion, serving many small business customers is better for business than serving fewer much larger customers.

This is a pitch we in small business can make, especially to toy suppliers who may be in pain as a result of the Toys R Us situation, which will cost some many millions in uncollected debts and considerably more with the closure of retail outlets.

Revenue from toys is growing in engaged newsagency businesses, especially in the brand name area. Getting these products means dealing direct with the manufacturer or their authorised Australian distribution network.

The low end of toys, cheap unbranded toys, is flat with discount variety stores selling cheap product for low margin. This end of the market is of no interest to me.

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Newsagency opportunities

Unplug magazine from Bauer Media reflects a problem with the magazine supply model

Unplug magazine was released in late January. We received 17 copies. We have sold two copies. This makes the title unprofitable for us. It is not even paying for the space necessary to store the seventeen, thick, copies.

There is no evidence in our data to justify being sent 17 copies of a launch issue in the crossword / puzzle space.

I am over magazine pub fishers using small business newsagency channels as their bank and business partner in the launch of new titles. Rather than testing and topping up if a title sells well, they load us, make us responsible and apply onto our businesses costs that see us carrying a financial burden that is unreasonable.

I would have preferred to receive no more than five copies of this launch issue. Given the transparency back to the publisher of sales, replenishing supply is easy. Instead, they load us and add to our costs of their launch.

On the magazine itself, I look at it and ask why was this even launched. We have been flooded with similar titles. Unplug looks like a copy of Breathe and others in this mindfulness puzzle segment. As a retailer looking at efficient assortment, I don’t see a need for the title. If I was a buyer in control of what I buy to stock in my business, given what I already have, I would not buy this title.

Unplug is not a bad magazine. However, it has entered a crowded segment, late. This is why I have no interest in stocking it.

We do not have the luxury of choosing the magazines to stock. This makes us weak. It positions us as victims. Okay I accept we get new titles. What frustrates me is the volume. The seventeen copies of Unplug is too many. It is an abuse of my business. Shame on the magazine model that allows it to happen.

It is 2018 people. More of this and more newsagents will cut back magazine space as doing this is the key step we can take to control what we receive.

Other magazine publishers need to take note.

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magazine distribution

Lovatts increasing magazine supply without justification

Lovatts Media has increased supply of several titles in situations where data show there are consistent returns. I see no evidence in sale or return data supporting an increase in supply. I see no evidence in current issues indicating a supply increase was warranted.

Lovatts senior management had previously advised they do their own allocations. Assuming that is the case, Lovatts has failed my small business, and maybe many others. Check your data. If my assumption is wrong and Gotch controls  allocations, then it is Gotch that has failed newsagents with unwarranted increases in supply.

Every magazine publisher needs to understand their situation on the shop floor in newsagency businesses. Every time a newsagent sees unjustified oversupply it encourages them to consider other steps to fight back. These other steps can include moving the location of magazines and cutting floorspace for magazines.

You could look at the screen cap I have included with this post and say: hey, it is only four extra copies. The is true. However, it is four extra copies soon top of what is being returned. This title from Lovatts has a 50% failure rate.

Their increase in supply increases the extent of the failure. It extends the financial risk to my business as I carry the cost fo theft. I also carry the cost of labour for product management and the cost of space for placement of the extra stock, which will not sell.

The problem here is a problem for every magazine publisher to contemplate and act on.

Newsagents are not the compliant agents of yesterday. Today, newsagents are more likely to be retailers looking carefully at what they make per square metre of floorspace. The failure of a single magazine to sell is far more a problem today than a few years ago. This is because more and more of what we sell has a GO% of 50%, sometimes more. The 25% from magazines puts the category more under the spotlight.

Lovatts needs to take control of this issue and immediately audit all supply situations. Given data available, Lovatts management could have an understanding of the scope of the problem in a few minutes. It will be interesting to see of Lovatts acts, to see if they care about newsagents.

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magazine distribution

ALNA makes the case newsagents are here to stay

Adam Joy, CEO of ALNA, has written for Convienence World making the case that newsagents are here to stay.

It is good to see the national association making this pitch on behalf of the channel.

The central thesis of the article is that newsagents embracing change are the ones with businesses that are here to stay. What the changes are will vary by business.

Click on the image to see a larger version.

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Newsagent representation

Green shoots can come in all colours, shapes and categories

The green shoots to which I referred in my latest newsagency sales benchmark report can come in different shapes, sizes and categories. These two receipts represent an example of the green shoots to which I refer in the report.

These receipts are from one of my newsagency businesses newsXpress Southland. They are a day apart. Each reflects a single sale, from a single category of product not common in newsagency businesses.

They two sales are part of plenty of sales this week from the same category.

Some of the sales came from shoppers new to the business, attracted by social media engagement.

The wins are: new traffic delivering good margin revenue from a new product category, which is leveraged into on-going business.

These receipts are one example from this business. There are plenty more, plenty of other categories, plenty of green shoots stories out there in plenty of newsagencies.

Each green shoot in any retail business is an opportunity for leveraging more success, and should be celebrated.

There is no big secret here. Any retailer can play outside tradition. Some playing works, some fails. Failure is goof for the learning.

The receipts are presented as evidence of success that can come from playing outside what has been usual for newsagency channel businesses. They are also presented as motivation.

For each of us in business ur success is ours to pursue and own.

Yes, this is a newsXpress. I know that will bother some. I don’t care. What I do care about is that there are newsagents who need motivation to work on their business, to find new traffic, to sell better margin products not common for the channel. Either case this for yourself or join a group, any group, with a track record of helping you achieve this. But to NOT do nothing.

Footnote (17/3): On the particular transaction covered in the second receipt, the store manager has been on leave and I have left the issue of the apparent GST mistake for them to investigate as I am overseas. This investigation was done yesterday, Friday. The receipt is wrong because some items in it were flagged in the stock file, incorrectly, as GST free. The items were new to the business the day before and received into the software the day before. The GST flag for the items has been corrected and remedial steps taken to ensure BAS reporting for the quarter is correct. The software has a GST audit facility which would have caught this too.

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Newsagency management

Is there a supply problem with Big League?

I have heard from a couple of newsagents this week about delivery problems with Big League, the NRL magazine. In one case the problem occurred for much fo last year with Gotch unable to resolve it.

The time involved is considerable and it is billed. The newsagent has to say it did not arrive and that process, as many newsagents would know, is inexact and can lead to a time consuming fight to get a credit for stock never received.

Are you experiencing supply issues with Big League magazine?

I connected with the publisher yesterday on Twitter about this:

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magazine distribution

Bitcoin in Australian newsagencies … but why?

The news that Bitcoin can now be purchased in some newsagency businesses in Australia has got a bit of a run in the media, including the AFR.

Cryptocurrency punters are now able to buy bitcoin and ethereum from 1200 newsagents across the country with nothing more than a digital wallet, $50, an email address and a phone number.

The move makes it easier for people interested in investing a small amount of money in cryptocurrencies to purchase bitcoin or ethereum, without needing to navigate the process of doing it online.

For newsagents, it’s also providing a new reason for shoppers to come into the stores, while newspaper and magazine sales decline.

The AFR journalist who wrote this, Yolanda Redrup should have done more legwork. I doubt Introducing Bitcoin to a business will boost valuable traffic. It is agency business. The commission will not cover adequately for the time necessary.

While some newsagents prefer agency revenue, many have long ago left that world for more valuable and higher margin retailing.

Adam Joy CEO of ALNA commented for the AFR piece:

“Newsagents have many ways to innovate that are much less concerning and fall within regulations and safeguards. For example, embracing omni-shopping with mobile apps and an online presence that integrate with in-store shopping,” he said.

“When looking at cryptocurrency in particular, businesses need to be aware of the level of illegal activity and lack of transparency attached to cryptocurrencies.”

I agree with him.

In my opinion, the Bitcoin move like other agency products on the Blueshyft platform are leech products and services that leverage existing newsagency traffic and that do not offer adequate compensation for the work involved and the risk to the business.

That said, from a tech perspective I am not imposing any barrier to agency products like this on any platform with which I am involved.

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Newsagency management

Talking about the future

I am grateful for the opportunity to have been part of the conference newsXpress hosted in Melbourne yesterday where terrific opportunities for transitioning newsagency businesses were discussed. The large room at Crown was full:

The agenda was varied and included presentations on products never contemplated before in newsagency businesses as well as an exciting magazine title promotion and plenty of good margin deals.

For me, however, it was the products through which we can reach shoppers who might not usually contemplate our businesses that interest. I firmly believe that our buying is a key factor in the new traffic we attract to our businesses. Get the buying right and all other activity necessary to get new people into the business flows.

It is vital for every newsagency business owner to be thinking ahead and planning on attracting new shoppers. There is no more important task we can undertake.

I am a Director of newsXpress. If you want to find out more about the opportunities this group offers your business, please reach out to National Sales Manager, Peter Francis: 0423 298 020.

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Newsagency management

Why I am not interested in a convenience model in any newsagency business I own

Convenience retail is highly competitive the world over. The channel is dominated by big players, national and multi national businesses with deep pockets, lucrative supplier relationships and the competitive advantage of centralised, efficient decision making.

A single locally owned convenience business has an uphill battle. It is not impossible, but it is tough.

The prime proposition of any convenience is convenience, location.

The secondary proposition is value, price.

While there are other propositions, they fall a long way behind, in my view, location and price.

A convenience focussed newsagency with a national brand convenience store nearby and / or fuel based convenience offerings nearby will always struggle. The brand awareness of the national brands counts for plenty as shoppers know what to expect.

While an indie retailer may pitch on price to compete with a national c-store, they will not have the capacity to negotiate the same buying price points nor will they have the resources to subsidise price. On top of this, they will rarely have the ability to market in the same way a national c-store will, especially in-store with price messaging.

So, to me, operating a convenience business feels like a tough battle.

I see more value in pursuing other retail segments, where differentiation is easier, shopper passion is higher and return business more certain. In such a business the margin dollars per purchase are higher, competition is less and people are more likely to travel by choice to shop with you.

An Aussie newsagency in any location can specialise in higher margin product categories. It takes research to understand the opportunities and maybe time to negotiate product access. However, the result can be a business that is more easily run, relying on less foot traffic, needing less of a perfect location.

This approach to me feels more strategic, long term and valuable in terms of overall business value. It is a business that is more easily marketed externally and harder to compete with.

Further, niche specialty retail is less likely to attract a national or multi-national retailer as competition. The competition is more likely to be online and while, for sure, this is a tough thing, you can look and understand an online competitor more.

Kudos to newsagency operators doing we’ll out of a convenience model. More power to you.

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Convenience retail

Gotch rejecting returns

Newsagents are having returns submitted to Gotch rejected by the company. Tower support people have check rejected files as have XchangeIT people – both parties say the returns files are to standard. The problem appears to be at the Gotch end. It looks like something has changed at Gotch over the weekend.

UPDATE: 4:35pm. Gotch says the number of stores affected is 36, that they do not know the cause and that they are working on it at their end.

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magazine distribution

What to do if traffic in your newsagency is down

If traffic in your newsagency is down and revenue down as a result, you must act. A traffic decline that is more than a blip or related to obvious factors such as street construction or major weather events demands a response.

Doing nothing is not an option. Complaining achieves nothing.

You must act.

  1. Make your business more appealing to new traffic.
  2. Reach outside your business to attract the new traffic.
  3. The more different your response to what you have been doing the better the opportunity of finding new traffic.

Okay, I get that these three points are simple and not detailed. That is deliberate for this post. My goal here is to stat what I see as the obvious: if you do not make changes in your business you cannot expect to alter the traffic and performance trajectory of the business.

You make your business more appealing to new traffic by engaging with new products and product categories.

You reach outside your business through smart and fun Facebook posts that you boost.

These are things any newsagent can do.

If your traffic is down, these are things you must do. The alternative is that you complain next month, and the month after, and the month after that traffic is down. What kind of business plan is that? It’s not, that is my point.

No supplier owes you a solution, no landlord has to fix this for you. Falling traffic is your challenge to lean into and to resolve.

I have seen it resolved. In fact, a dead business I took over less that a year ago is an example of this, an example of recasting the business for a new traffic future.

Success in approaching the declining traffic challenge will demoed on how far you are prepared to go, how different you are prepared to pitch your business outside of what it has been known for. This is difficult if the only retail you know is newsagency as recasting the business involves significant steps away from that traditional business.

Ask for help. Seek to be challenged. There are plenty out there who willingly help retailers recast their businesses.

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Newsagency management

Lost data can impact the sale of your business

A newsagent experienced a computer outage recently, losing weeks of data. The data was lost because they backup they thought someone else in the business was doing was not being done.

This business is on the market. A prospective owner doing due diligence could have questions about the gap in business data. This could impact the purchase price.

There is no excuse for not having a current data backup. It is essential for the swift recovery of accurate current business data in the event of hardware or other malfunction.

There was a sale last year that was held up because of data related issues that challenged trust.

Data backup is essential today and for what might come in the future. 

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Newsagency management

Some green shoots in December quarter sales data for Australian newsagents.

I have just, finally, completed analysis of the benchmark data provided by newsagents as part of my regular channel business performance study.

The October – December quarter sales data indicate a better result for magazines in Australian newsagencies with the rate of sales decline falling.

Benchmark headline numbers.

  • Magazine unit sales declined 9.5%. What is interesting is the weeklies. The average decline there was 6.9%. This is good news in that the decline has slowed.
  • Greeting card revenue was flat. However, one reported year on year growth of 17% with plenty at close to 10%.
  • Lottery revenue declined 1.6%.
  • Newspaper unit sales declined 12.5%.
  • Gift revenue increased by 15%. This is good news for those strong in gifts.
  • Toy revenue increased by 8%. This is good news for those strong in toys.
  • Plush revenue increased by 11%. This is good news for those strong in plush.
  • Stationery revenue declined 10%.

The above percentages reflect the overall performance of the 168 newsagency businesses in this benchmark study – large small, city country, in groups and solo.

The results for magazines represent the best quarter in the 2017 calendar year.

OVERALL PERFORMANCE DATA.

  • Customer traffic. 72% of newsagents report average decline of 4%.
  • Overall sales. 43% reported an average revenue growth of 3+%.
  • Basket depth. 46% report a 1.8% increase in basket size.
  • Basket dollar value. 49% report a increase in basket value of 4%.

THE MOST IMPORTANT DATA FOR NEWSAGENTS

This benchmark dataset provides newsagents something to compare with. The more important analysis is for newsagents to do your own comparison for their own business for these comparative periods. We are our most important competitor.

If your numbers are not as good as you want, things must change for if they do not change the trajectory will continue.

What is your intention for 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.

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:

  1. 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%.
  1. 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.
  2. 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.
  3. 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.
  4. Overall revenue mix percentage targets: Cards: 25%; Gifts/toys/plush: 25%; Stat: 10%; magazines/newspapers: 20%; other: 15%.
  5. 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.
  6. Mark-up goals: Stationery: 125%; Gifts 110%; plush: 110%.
  7. 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.
  8. 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).
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Newsagency benchmark

Anonymous mail

I have received four pieces of mail over the last two weeks from people asking me to publish material related to entities serving the newsagency channel. Each piece relates to national organisations in the channel.

One piece is highly critical and, I suspect, if published, would be open to legal challenge. The pieces are not related to businesses my businesses compete with.

Those who sent the material, and it may be several people, want this blog to be used to serve their agenda. They should find their own platform.

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Newsagency management

Pitching to older shoppers

I like this sign I saw in a US clothing store. Through this sign and elsewhere in the business they pitch to the older shopper and those who buy for them, in a fun and disarming way. Their in-store signage approach is more direct and obvious that what we tend to see in Australia.

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marketing

New faith based cards driving new shopper traffic

We have had several ranges of DaySpring faith based cards in store since prior to Christmas, long enough to get good data to access performance.

In addition to being added to baskets of existing shoppers, the DaySpring cards are helping us attract new shoppers to the business. We are doing this through a thoughtfully crafted social media campaign that seeks to reach people we think could purchase these cards.

Customer feedback has been wonderful.

DaySpring is a Hallmark subsidiary. These cards have never been available in newsagencies or regular card shops in Australia before. It is new ground we are grateful to have the opportunity to tread.

What we are finding is that the DaySpring cards have brand appeal, broader than one may think when you loom at the cards and realise that each contains a bible verse related to the sentiment expressed.

I know one newsagent who has the range who sold $165.00 of the cards to one customer in one transaction … yes, the customer was that thrilled to find the range.

The DaySpring shopper is more likely to purchase multiple cards in a single purchase, making them more valuable than the average card shopper.

We have the range in a spinner, which we move to interrupt destination traffic in-store and thereby have more retailers see the range.

Footnote: the DaySpring range is part of the newsXpress product exclusivity project that delivers newsXpress members access to products they are unable to source elsewhere, providing a range advantage. I am a Director of newsXpress.

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Greeting Cards
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