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

Author: Mark Fletcher

The suburban newsagency card department

This post is an update on the high street location business we opened a week ago. This is a business we purchased from the administrator of a failing specialty card and gift business. The business has been opened with minimal capex. Indeed, the only capex has been for signage.

In the middle of the shop we stuck with the existing card fixtures for the next few months while we learned about the local shoppers and what they like. The reaction in the first week has been terrific.

We took off some gift shelving that was on the top of the card unit, to create better across the shop sight lines.

Here is what the card department looks like with around 1,200 pockets filled:

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Greeting Cards

Promoting the WIN A CAR! competition to drive magazine sales

I urge newsagents to serve this coupon on POS software receipts during the WIN A CAR! promotion from Pacific Magazines. Every touch point you can offer for a promotion like this is valuable. Shopper receipts are an ideal way to reach existing shoppers.

Out of store, use the collateral from Pacific. I have used the art below on Facebook from Thursday morning this week to reach people:

The more touchpoints the better for this newsagent-only campaign.

In my own situation these touchpoints include social media, at the entrance to the business, at the weekly magazine display, on receipts and at the counter.

Experience with past campaigns like this one is that the greater the engagement the greater the sales uplift. That greater engagement is on each of us in retail. pacific has provided the collateral. All we need do is use it.

To those preparing to comment here and complain about poor magazine margin and that you have better things to promote – don’t comment. Instead, engage with this proven promotion and leverage incremental business. The alternative is you chase magazines out of your shop. There is no win from that.

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marketing

Have I wasted my money on a subscription to The Age?

In February this year, in support of professional journalism, I subscribes to the Washington Post, the New York Times and The Age. I wrote about it here and here.

In the wake of the news Wednesday that Fairfax is cutting editorial staff by 25%, I wonder if the subscription for The Age is a good move. I signed on as a subscriber to support quality independent journalism. I feel dudded. Fairfax titles already struggle because of limited journalist resources. The 25% cut will hit hard.

What is a trusted newspaper if it does not have journalists creating the product at the core of the business? As Mark Day wrote in The Australian yesterday:

Fairfax says it intends to use more contributors to fill its column­s, but it intends to pay them less. It is a recipe for disaster, for if a publishing company cannot­ offer journalistic quality, it has nothing to offer. You can’t keep cutting the core of the business because, soon, there will be no business left.

I get it that Fairfax is in a tough situation. All print media is. My outsider view is that the company should have sought savings by cutting print editions. I expect they are losing money on print at least four days a week. I say that thinking of how thin the papers are some days. It is embarrassing what we charge for what feels like a pamphlet more so than a newspaper.

My thinking is: cut the weekday editions, produce beautiful bumper weekend editions and make money off of print and drive the migration to digital for weekday. Maybe would keep a Wednesday edition but certainly not Monday, Tuesday and Thursday. Make Friday a Friday / Saturday newspaper.

Cutting loss making print editions should mean the company is better resourced to create the journalism that is its differentiator. Or am I missing something here?

The other move I’d make is to deliver a digital experience that is best-practice. Currently from fair fax it is far from best practice. As a subscriber to the Washington Post I am enjoying a terrific online news experience that also provides access to quality journalism. The digital experience itself is key, especially on a pone as I suspect the majority of news site accesses are from a phone or mobile device.

The Washington Post tech and design team have produced a platform that makes me happy to pay for access, for the experience. Their investment in quality journalism reminds me my subscription is a good investment. This is what Fairfax needs to provide. Right now, their online experience gives me too much clickbait and a browsing experience that is not ideal for the iPhone.

Cutting editorial staff at Fairfax right now does not make sense to me, not this round. Hopefully, we see The Guardian, BuzzFeed, HuffPost in Australia and others fill the gap with quality journalism as Fairfax management appears disinterested their core differentiator.

Footnote: I am serious is asking the question. It is what I first thought when I heard the news of Fairfax cutting 25% of editorial staff.

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newspaper masthead desecration

Newsagency benchmark results: Q1 2017

The March quarter was patchy for retail newsagency performance. While the overall channel performance was flat, plenty peaked and plenty troughed.

It is dangerous to look at the overall and take that as the performance metric for the channel. It is not, as many individual newsagents know.

Here are the headlines from the latest benchmark study:

  1. Gifts are the fastest growing product category. However, there is disagreement about what to call gifts with some putting toys in gifts while others run a separate toy department. Most newsagents with gifts reported double digit growth. The businesses with weaker gift sales are those with the more traditional, old-school newsagency, gift offering.
  2. Of the third of businesses with a separate toy department, year on year toy revenue is up close to double digits.
  3. Cards performed reasonably well with 2.8% growth in the quarter with everyday accounting for a strong proportion of the growth.
  4. Stationery was soft with a 1% increase in revenue.
  5. Books are making a resurgence with a third of participating stores showing a separate book department and this achieving close to double digit growth.
  6. Newspaper unit sales fell 10%.
  7. Magazine unit sales declined 9.5%.
  8. 45% of businesses have overall GP in the old-school band of 28% to 32%, 35% sit in the 30% to 35% band while only 20% run with GP above 35%. Those businesses, with GP at 35% or above, are the ones with a bright future as it is only them with the capacity to hope to weather annual labour and rent increases.

For this latest study, I have looked at data from 167 newsagencies – large and small, city and country, shopping centre and high street: Newspower, the various versions of Nextra and newsXpress as well as independent.

Overall, Q1 2017 delivered better results than Q3. Here are the overall results:

  • Customer traffic. 70% of newsagents report average decline of 1.8%.
  • Overall sales. 55% reported an average revenue decline of 3.0%.
  • Basket depth. 60% report a 1.5% decrease in basket size.
  • Basket dollar value. 65% report a decrease in basket value of 2%.

Some look at these and other data points to see how they compare and are relieved if they are not in the worst group. This is a mistake in my view.

The best way to use the benchmark results is to understand industry trends. For example, if your gifts are not growing by double digits and gift revenue is not more than card revenue then you have a problem. If you are not in toys enough to have a separate department and are not achieving growth in toys then you have a problem.

What does success look like? This is an important question as there are newsagents contemplating there is no upside, nothing worth fighting on for. I disagree. There is plenty of upside, for those prepared to create it for themselves.

I think any newsagency business can be successful, regardless of location and situation. This is more true 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.

For a glimpse of success, take a look at these data points for one newsagency for which I have seen performance data:

  • Number of sales: up 5%
  • Average sale value: up 16%
  • Average item value: up 16%
  • Average items per transaction: up 3%
  • Overall revenue: up 21%.
  • Overall business GP: 40% (no lotteries or agency business).
  • Cards: revenue up 19% and accounts for 23.8% of overall revenue.
  • Magazines: unit sales down 2% but weeklies up 3% and overall revenue contribution is only 18%.
  • Gifts: revenue up 100% and account for 35% of all revenue.

Now, before you dismiss this as being an exception. This business is long established, in a highly competitive situation. It is debt free. What sets it apart is that every decision is made based on data, not gut, not emotion, but data. The business regularly promotes outside the business and in a way that is not common for a newsagency. In-store, this does not look like an average newsagency.

Every year on year comparison report I have looked at has its own story. It reflects not only the challenges of small business retail but also the challenges of product categories, local challenges, owner challenges and more. The comparison data is a narrative for the 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?

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 has to be urgent and dramatic.

AGENCY IS OVER.

My opinion remains – there is no upside in any agency parts of the business.

OPTIMISTIC.

I am optimistic for my own newsagency businesses and for the businesses of many newsagents. Indeed I have opened a new outlet in the last couple of weeks.

HOW TO USE THESE RESULTS

Look at your own situation. Compare your year on year results with those detailed here. If you are doing worse, act. If you are doing better, celebrate briefly and then get back to it.

There is no time to lose. We are in a period of extraordinary change and challenge on many fronts and the best way to confront change and challenge is to lean in and bring it on.

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:

  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%.
  2. 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.
  3. 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.
  4. 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.
  5. Overall revenue mix percentage targets: Cards: 25%; Gifts/toys/plush: 25%; Stat: 10%; magazines/newspapers: 20%; other: 15%.
  6. 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.
  7. Mark-up goals: Stationery: 125%; Gifts 110%; plush: 110%.
  8. 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.
  9. 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

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Newsagency benchmark

Local prizes help drive seasonal sales in the newsagency

I have written here before abut the value of local prizes for driving shopper traffic. This is especially true at seasonal times, such as Mother’s Day. The right local prize can generate net new traffic when it is actively promoted outside the business.

We are promoting this beautiful T2 gift pack knowing that one of our customers will win a pack, as each participating store has their own T2 prize pack to give away to one lucky shopper of Hallmark Mother’s Day cards.

While a more valuable national prize may have a headline appeal, I have found it is easier to sell this prize will be done by one of our customers. That pitch is made even easier when the prize pack is perfectly targeted for a season  like this T2 prize pack.

The T2 pack also works as it fits well with our everyday female gift line. It compliments what we offer, making the message of the prize pack valuable beyond the season.

The newsXpress exclusive T2 Mother’s Day prize pack is part of the Hallmark / newsXpress relationship.

The total campaign has a value of in excess of $50,000. I suspect this is the most valuable Mother’s Day campaign in the newsagency channel inn 2017.

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marketing

Plug and play magazine fixtures

I like this wall of magazines I saw in Hong Kong – for the volume of stock it can hold, the ease of change and the way it displays each title – with plenty ty of the cover on show. Use similar fixtures except my pockets a a bit deeper – eliminating the need to waterfall most titles.

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magazines

The importance of exclusive products for small business retailers

Having access to exclusive products is key to differentiation for any business. In the supermarkets they use home brands to achieve this while major toy, homewares and gift businesses buy in bulk products exclusive to their banner.

Typo is a good example of an exclusive focussed business. Almost all of what they sell in Typo brand. While you can get similar elsewhere, for Typo the products are tweaked in a way to make then a genuine exclusive.

Exclusivity means price comparison is harder. It also means you can play with your offers in a way that benefits your margin. Take a careful look at Typo and you will see how they do this.

Kikki.k is another store that sells its own products – for all the reasons noted above.

I have been in Hong Kong at the gift fair this weekend, looking at products for newsXpress. At this fair, talking with buyers from major retail groups, the value of exclusivity was reinforced in a brutal way.

On one stand a small business retailer with six shops was looking at a new hot product at the same time a buyer was from a national retailer from the same country. The national retailer buyer was able to commit to purchasing one hundred times the small business retailer could commit to. In return, the buyer sought, and was given, exclusivity.

In this world of borderless retail, having products that no one else has is important. The best way to achieve this is to be as close as possible to the source of the products.

This is a big challenge for retailers who buy by themselves from everyday wholesalers.

It is also a big challenge for banner groups that don’t attend the international trade shows to access new products before their usual local wholesalers have the products in their catalogues.

Exclusivity can be accessed in a number of ways. The best approach depends on the product line and the supplier attitude to exclusivity. I have seen it work well in a range of categories, where exclusive products have been key in driving net new traffic for the the engaged retailers.

Getting the exclusive product is the start, next comes the in-store pitch, out of store marketing and commitment of all involved to make it work.

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Newsagency management

Sunday newsagency marketing tip: be an outlet for local artists

Find a wall in your shop and turn it into a mini gallery space for local artists. Make it available at no cost. Choose artists based on what you think works best.

You will help local artists and better connect you with the community.

The photo is from a shop I was in two weeks ago. On the wall they had a small showing of photos taken by a local young photographer. There was nothing commercial about it.

To me, this idea is a not brainer for any regional, rural or high street independent retail business. The more we support our local community the more likely the local community will support us.

The added benefit is the beauty you can bring to the shop.

Be a force for good: support local artists and give locals another reason to visit your business.

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marketing

Sunday newsagency management tip: dig for gold in your card data

Greeting card sales data offers newsagents terrific guidance on what gifts to stock. Dig deep into the data and you will be equipped to make better quality decisions on what gifts to stock in the business.

I was talking to a newsagent last year who said they could not sell male gifts. They did not have any in the shop. It turned out they had not had any in the ten years the current owner had owned the business. In their card data, plenty of male birthday cards were being purchased. A quick dig provided demographic and other information.

Greeting card sales data in a newsagency business is one of the best resources to mine if you want to grow gift sales.

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Management tip

Magazines in specialty retail

In the US last week I saw Tiger Beat magazine in several Claire’s stores. Claire’s is a value-based fashion store targeting girls 8 through around 15.

This was the first time I had noticed a magazine in a Claire’s.  So, I suspect this is a publisher arrangement or promotion.

It makes sense when you think about it, pitching a special interest title in a retail chain that perfect fits with the demographic you are targeting.

I have seen this plenty in overseas retail in the last year – magazines in specialty retail situations where you would not in the past have seen magazines. While I am not aware of it being widespread in Australia I suspect we will see it as magazine publishers explore other go to market strategies through which they can reach their target reader.

Newsagents are effectively encouraging magazine publishers to consider alternative routes as we continue to dilute our commitment to the category. I note we are doing this with good cause – poor margin, a challenging supply model, increasing labour and retail space costs – all making the category less appealing than ever.

As we diversify our businesses I think we can be more specialised in our magazine offering. However, it is hard work to achieve this given the current model.

Good on Claire’s for pitching Tiger Beat. You can tell from then placement they consider it to be an ideal title with which to signpost the store. Each shop I visited had the stand in the same location – just inside the door.

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magazines

It’s the massive jackpot that lures gamblers

Talking to someone who knows a bit about gamblers today and they pointed out that it is the massive jackpots Lottoland offers that worry them the most. We were talking about as I got a new pitch by email today:

Given their betting and online-only model it is easy for them to pitch and sell.

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Lotteries

News Corp. Play Doh promotion offers newsagents little incentive

I have been contacted over the last two days by several Queensland distribution newsagents this week about the Play-Doh promotion being run next month by News Corp. promoting their Courier Mail newspaper.

This blog post is for them.

The main complaint is the meagre margin of 11 cents per item sold. Distribution newsagents receive this eleven cents for handling the promotional product. This will not cover labour, space and shrinkage in handling the product.

While News Corp. will say the pay-off for newsagents is increased sales, I doubt the company would accept that response if a supplier of theirs used the same argument. Indeed, given the slim margin for newspapers the bump i sales would have to be extraordinary to make the promotion profitable.

News Corp. needs to listen to newsagents on promotions like this. The old school way of doing things, as is reflected in the promotion, is not appropriate to today. In fact, it disrespects newsagents.

When a supplier expects a newsagent to provide labour to support the supplier business they need to compensate the small business newsagent fairly. Newsagents have no capacity to hire staff to work for as little as News Corp. is paying for this promotion.

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Newspaper marketing

Recasting the image and appeal of the newsagency

We are preparing to open a business a new location in a high street situation in suburban Melbourne.

As part of the process of preparing the business we have been looking at our messaging inside and outside the shop. We wanted messaging that reflected the style and emotion of the business.

Here is art we are using for the first three months. I say three months as we will be chasing the art regularly.

This poster will run across the lower part of the front window, facing the street, as well as inside the store. It is not the only positioning collateral we are using. I will save those photos for another time.

While trading under a brand, major international product brands feature on the shingle and elsewhere in the business. These, coupled with the emotion-focussed posters above, pitch the business in a fresh way and in my view a better way than a newsagency shingle would.

The shop itself was a card shop until the owner put it into administration just before easter. We had a day to make a decision and move, which we did, acquiring the business from the administrator. The shop will open sometime next week and evolve over the next few months as we play with fresh ideas before we settle on what the model actually looks like.

This will be a hybrid business. It has no lotteries or tobacco products and will only have limited papers and magazines. The shop will primarily offer cards, gifts and collectibles.

What I am doing here, investing in a new retail location, reflects my optimism for the channel, regardless of the shingle under which businesses trade.

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Newsagency management

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About us

Here is a way to find out the magazines your customers want you to stock

I like this sign I noticed in a magazine shop I visited last week. I like it for several reasons: it shows shoppers the business can get more titles than are currently stocked, it involved the customers in the process and, it shows the business acting as a place that cares about magazines.

These are all important factors if you see yourself as a magazine specialist, or at least a retailer doing a better job with magazines than supermarkets.

I have used signs before but not one like this. I think I will give it a go.

I know of newsagents who comb the list of titles available from Gotch and request what they think might work. I applied their initiative and action. But there has to be an easier way.

The poster in then image with this blog post is of itself not an answer either as it takes care of the customer side while on the supply side there continues to be a disconnect when it comes to us getting titles we think we can sell.

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magazines

Why I think Tatts will be a challenge for retailers regardless of who owns the company

I don’t see any reduction in the challenges for lottery retailers from a change of ownership of Tatts Group.

While the company is clearly in play with reports last week about Kohlberg Kravis Roberts restating their desire for the company and the on-going pursuit by Tabcorp, I don’t see how an acquisition can improve the lot of retailers.

Let’s think this through. The successful suitor will need to demonstrate prospects for a good return for their share price to benefit … and driving share price is the single most important goal of any public company.

To drive share price they have to pursue value. Value is driven by efficient, friction-less, customer engagement. Efficient, friction-less, customer engagement for lottery purchases is about online, mobile to be more specific.

That game of in-store lottery purchase versus online is over. Online has won. Those who disagree don’t realise yet that online has won.

You only have to look at what people are purchasing online, how and when they purchase and the purchase volume.

That I can purchase lottery tickets in seconds and easily sign up for a subscription is what I as a shopper want. I am sure it is what many shoppers want. It is also what I would want to see from tatts if I was a shareholder.

Sure, there are plenty who like the trek to the shop, the banter at the counter, the manual ticket check and the re check in your shop. I think those people are diminishing in number.

Based on their tech investment, tatts thinks this too. So does Tabcorp based o their online and mobile tech investments.

The only thing that may change user a new owner is the capex requirement around in-store infrastructure. However they play it, it won’t be good news for retailers.

If you have lotteries i your shop and are hoping for a new owner to make things easier for you, I suggest you don’t wait. Rather, work today to make your business strong and diverse so it has a future without lotteries.

Tatts is talking down online at their current round of retailer briefings. They say online has plateaued.

Here is the evidence on which Tatts relies to say online has plateaued. It is wrong to make the claim based on such limited data. You need to see the numbers a year and two years out. You also need deeper analysis of the data and not just the topline numbers they have released.

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Lotteries

Sunday newsagency marketing tip: events are terrific traffic drivers

In our retail businesses, with such a diverse mix of products and specialisations, we have wonderful opportunities for hosting closed-door events.

Each event can target a special interest or a demographic niche that is of value to you. Each is an opportunity bring new people to your business.

This type of marketing activity is 100% on the retailer and not suppliers.

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marketing

Sunday newsagency management tip: look at the right data

A newsagents I was speaking with recently expressed concern about sales. I took a look at their data and saw healthy numbers. Whereas they were looking at data for two weeks, I was looking at data for three months.

Comparing trading periods with less than two weeks data is dangerous. You need at least three months, preferably longer.

In my own businesses I look at three months and then compare over a longer period.

Anything shorter than three months can skew your perspective. Seasons, for example, can impact and this is heightened with a smaller data set.

Comparing the first six months of a year with the year before provides a cleaner, smoother analysis and this is what you need for uncovering real trends being experienced by the business. Looking at two weeks is dangerous.

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Management tip
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