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

Author: Mark Fletcher

Government misses tax break opportunity

Wayne Swan, Treasurer, and Craig Emerson, the Minister for Small Business tonight are making plenty of noise about the Government’s decision to increase the tax break for capital investment in small business – from 30% to 50% for items purchased prior to the end of this year.  Their joint press release outlines examples:

The increased Tax Break provides small businesses with an even greater incentive to invest in new capital items, such as computer hardware and business vehicles, and to make capital improvements to existing machinery and equipment.

While the 50% tax break is an incentive, I’d note that computer hardware without any form of software is no investment at all. 

If the government was serious about helping small business improve productivity they would have extended the temporary tax break to business software, especially Australian business software.

Smart business software, coupled with quality hardware and appropriate training could help a small business better cope with the challenges of today’s marketplace.  Indeed, good software could help small businesses more effectively compete.

This is a missed opportunity by the Federal Government.  I was the only newsagency representative to make a submission on this.  Unfortunately it did not achieve its goal.

Disclosure: I own Tower Systems, the software company serving more newsagents than any other – in excesss of 1,600 Australian newsagencies.

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Ugh!

Magazine numbers improving?

The performance of the Women’s Weeklies segment of magazines in newsagencies is a good indicator of overall health of the magazine category.  I am seeing sales data which indicates that the year on year decline of 10% and more which we experienced in January through March has slowed.  The more recent average year on year performance from a small group of stores over recent weeks has been 2%.  While the period is short and the dataset is small, I am watching to see is this is the trend.  I’d be interested in sales results from others.

The Women’s Weeklies segment includes key high volume titles: New Idea, Woman’s Day, Take 5, That’s Life, NW, Who, OK! and Famous.

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magazines

Early magazine returns can be a self fulfilling prophecy

I have seen data which proves that some newsagents are returning some titles too soon in the on-sale period, thus driving sales on a downward spiral.

Newsagents I have spoken with say that publishers overloading them drives early returns.

Newsagent business data shows a different story. It shows, in the cases I have seen, that some newsagents returned stock less than half way through the on-sale and that they could have expected to sell at least two thirds of the stock they returned. Their early returns stopped them achieving sales their data history indicated would have been made.  Early returns of these specific titles for which I have seen data cost these newsagents money.

Early returns based on gut feel can drive a self fulfilling prophecy. The newsagent thinks they are oversupplied and that stock will not sell based on what is on the shelf. Without reference to data they send the stock back early. They don’t have the stock to sell. Sales fall. Eventually the title dies in that newsagency.

Newsagents need to take care when early returning – make sure you are not losing sales. Check your sales history for a title before you make the move. Understand when in the sales cycle you sell a title before removing it early.  Smart publishers provide access to data which helps newsagents – such as the data I was shown recently. I’d gladly put newsagents in touch with publishers who are proactive in this area if they are concerned about early returns.

Of course, magazine distributors can reduce early returns by supplying to achieve a 60% or better sell through for all titles and not just the top sellers. Newsagents who see a poor performing title have been known to hit back at this by early returning other titles.  I can understand this from a cash management perspective.  Magazine distributors often have only themselves to blame in such situations.

The other way publishers can reduce early returns is to supply 30 day stock.  By this I mean, eliminate stock we are to hold for longer than 30 days.  Many longer on-sale products are supplied in larger quantities to satisfy the selflife.  Split the delivery and reduce the cash-flow strain on newsagents.  There will be fewer early returns as a result.

Early returning because you have no space is a different story, one for another day because that is an industry problem.

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magazine distribution

The expensive print model

Printing and physical distribution are expensive. For as long as they still print and mail publications, publishers should do it less frequently. Monthly magazines can be printed bimonthly; weekly magazines can be printed biweekly; newspapers can print on weekends only.

This quote is from an excellent article, How to Save Media by Jason Pontin and published at Technology Review from MIT.  This considered piece takes the reader through the challenges being faced by newspapers and magazines in the US – some of which we see here in Australia.  It pays particular attention to structural issues.  We need to be looking at structural issues in our businesses.  The structure of newspaper and magazine distribution, the structure within retail necessary to support the specific requirements for retailing the range of newspapers and magazines we carry.

It seems that every day there are more articles, reports and blog posts being published out of the US and Europe which challenge the foundations of the newsagency model here in Australia yet those who claim to lead newsagents remain silent on the issue of fundamental disruption of core products on which we have relied for traffic and revenue since the first newsagencies began in the 1800s. They either do not understand what is coming or are scared of upsetting suppliers and or newsagents by opening a discussion on structural change.

Personally, I see what is happening in the US and elsewhere as an excellent opportunity for my newsagencies and the channel more widely.  The opportunity is to seize the disruption of the model, build stronger businesses and exert more control over our own businesses than ever before.  Some of us are doing this already – but not enough.

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magazines

Craft magazines tracking 15% growth

craft_mags.jpgWe recently relocated our craft titles to a better position from where they will be seen by more customers. We also featured the category in a display out the front of our newsagency. The result is currently tracking at a 15% uplift in sales on a year on year basis – more than other magazine categories in the current period. We are very happy with these results.

Craft and hobby titles account for 12% of all of our magazine sales. This is our second most popular category.

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magazines

Oversupply of greeting cards

As part of helping a business recently I reviewed stock on hand for greeting cards.  One card company was found to have more than thirty pockets with ten or more cards per pocket.  In three cases, there were twelve cards.  In thirteen pockets there were  two designs with more than three cards for each of the two designs.  This is unconscionable behaviour by any measure.

The sales pattern in the store did not require pulling on anything more than one card in a pocket.  So, at worst case I would accept seven cards in a pocket.  Twelve cannot be justified.

The card audit indicated that oversupply by the card company in question was costing the business in excess of $8,000.

Newsagents need to closely monitor card company performance.  While the category is feel good, it has to be financially viable.  This means delivering a healthy stock turn, driving an equitable return on investment and return on floor space.

I’d note for the record that the card company involved was not John Sands or Hallmark.

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Greeting Cards

Moving stock sells stock

fhn_journals.JPGWe moved our social stationery recently and in the course of undertaking this work customers noticed items and purchased them on impulse.  Every retailer has stories like this.  Experiencing it is a reminder of the value of moving stock regularly, or working with stock on the shop floor – being more accessible to customers who want to ask questions but who will not ask over the counter.

The new location for our social stationery is working well, sales lifted immediately.  Customers buying a newspaper easily see this range as do many of our magazine customers – leveraging this circulation traffic is a key goal of the move.

By moving the social stationery, we have been able to create a better retail story in our cards and gifts department.

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retail

Promoting green magazines

green_magazines.JPGWe have moved four magazines which always feature articles on green environmentally friendly living to a new location and created better retail story. We have placed Green Living, Green Smart, ReNew and G Magazine in our home, living and garden magazine section.

While sales of green titles are not strong, I am certain that better placement, together and in a higher traffic location, will help – in our newsagencies at least.

Previously, these titles were in separate locations, where each is guided to be placed based on their Magazine Publishers of Australia segment codes. Bringing them together creates a more noticeable story. Placing them between Notebook, House and Garden, Better Homes and Gardens and Inside Out ensure they are browsed by more people.

If another title comes out with a green issue, we will place it with these magazines. We will also play this the display in the photo to visually frame these green titles, so they stand out more.

I noticed a report at Environmental Leader over the weekend saying that environmentally-themed issues of US magazines are underperforming. My sense is that we will gain more traction from promoting the titles which are dedicated to these issues rather than infrequent special issues.  Hence our moving of the four titled mentioned to a better location.

NOTE TO MAGAZINE PUBLISHERS: This post highlights a key benefit of the newsagency channel.  We can create opportunities like this – around a new retail segment placed in a high-traffic location – from which various publishers stand to benefit.  Try and negotiate this with a supermarket or petrol outlet.  They will not do it unless you do the work.  Newsagents are your best friends if you want to innovate.  Try working together as publishers and engaging with newsagents.

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Environment

New Idea TV show

B&T has reported that the Seven Network has produced a pilot for a new daily TV series in association with New Idea.  From a magazine sales perspective, the Better Homes and Gardens TV show / magazine marriage works a treat.

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magazines

The payment for content debate

Vanessa Thorpe has an excellent article at The Guardian website which covers the debate this week about whether news content should be free online.  The debate was reignited by Rupert Murdoch when he indicated, during the annoncement of a huge fall profits for his News Corp. business in the latest quarter, that it was time to charge for content.

“We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning,” Murdoch said. His volte-face followed background news that profits from News Corp newspapers were down year-on-year from $216m to $7m and that British newspaper advertising revenues were down 21%.

The upshot was, Murdoch concluded, that within a year the web would have utterly changed its financial model and his titles would be leading the pack. Earlier in the week, reports that the Guardian Media Group, the owner of this newspaper, was thinking along similar lines had ricocheted around the globe.

A pay wall to access news is an an old business approach to a new business problem.  Just as us newspaper and magzine vendors need to find a new modelforthe evolving circumstances, so too will publishers.

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Media disruption

Excellent Mother’s Day sales

fhn_mothersdays.jpgThe day before Mother’s Day is usually the busiest of the Mother’s Day season.  This is when Dad and the younger kids get out to buy cards and gifts for the first time in the season along with others who shop at the last minute.  All of the stores in which I have a financial stake experienced excellent trading.  We were ready for last minute shoppers.  Mother’s Day cards were the stand out.  Double digit growth in most situations.  Gifts were strong as well as magazines.

I spoke to newsagents in several states, city and rural, shopping centre and high street during the course of yesterday.  All reported excellent business.  Many had crowds even bigger than at the height of Christmas.  While only anecdotal, I’d expect the card companies to report an excellent Mother’s day 2009.

Newsagents own these seasons.  This is why we need to embrace them wholeheartedly.  Father’s Day is next.  It is another opportunity to re-present ourselves to infrequent visitors.

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Greeting Cards

The last minute display

fhn_tvweek.JPGWe did not receive our TV Week marketing collateral until late in the week, well after our prime display space was allocated.  To give the Logies edition coverage in-store, our team at Forest Hill created the display in the photo next to the Herald Sun, our top selling newspaper.  They built the display around a small wire stand.    It’s another example of found space – a place we can create a display where there would otherwise be none and without getting too much in the way of customer traffic.  I saw the display yesterday when in the shop for the first time in a few days and it looks stunning in person.

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magazines

Warning on magazine returns

Magazine distributors in Australia are serious this year in enforcing rules around magazine return claims.  Whereas in the past they have permitted paper, fax, website and EDI claims, they have eliminated fax and will eliminate paper claims.  This brings the website and EDI returns claims into sharp focus.  In each case, they require all data to be provided.  Newsagents submitting returns without issue codes or returns on the wrong EDI form (supplementary versus regular) risk missing credits.

I know a bit about this because I own Tower Systems.  Tower serves more than 1,600 newsagents and have met the evolving EDI standards since they were first introduced more than ten years ago.  We work closely with the magazine distributors and XchangeIT on changes to ensure that our newsagent community is able to process returns with certainty.  Millions of dollars are involved.  This is why we sunset our DOS software ten years ago.  DOS is dead for newsagents and has been for years.

I have also been helping several newsagents in the last week who have missed returns because inaccurate data provided via they software they have used. In three cases, the software is at fault – one did not include return codes and the other system involved did not differentiate between supplementary and regular returns. In the case of the second software company, they have not sought to understand the returns handling process and have thereby missed ensuring that their software protects newsagents from missing returns credits.

Now is the time for newsagents to contact their software providers and request immediate and guaranteed continued compliance with current EDI standards and seek up to date training on how to make this work operationally in a newsagency.

Tower Systems is currently running free EDI / XchangeIT training nationally – face to face and online.  By the end of the current cycle hundreds of newsagents will have participated.

The magazine returns process ought to be easy and certain.  Sometimes, poor technology and a lack of training can make it expensive for newsagents.  I will gladly help any newsagent missing return credits regardless of they software they use.

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newsagent software

The pen testing station

fhn_pen_tester.JPGCustomers browsing pens in newsagencies tend to test pens on anything including stock. To combat this, our team at Forest Hill came up with this simple yet brilliant pen testing station. So far, we are noticing fewer test squiggles on other stationery, the boxes of ink nearby and the labels on our pen displays.

The pads are our own newsXpress branded pads left over from a New Year promotion – this reinforces where the customer is shopping.

The result of this initiative is a far tidier pen offer.  We are certain this will help drive sales.

While this may seem to be a small initiative, it reflects the structure we are keen to apply throughout our business.  We want to feel like a well organised consistent business yet back this with the friendly personal service you would expect from an independent retailer.

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retail

Discounting Mother’s Day stock

mday09.jpgHappy Mother’s Day for tomorrow to all the mums reading this. On a business note – I have been surprised to see some newsagents and other retailers discounting Mother’s Day products for the last week, even longer. One shop I saw was offering Mother’s Day cards for 25% off from two weeks ago. What is that about? Mother’s Day is our second biggest greeting card season in Australia. This year is looking good based on the sales numbers I see. Why give away margin if sales do not warrant this?

The key to a discount strategy is to have a strategy: a reason, an entry point and an exit point. Discounting early in an historically successful season does not make sense to me.

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Greeting Cards

All bets are off

In a shopping centre, as in a high street situation, small business competitors usually respect each other so that each business grows. I have experienced a situation recently where a competitor retailer in the greeting card category has moved their outpost to within a few metres of the front of one of my newsagencies. This makes me less inclined to consider them before selecting products or undertaking marketing.  While the landlord has played some role in facilitating this, the retailer has the ultimate decision as to whether trade in n outpost location or not.

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retail

Incorrect date on Woman’s Day next week

ACP magazines released advice today that thewrong issue date is on thecover for Woman’s Day on sale Monday 11th May 2009. The issue is cover dated 18th April 2009.  This should be dated 18th May 2009. There are no problems with the barcode and this will scan as the correct issue. The returns form will have the correct issue date of 18th May 2009 on it.

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magazines

Newspaper mastheads covered by lamb roast

age_may8.JPGThe masthead of THE AGE today is obscured by a post-it type ad promoting lamb for Mother’s Day stuck over the word AGE. While love a good lamb roast, I like to see brands like THE AGE treated professionally even more.

smh_may8.JPGThe Sydney Morning Herald masthead is covered in the same way by the same ad.  I cannot understand why a respected brand allows itself to be covered up in this way.  Money obvioulsy talks more with the folk at Fairfax than brand and editorial.

This is not the way to treat a newspaper masthead.

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newspaper masthead desecration

The Australia Post gift shop

auspost_mothers.JPGThe bear and other items on display in the Government owned Australia Post shop say nothing about postage, the core product of this business. Not content to pursue independent newsagents through their stationery and greeting card offers, this Government owned business is also pursuing traditional seasons such as Mother’s day by offering items you would usually expect to find in a newsagency at this time.

One way the Prime Minister could help small business newsagents would be to turn Government owned Post Offices into, well, Post Offices.

The Act does, after all, say that postal services are the core and the rest are to be incidental. Visit a Government owned Post Office and see how they treat these incidental items compared to their core products.

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Australia Post

Managing magazines in the morning

fhn_magazine_process.JPGI have been asked by several people about our process for unpacking, labeling and putting out magazines on Mondays, Wednesdays and Fridays at our newsagency. We have this process complete by no later than 8:15 each morning – having started at 7am. Returns are done the same day, by mid morning. The process runs to military precision. Behind the counter two of the team label stock, by distributor. Labeled magazines are put into columns based on the aisle in which the title is situated. The shopping trolley is for rubbish – this keeps behind the counter clear. I or whoever is putting the stock out takes titles from the customer side an aisle at a time. New titles are put out, unsold stock is put in another trolley which is wheeled to the side of the counter for returns scanning mid morning.

The business turns over around $450,000 a year in magazines. I mention this for those comparing the timing with their own business.

We have tried several approaches to magazines over the years. The approach described above has been followed for the last five years and it has proved to be the most efficient and consistent.

The most common comment we get from people who see our process relates to placement of stock to be put out by aisle.  We found this significantly reduced the time it takes to put stock out.

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magazines

Too many local wedding magazines

hunter_wedding.JPGLocal is a  successful strategy with magazines.  People like reading about their local community.  SA Life is tremendously popular in South Australia, Tasmanian Life is tremendously popular in Tasmania.  What frustrates me is the range of local wedding magazines which are sent far are wide, way beyond the local community reach.  I doubt that someone in Forest Hill, 45 minutes out of Melbourne is going to buy a magazine which focuses on weddings in the Hunter Valley in New South Wales.  Maybe someone in the wedding game visiting our shop will but this title but not a bride to be – the target market for the White magazine in the photo.

Local magazines are meant for local communities.  Publishers ought to understand the cash-flow cost on newsagents when they use the low cost magazine distribution model to send us product like this.  The weak relevance to our customers and the long on-sale (six months) make White of dubious value to my newsagency.

The publisher’s website makes their target market for White clear: Wedding magazine for Central Coast, Newcastle, Hunter Valley. I wonder what they have pitched to their advertisers. If they sell, say, 500 copies through newsagencies like mine (as real sales or shrinkage) are the local Hunter Valley advertisers thinking these are sales in their area?

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magazine distribution

Volt magazine makes a statement

volt.JPGVolt is a BIG magazine.  I didn’t know this when I said we would stock it.  I quite like the size because it makes a visual statement and draws attention further down the aisle than if all titles were the same size. We are working with a magazine distributor to expand our range in several categories and are finding some unusual titles available. NOTE: This is not an invitation to magazine distributors to send large format titles to me.

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magazines

Gifts damage Real Living

real_living_damage.JPGReal Living is pulled down by the Natio gloss provided free with the magazine this month.  The cards the gloss is attached to have either fallen out of become ripped.  The free gift is more likely to hinder sales than help.  I am tempted to remove the gift altogether.

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magazines

Amazon launches Kindle DX

kindle_dx.jpgAmazon launched the Kindle DX reader yesterday in the US.  This new device is being touted by some newspapers as a device which could help save newspaper publishing.    Amazon said that three newspapers, The New York Times, The Boston Globe and The Washington Post, will offer the Kindle DX from mid this year at a reduced price to subscribers who sign up for long-term subscriptions.

The New York Observer quotes Arthur Sulzberger, publisher of The New York Times:

Mr. Sulzberger called the Times Company’s embrace of the Kindle DX “an important milestone in the convergence of print and digital.”

“We at the New York Times company are delighted to make use of the Kindle DX,” Mr. Sulzberger continued. “We know that the e-reader can offer the same satisfying experience [as the print edition].”

The Kindle is not currently available here as it operates through a wireless network and the Australian marketplace reportedly presents some challenges in this regard.

Looking at the US situation, newsstands and other newspaper vendors play no role in the new distribution model.  In a Kindle relationship, the publisher offers the subscription through Amazon.  Production costs beyond the first copy are nil. No wonder publishers see the Kindle DX and other e-reader type devices as crucial to their future business plans.

I would expect publishers to say that customers accessing newspapers through the Kindle are different to those purchasing print.  Film, TV and music producers said that too many years ago.  The iPod changed that.  Only time will tell whether the Kindle is the iPod of print and changes distribution forever.

In the meantime, my view is that no newsagent should sign up for a shop fit which includes purpose built newspaper or magazine fixtures.  These parts of our shops need to be able to be changed without any capital expenditure.  we have a tremendous opportunity here compared to our counterparts in the US, an opportunity to lead change.

PaidContent has good coverage of the launch of the DX.

The photo is from the Amazon website.

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Media disruption
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