JULY 2008 UPDATE => for my latest posts on Bill Express, click here.
Bill Express (ASX code – BXP) has unleashed a firestorm of anger among newsagents, its retail network, by removing a long standing marketing subsidy making the relationship loss making for many. The subsidy was removed prior to Bill Express advising newsagents.
The Bill Express action risks newsagents turning off the service and the company being without its retail network. This would upset biller partners as well as telcos such as Telstra, Optus and Vodafone who rely on newsagents to sell recharge through the Bill Express / newsagent relationship.
Some newsagents are calling for a national boycott of Bill Express, some have already stopped accepting bill payment through Bill Express and some are researching possible legal avenues – several having met with lawyers already.
Removal of the marketing subsidy is a high risk strategy by Bill Express. They knew it yet they proceeded. They were told prior to the announcement how newsagents would react yet the proceeded. My assessment is that they chose the lesser of two evils, they chose to save their cash.
In 2003, Bill Express was a small start up in need of capital and a retail network. Newsagents provided both on the promise of shared profit. 3,500 signed up – committing to leases valued at $25,000 each, taking the financial risk and unlocking around $87.5 million in free capital for Bill Express. I was skeptical and arrived late at the Bill Express table. In hindsight, my skepticism was well placed as were the tough questions put by some in the industry.
But that’s history now, newsagents signed up, we delivered the retail network and capital to Bill Express. We signed contracts which are difficult to terminate. Thanks to the withdrawal of the marketing subsidy, we are burdened with around $3,000 a year more in bottom line costs. This is our reward for our extraordinary support. Bill Express, in the meantime, has added $875,000 a month to their bottom line by removing the marketing subsidy.
It is easy to see the winner in this. But it was always going to be so. Bill Express was clever to spin the impression that the subsidy would remain while always knowing that it would end.
It is instructive to break down the four-part Bill Express offer: The bill payment side is loss making; the in store advertising screen system XIP media is a failure; the BOPO debit card is, well, very slow at getting off the ground. Bill Express, as part of their spin to newsagents this week, uses an example showing I can make money if I sign up one new BOPO customer every day. I currently sign up, on average 1.5 a month. One a day is a huge stretch for something with slim margins and a high labour cost; the Dialtime phone recharge component is the only money making aspect for newsagents. However, what we make from this is diluted by the now chunky Bill Express fees.
The numbers put to newsagents by Bill Express this week to show how they can make money are not being believed. Indeed, they make matters worse for Bill Express as they show an organisation out of touch with its retail network.
Recovery from the loss of faith among newsagents looks insurmountable. I wonder at what point Bill Express will have to make an announcement to the ASX about this.
I am conflicted in the Bill Express matter. Seven months ago, I and my team at Tower Systems started work on eziPass, a software product which competes with Bill Express. We developed this product and exclusively integrated it with our newsagency point of sale software. We have also developed a stand alone version which will be available in a matter of weeks free to all newsagents. Up to a week ago, 220 newsagents had signed up with eziPass. Sign ups have increased considerably since the Bill Express announcement this week.
While eziPass competes with Bill Express, my work and that of Tower Systems is pro-bono for newsagents. Neither I nor Tower Systems nor any business assocoiated with me makes money from eziPass. I know that by not taking a cut I was able to maximise the return newsagents achieved from selling phone recharge, attraction tickets, tollway passes and the 300 products through eziPass. This is why many eziPass assessible products have a better margin for newsagents.
While eziPass benefits from the difficulties in which Bill Express finds itself, Bill Express alone is responsible for its problems. It is responsible for promises made on its behalf to newsagents, the failure of the in store advertising screens, the slow uptake of BOPO and the now high cost of its old bill payment technology. eziPass is the smarter alternative. No expensive baggage. No capital outlay. No monthly fee. No onerous contract. No special computer hardware. There are fewer middlemen sharing the pie. It is integrated with point of sale for all 1,450 Tower newsagents and available from April for non Tower newsagents. Free.
I am pleased to be able to offer newsagents an alternative to Bill Express – for many it offers an attractive parachute.
The wrath expressed by newsagents over the last 48 hours is unlike anything I have seen before. They are angry and upset – with justification I would note. I am surprised that Bill Express has remained silent. It’s as if they are resigned to taking a hit because of their decision and that they’d prefer to weather this than reinstate the subsidy. Cash is king I guess.
Beyond the public anger being vented, some newsagents have sought legal advice on action against Bill Express over the removal of the subsidy and misrepresentations surrounding the benefits claimed prior to them signing up for the service. The problem for newsagents is the Bill Express contract many signed. It requires notice six months prior to the end of the agreement that a newsagent does not wish to roll over otherwise it is automatically renewed. Of course, most newsagents have not given such notice and have automatically renewed contracts.
My view is that the Bill Express contract will need to be tested in an appropriate forum. Whether this is tribunal such as the Consumer, Trader & Tenancy Tribunal in NSW or as high as a Supreme Court or somewhere in between remains to be seen. In the meantime, newsagents can vote through their actions by putting as little business through Bill Express as possible.
