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

Author: Mark Fletcher

How much for that newsagency?

I think it is time for change in how newsagencies are valued. The multiple of between 3 and 4.5 times net earnings where net earnings is a figure with too many add-backs is not viable for incoming newsagents. It is more important for us to make our money week by week rather than relying on a parachute at the end. Ill informed purchasers find they have paid too much.

These words which I published last week in a post here have upset some newsagents. I can understand that. I am challenging the traditional way newsagencies are valued. I am proposing that instead of a high multiple on an often questionable net profit figure that we let the market find its level. This approach makes incoming newsagents more informed and surely that makes for a healthier channel in the future.

Newsagents need to debate these matters since they go to the viability of our channel in the future. It’s this long term view we need to take. At least I hope that’s the view newsagents take on this issue.

I’m glad to discuss the issue of newsagency valuations with anyone. I’d be glad to participate in open debate – not because I think I am right but because I think we ought to debate these things so we can work out what is right.

I want a viable newsagency channel long into the future. Hopefully the stone I budged down the hill last week will, in a small way, support that.

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Newsagency challenges

Easter eggs on show

The Darrel Lea Easter egg range is drawing attention.  The photo below shows around half the range we have in store.  We have it on the dance floor, right at the front of the shop – nest to our range of Easter cards.

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We made a decision a couple of years ago to promote aggressively at Easter and it has paid off ever since.  While we’re competing with the major, we are competing and our customers are responding.

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confectionary

Hollywood fashion tape, free with OK!

fashion_tape.JPGI’ve never heard of fashion tape before and when I found out it was the giveaway with OK! magazine this week (an exclusive newsXpress promotion) I was, well, surprised.  It turns out, it’s the tape is the ultimate fashion accessory, helping keep closed attached to the body when otherwise they might fall off.  Now that I understand, I can see it’s a smart giveaway – especially since this is th week of the Academy Awards.  Knowing the back story of a giveaway can help make it more successful.

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magazines

Thomas The Tank at Easter

thomas_the_tank.JPGEaster is close and we have our Darrell Lea range out including this Thomas The Tank package. It includes an activity as well as the egg which is good. I’m curious about the management of brands such as Thomas since we access the eggs from one place, cards and bags from another, books another and toys another. While it’s impractical to have them all come through one supplier, it would be good if there was a more co-ordinated approach.

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confectionary

St Patrick’s Day cards

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We are promoting our range of St Patrick’s Day cards away from the usual card display in one of our newsagencies. Our view is that some people may buy a card as an impulse and not as a destination purchase – hence this small display at the counter. We’ll move it around a bit including to thelottery counter where we expect it to be a hit.

Promoting small card seasons like this at the counter makes sense. Otherwise people have to remember the small season and then go hunting for the cards. Right now, St Patricks is overwhelmed by Easter cards in the regular card fixturing.

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Greeting Cards

The cynical newspaper publisher

Newspaper publishers often seek to mitigate the impact of a price rise. Smart ones do this through promotions wh9ch add value to the product. Less smart publishers offer steep discounts off the increased price. Even less smart publishers offer steep discounts through one channel (home delivery) while expecting equally loyal customers through the other channel (retail) to cop it sweet.

This is what was behind the awful sticker stuck on the front of the Sydney Morning Herald this morning. The marketing department was seeking to mitigate the impact of their cover price increase. The offer disrespects their retail partners. It also disrespects existing home delivery customers. Oh, and it disrespects home delivery newsagents who stand to make less because of the Fairfax largesse.

70% off! What is that? It’s scared marketing that’s what it is. It’s, we know this paper is not worth what we are charging so we are prepared to cut the guts out of the price but only if you use the distribution channel which gives us more control, is more expensing and which is funded as a loss leader by small business people who can ill afford to have margin further cut.

I love the Sydney Morning Herald as a newspaper, it is worth the cover price increase. The game played out today, stuck on the masthead, cheapens the product and shows that some within Fairfax don’t share my faith in their newspaper.

My view is that Fairfax ought to have ridden through any downside of the price increase and come out in a week or two with a premium offer based on coupon redemption.  Something of value which gets people buying at retail over seven or fourteen days.  The Australian is doing this right now and my information says it is working.  News Ltd is smart when it comes to these things.

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Newsagency challenges

Trashing the newspaper

What does today’s Sydney Morning Herald tell us about the state of the newspaper. As the photo below shows, the marketing department has succeeded in having their ad – for cheap home delivery – stuck on top of the masthead, obscuring the Sydney in the title.

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I was shocked when I saw this when I arrived here this morning. At least the folks at The Age stick their ads over editorial, not the actual masthead itself. Journalists I correspond with in the US tell me they would bring on industrial action if their publisher permitted such an attack on the brand.

While I am no marketing expert, I would have thought that covering your brand in this way is a bad move.

On the home delivery offer itself, I doubt newsagents will be happy – they make less from a home delivery sale than retail from the product itself and add on sales through retail. A smart publisher would develop an incentive program with retailers so they can drive single copy sales.  This is fertile ground yet of little interest to some publishers as they don;t have the same control they have through home delivery.

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newspaper masthead desecration

Off to the Gift Fair

Along with thousands of others I am in Sydney today for the Gift Fair. Actually, there are three fairs in three locations. I’ll be there for the day. Others from our retail businesses will spend longer.

What’s interesting about Gift Fair is how the retailers interact with suppliers. They are in a marketplace where the retailer chooses what they want to sell, how much of the range and they control display and price. The fair is a true marketplace. Buyers and sellers are excited. Businesses live or die based on the decisions made.

Newsagents, for significant parts of their businesses, don’t have this control. It shows at trade show in those product categories and in the way newsagents and suppliers interact with each other. If only all a newsagency was as commercial and free as in the gift space. I think you’d find many more entrepreneurial newsagents.

I’m excited about today. We are looking for products for our Sophie Randall gift shops as well as our three newsagencies. It’s going to be a fun!

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Newsagency challenges

Another free digital magazine

gizmo.JPGDennis Publishing, the publisher of the highly successful Monkey digital magazine, has launched Gizmo, a consumer technology digital magazine. They claim it’s a world first. Gizmo will be free, just like Monkey. Dennis Publishing publishes more than 50 titles. They are leaders when it comes to successful digital launches.

It is news like this which newsagents need to consider when planning shop fits. What is the best retail fixturing for magazines in this new world? How much space do we allocate? Do we focus on the top selling titles or the titles others don’t sell?

More publishers will pursue online models like the folks at Dennis are successful with. They have to. What we have to do is to pursue the future as we see it for ourselves. Too few newsagents are doing this, they are waiting for publishers and other suppliers to take their hand to the future.

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magazines

Marketing failure learning success

browser.JPGIt seemed like a good idea at the time – an in store marketing campaign which sought to turn magazine browsers into greeting card customers. The idea didn’t work and now we’re processing the learnings from the experience.

I came up with the idea and convinced my colleagues at newsXpress to test it through five newsXpress locations. The tests, over the last month or so, have not resulted in the incremental sales I expected.

We designed coupons, business card size, had them professionally printed and offered these to people browsing magazines at high browser time – late night shoppers and guys on Saturdays and Sundays. We focused on guys as they are less likely to buy cards. The coupon was redeemable that day only and offered 25% off cards.

That test did not work does not concern us. We had a go and have learnt something from that. We’re likely to regroup and try again. All good marketing is developed this way – testing, tweaking and more testing. Some of the successes I blog about here are the end result of countless hours of hard work. I have faith in the concept at the heart of this idea, there are elements of the execution which need work such as the coupon itself, the pitch and even the core offer.

I see it as important that we work at leveraging existing traffic in addition to drawing new traffic. You cannot do one and not the other. While we drive our stores to up-sell themselves, it is always good to find ways to facilitate team member interaction with customers beyond a hello or a smile. Standing behind the counter serving doesn’t cut it nor does the gimmick promotions of If I don’t ask you about such and such you get a free thing. We need to engage with our customers and add value to their visit. It was belief in these things which led to the development of the coupon campaign.

There are some in the newsagency channel who are happy to report other’s failure. They see it as a badge of dishonour and gleefully gossip about it. Having a go is part of being Australian and part of what we newsagents need to do now more than ever. When was the last time you tried something challenging in our newsagency? I mean really challenging? Your competitors are doing it all the time so why not you?

Every day we make a change in the newsagencies I own – from moving product categories to creating a display outside of what suppliers ask us to do to running an local promotion to shifting product at the counter. This sense of perpetual motion is key to stopping customers and team members becoming store blind. Change is something we enjoy an celebrate.

The greeting card up-sell didn’t work. In the numbers game of marketing it strengthens the chances of the next idea working.

Why have I blogged about this? It’s important to me to be open with you here about ideas which don’t work so the learnings can be shared and to demonstrate that failure is an important part of success.

Thanks for reading.

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Newsagency challenges

The free newspaper challenge

In Sydney on Monday night this week I saw, again, the distribution of mX on the streets in the city and at railway stations. There’s no effort necessary, commuters step up for their free newspaper.  While mX is not a patch on the daily paid for newspapers, it’s popular.

Some commentators wonder if the free daily model will become the norm.  Certainly in the US and Europe, in major cities, it’s popular and many of the free daily newspapers are almost as substantial as paid for product.

While I don’t know the future of free dailies here in Australia, I do know that free dailies are something newsagents ought to think about and discuss.  Do we see a role for ourselves if the free daily model expanded?  Some newsagents are involved already but only a few.  How would we react if a publisher asked us to be a pick up point for a free daily in our newsagencies?  Some of us participate already permitting free local newspapers to be collected from our shops.  Do we open a conversation with a publisher before they start to think about these things?  We have a track record for reacting as opposed to leading on issues of change.

I don’t know where free daily newspapers will end up nor do I know their impact on the newsagency model but I’d sure like to engage in active discussion on the issues.

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Media disruption

New Biggest Loser books

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It will be interesting to see if The Biggest Loser brand works with the new Food & Exercise Diary and the Complete Calorie & Fat Counter. We have very similar products under other branding and while sales are good, I’d expect the TV show connection to drive the latest releases to the top.

We have put The Biggest Loser products at the counter since the TV show is on every weeknight. Once the TV show is over so we’re better off getting in early.

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magazines

Great magazine cover drives sales

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The latest issue of Harper’s Bazaar has been a huge success thanks, I think, to the stunning cover. It stands out amid the bright colours of the other magazines around it – people notice it. Brilliant. The key for newsagents is to display the cover and not just the masthead. Do this and it walks out the door.

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magazines

Recalling sunglasses

It’s good to see the folks at Marie Claire respond quickly yesterday to a call from the ACCC for them to recall the brown sunglasses given away with the magazine last month in a campaign run in partnership with Cancer Council Australia. Newsagents have been shielded from having to process – not that I’d expect many pairs of glasses to come back.

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magazines

Promoting K-Mart

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I was interested to see this sign in the centre where we have our newsagency in Frankston. My initial reaction was wow, great promotion for Real Living. Then I realised it was an ad for K-Mart. At least that’s what I think it is.

I’d prefer to see our shop connected with this. We sell the magazine. Sure, K-Mart does too but their real focus is the products in the magazine.

Now when I look at the magazine on our shelves I feel as if we are promoting K-Mart. I know we’re not directly but this connection between the magazine and K-Mart is pretty strong.

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magazines

Selling Forest Hill

I have made a decision to put our newsagency at Forest Hill, newsXpress Forest Hill, on the market.  I have owned this business for twelve years and feel that it is time to pass this business to others to take it on the next part of its journey.  It’s in healthy shape.

 

I purchased Forest Hill in February 1996 to provide hands on experience for myself and our team at Tower Systems.  It has played an important role in helping us build better software for newsagents and has acted as a place where we and newsagent suppliers can test new standards and products.  Forest Hill and the experience it has provided is a key reason Tower Systems is by far the largest supplier of software to newsagents.

 

Purchasing Quayside Newsagency in Frankston late last year maintains our excellent hands-on connection with operating a newsagency.  Indeed, as we embark on a major shop-fit and a realignment of product mix, we have a new playground in which to explore the newsagency of the future.  I am also a significant shareholder in newsXpress Watergardens which offers a different hands-on experience in pursuit of a bright future for newsagents.

 

I think it is time for change in how newsagencies are valued.  The multiple of between 3 and 4.5 times net earnings where net earnings is a figure with too many add-backs is not viable for incoming newsagents.  It is more important for us to make our money week by week rather than relying on a parachute at the end.  Ill informed purchasers find they have paid too much. 

 

I appreciate that this sounds like heresy to some looking to exit soon.  I have looked at how other businesses are valued and I think that for the health of our channel we need to debate this issue today.  Hence my comments here, to encourage a conversation about how we value our businesses when we sell them.  We owe it to the future health of the channel to talk about this issue.

 

In line with my thinking, I have not put a price on Forest Hill.  We are inviting offers.  Interested parties who complete a non disclosure will be provided all the information they need to make an informed decision.  We will let the market find its level.  Of course, there may be no interest in which case we will implement t plan B – and, yes, we do have a good plan B.

 

I have appointed Denis King as the broker to handle the sale.  I have known Denis for years and have done business with him in the past.

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About us

Hot Ink promotion kicks in

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The flyers sent out around each of our newsagencies have just hit promoting the latest Hot Ink offer.  The last couple of days have been like turning on a hose – previously good daily sales have gone through the roof.  People bring the flyer in looking for specific product.

The promotion is based on national pricing. It beats Big W, Dick Smith, Australia Post and JB Hi Fi. It builds trust and this trust has a flow on effect in stationery and other sales – and we maintain a healthy margin.

Dropping 25,000 flyers around a newsagency is considered too big a commitment to some newsagents. I’ve tested this approach in several locations now and I know it works – especially in demographics where one would least expect it to work. The key is to be patient because it takes a couple of cycles to build trust and break buying habits.

I appreciate that I’m promoting newsXpress with this blog post (a group of which I am a Director). Their Hot Ink promotion is very successful not just in my newsagencies but many others. It’s bottom line evidence of the value of membership of newsXpress.

It is by playing in areas like this that we can ensure relevance with out customers. Newsagents not in this space, in a professional way, are at l

We still operate our online ink and toner business- Inkfast. That serves an entirely different clientèle since it is national, online only and primarily focused on toner.

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newsagency marketing

The cost of shrinkage

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Better Photoshop Techniques sells for $24.95. Our buy price is $18.71. One copy stolen costs us the GP from three sales. This happened to us this week, a copy stolen. It’s frustrating because of the high cover price. It hits harder than losing a $3.95 magazine. No wonder newsagents automatically early return higher priced magazines.  The cost of the theft risk is too high.

I’d like to see discussion opened on the cost of magazine shrinkage. At the moment newsagents wear 100% of the cost and with it costing between 3% and 5% of turnover we’re losing the battle. The problem is even worse since we do not control what we receive and therefore cannot manage our risk as effectively ads we otherwise might.

While publishers could say that we ought to better manage the risk in store, this is not easily done in higher rent situations where occupancy costs can be 15% or even higher, labour at 12%, expenses at 5% and, well, there is nothing left in the 25% GP for magazines for the kind of on the ground security necessary to stop magazine theft.

In my newsagencies the team is vigilant and, yes, people are caught.   But we also miss people – we see a report weekly of the cost of magazine theft as we return product.

I’d like publishers and distributors to discuss the shrinkage problem with newsagents.  It is unfair for newsagents to continue to carry the high cost while they, publishers and distribution, support moving top selling product outside the newsagency channel.

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magazines

Andrew Symonds Alpha cover

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Kudos to Andrew Symonds for his success in the IPL bidding in India overnight. I’m especially happy given that Symonds is on the cover of the latest issue of Alpha sports magazine. In response to the amazing bidding result for Symonds, we’ve placed Alpha in a high traffic area to capture heightened interest over the next few days. It’s the kind of opportunistic action we need to take as retailers. Hopefully it works and sales of Alpha kick as a result.

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magazines

Free Trading Post

A representative from the Trading Post visited one of our newsagencies earlier this week, counted our stock and asked us to give away the remaining copies for free. They even stamped the stock with the stamp you can see on the photo below. The did the same for Things That Go.

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I am not sure of what to make of this. While a free Trading Post is nice, what does this mean for the long term? Will our customers expect it again? Is this part of a bigger plan?

I’d have preferred to have been given advance notice and an opportunity for a discussion about strategy so we could make the most of the offer at our main counter – rather than leaving the stamped stock in the usual display unit.

If these publications are going entirely free, as I expect, then they ought to talk with newsagents about being part of the free model. I’m okay with that and would welcome people coming in to collect a free Trading Post as long as I have a say on how it is pitched and where it is located.

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Media disruption

Stack em high, promoting partworks

As the photo shows, we have taken space on our dance floor to promote the Elvis, Star Trek, Treasurers of the Earth and BBC drama partworks which are all receiving strong attention at the moment.

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While there is nothing exceptionally pretty about these displays they work because they show our strength. As retailers often say, stack em high, watch em fly.

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magazines

A new competitor?

Is there a new player about to enter the newsagency traditional space of magazines and, maybe, lotteries? I have heard a couple of repoprts of a national retail brand keen to acquire into the newsagency space. I’d heard from a different source that they were also seeking to access top 20 magazine titles for their existing format.

While these are unconfirmed rumors at the moment, there is enough noise around them to warrant consideration even if only on a what if basis.  What is a new national retailer entered our space, selling the top 20 or so magazine titles?  What if they competed with us for lottery business?  What if they became more agressive in the greeting card business than they current seasons only approach?

We can sit on the side and watch these changes or we can embrace it in our businesses.  We are in the era of entrepreneurial newsagents .   These challenges separate business builders from process workers.  So, while the rumors concern me, they are highly motivating and will only lead to better newsagencies – if we want that.

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Newsagency challenges

Playboy forecasts a fall

Playboy has announced a fall in earnings and forecast a 30% fall in ad revenue from the magazine.  The Playboy consumer has easier and lower cost access to the articles and photos from a vast range of websites online.

Early indications from the latest Tower Systems newsagent benchmark project shows sales of adult magazines to have fallen by, on average, 12% in the eight months to January 31, 2008 in newsagencies compared to the eight months to Jan 31, 2007. No wonder ad revenue forecasts are gloomy.

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magazines

Free laptop for newsagents

Tower Systems is offering a free current model highly configured Dell laptop (with built in camera) to every newsagent purchasing a package from the company to celebrate the official launch of its national online training program for newsagents. The online training, in addition to face to face in-store training, a national free group training program and a national user meeting program is an exclusive service from Tower Systems which is bringing more and more newsagent together learning and sharing ideas.

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We have set no cap on the number of laptops being given away. The more the better!

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newsagent software