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

Author: Mark Fletcher

Interesting stoush in the UK on newspaper margins

WH Smith stopped selling UK newspaper the Daily Telegraph for several days in train station outlets because of a dispute on margin.

WHSmith has banished the Daily Telegraph from its outlets in railway stations, escalating an industry-wide battle over shrinking margins for newspaper retailers.

After ordering managers to move the Telegraph titles to the magazine section on Friday, the UK chain this week refused to stock the daily newspaper in about 120 railway stores.

The dispute arose after the Telegraph raised the cover price of its newspapers by almost a quarter this month — the daily edition to £2.50 and the Sunday Telegraph to £2.80 — but did not increase the amount paid to retailers by the same proportion.

That move, not sharing cover price gain with retailers, is what has been happening in Australia for a while. As the Financial Times story continues…

The disagreement reflects years of frustration among newsagents, whose sales income has fallen along with tumbling circulation of print copies. While Britain’s national papers have steadily raised their cover prices over the past decade, the increases have been offset by cuts to the retailers’ share.

Yes, here too.

A study in 2016 by Deloitte found that the industry, on average, paid 23 per cent of a newspaper’s cover price to retailers and 5 per cent to wholesalers. Today, the national newspaper average for retailers is closer to 22 per cent, according to Financial Times calculations.

Whoa! UK newsagents are better off that us. We are on 12.5% – making newspaper loss making. Plus, newspaper shoppers are not efficient, they rarely purchase anything else.

Like much of the industry, the Telegraph has struggled to cope with plummeting print circulation over the past decade. Since 2017, the Daily Telegraph print circulation has fallen 34 per cent, from 484,000 to 317,000 copies a day, according to data from the Audit Bureau of Circulations.

Boo hoo. The challenges faced by newspaper publishers are not something small business newsagents have to financially support. We have our own challenges that demand our time and capital.

Note, a few days after the newspaper was removed, it was back on sale. No news of the details of any deal being struck.

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Media disruption

An imminent store closure can tell you plenty about what sells

The final days sales leading to the sclosure of a store can tell you plenty about the products you have been offering. I know for personal experience.

Right now, in the US, this is on show at the Papyrus card and gift stores, which will all close on February 26. They have been running a massive sale for more than two weeks. What is left is what has not worked for them. I say this given that everything is discounted by between 50% and 75%.

On the card shelves there are captions that remain quite full. 10 cards for $5.00 is a good price as most of these cards regularly sell at $5.99 or thereabouts.

Still, plenty of greeting cards are unsold with less than 3 days remaining.

What has clearly been a failure at Papyrus is their wooden models. These are small battery operated merry-go-rounds and similar. Several stores I have seen have windows full of this stock. Given that Papyrus has stocked them for several years I am surprised their sales data did not forecast problems with the category.

Retail success comes down to giving customers you can reach what they want and operating with a cost base that permits profitability.

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Gifts

A brilliant local town newspaper story in the New York Times

This local newspaper in the US town of Marfa Texas (pop. circa 2,000) added a cafe/bar to the news room. They then needed to add more journalists. Redefining the newspaper …

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newsagency of the future

Bill Express final dividend

The liquidator of Bill Express Limited has sent out a notice of final dividend. The payout is expected to be 0.021 cents in the dollar.

What an end to a saga that cost newsagents tens of millions of dollars.

What a scam if was.

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Bill Express

Inspiration: the passion economy

Take a moment to listen to the story from Richard Aedy on ABC Radio about a book called The Passion Economy. It is 30 minutes of inspiration. It’s especially relevant to indie retailers, including newsagents who are wondering about their role in retail today.

When you have access to the entire world, can you find your narrow area of interest and make a living from it? Drawing on business case studies, award-winning writer and broadcaster Adam Davidson describes how the 21st century economy offers opportunities for people to combine the things they love with their careers. Guest: Adam Davidson, author, The Passion Economy: The New Rules for Thriving in the Twenty-First Century

On the back of changes and retreats from what has been traditional in our channel, more and more newsagents are wondering about their future. While we would say they are late to such considerations, their considerations are what they are.

Finding a need and filling it is key. Doing this through things we are passionate about is gold. That is where this ABC Radio story fits so well. Please take some time and listen.

We need to stop defining our businesses by our respective shingles and by customer expectations. Our future is in the future and not the past, to be glib. Too many in our channel remain obsessed with the past and that is not good for them or the channel more broadly.

Too many prefer the comfort of low-margin volume business.

Specialisation is key to a brighter future for it is through this that we are more able to achieve better margin and greater shopper stickiness.

 

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newsagency of the future

Premium Easter

This rabbit is one of 4 in the shop on show for Easter, each a different colour, playing in a more premium space for this small but important season. Artist designed and hand made in Europe, this rabbit is an interesting counter talking point and unlike other Easter offers in the mall of 300 shops. It’s also a photo op with people who like how unique it is.

The more we play away from what is usual the better the opportunity for us to be surprised with new traffic and revenue.

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Gifts

Smart home grown pitch

The home grown pitch by Ardmona on their shelf packaging is smart and helps inform shoppers keen to genuinely shop local.

This pitch is a reminder to us retailers to actively inform shoppers about locally made and sourced products as shop local is about more than us having a locally owned shop.

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Social responsibility

Shop local matters more than ever in small business indie retail

Social media pitches from small business retailers calling for people to shop local tend to be tiresome clichés, serving the needs of those who post rather than those they want to reach.

Too often you can see a business calling for people to shop local not shopping local themselves.

For me, the shop local issue comes down to the adage of actions speak louder than words.

In these early months of 2020, on the back of an awful bushfire season, sustained rounds, now, floods, and the coronavirus, shop local management is important and timely. I say management because that has to be our focus.

  • Wherever possible, source products made locally where locally can mean in the local community, within the state or territory or at least within Australia. This is hard but rewarding work.
  • Source the services your business uses locally, at least within Australia. Just because a company has a local rep it does not mean they are local. Ask.
  • Focus any giving locally.
  • Systemise your local engagement. On receipts, show locally made items. Have tis information shared with shoppers automatically.
  • In store, indicate Australian made and locally made with curated displays that pitch this.
  • On social media, talk about your support for local groups and why. Don’t be oh look at how good we are. Rather, be grateful about finding local products and appreciating customer support for them.
  • Use your loyalty program to support local charities where shoppers have the opportunity of donating the loyalty reward they have earned to a local charity you partner with. In my own Tower Systems POS software this is easy. I have used it my own businesses with success.
  • Use local music play lists.
  • Leverage local talent for music out the front of your store in physically appropriate.

This is all about being patriotic without being a show off, without being a hollow bell. You strengthening your local engagement strengthens the local economy and all businesses (and people) in the local economy benefit from that.

Where this all starts is with your next buying decision of products or services. Ask the question. Be sure of where the dollar you spend goes.  This is more valuable and useful than posting lazily on social media calling for people to shop local.

Asking people to shop with you is not enough of itself. You need to demonstrate that you are living and acting locally.

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Social responsibility

Touch to cease operations.

Two weeks ago, senior management at Afterpay confidentially advised they were shutting down their Touch business – the business through which close to 2,000 newsagents access phone recharge and other voucher related products.

This news is set to be announced to you today by Touch. I mention it here because NANA emailed newsagents in its database yesterday, unexpectedly.

Through the Tower integrated ezipass platform close to all 1,700+ Tower Systems software user newsagents have relied on Touch for 15+ years.

As far as I am aware, there is no other POS software integrated platform available.

If you want to offer voucher services, I think you will be forced to go with an ePay terminal, which is not integrated. I don’t like ePay. They have not helped support small business retailers. Their approach is to require you to use stand-alone technology on the counter to sell their products. This is inefficient.

I am pursuing alternatives as sourcing these through a POS software company makes the most sense.

If the decision by Afterpay to close frustrates you, please know that it frustrates me too. I like their platform and their people and have enjoyed doing business with them.

For what it is worth in the three shops I own and run, we will cease to offer these Touch type services. Our businesses have transitioned significantly away from traditional newsagency retail with more revenue coming from outside what has been usual for that retail channel.

Mark Fletcher
Managing Director
Tower Systems
0418 321 338

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Newsagency management

The loss making book promotion from News Corp.

The newspaper sales latest book promotion from News Corp. is as frustrating as these promotions have become with stock arriving in bulk the week before and fully paying for this before 90% of the stock can be sold. Then, there is the appalling margin position.

Add to these points that the promotion drives minimal net new traffic and you can see why it is not highly regarded by many retailers.

As well as the paltry margin that itself does not even cover labour and space, News Corp wants floor stickers and posters, visual noise that detract from the messages that are more commercially valuable for our business. This is why I removed all  promotional material on the weekend.

I get that publishers want to support over the counter newspaper purchases as they play a valuable role in conversion to subscription, especially digital subscription. I’d like to see a fairer billing cycle, better margin and more active support of retail newsagents as locations.

Running a promotion that takes up so much time and space and distracts from the new core of the business no longer works for me. So, something has to give. In the face of tired and inflexible promotions from News, I think my next step is one I have to take. The future of my business is not in low margin inefficient agency lines.

I was frustrated when I saw the books and posters on Saturday because there is so much good margin news in the shop with new categories performing well and delivering high-value new shoppers to the business. I saw all this good news and the fresh appeal off the front of the shop and then, thud, there was this  reminder of practices from decades ago. It was like going back in time.

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Newsagency challenges

Pitching plastic free as a card differentiator

Most of the cards displayed at Marks & Spencer are wrapped in cello. For the small range not wrapped in cello, they pitch this sign:

While the gesture feels token in this large department store, it is a message.

Elsewhere at card and gifts trade shows here in Australia as well as overseas, card manufacturers are taking a stronger stand with some saying cello has been if is being removed altogether. Others have found innovative approaches to maintaining physical product integrity.

This is an active space for us as retailers as more shoppers want to see less waste in what we sell. Reducing cello / plastic from cards will help with sales.

Indie retailers are better positioned to leverage the new approach to packaging greeting cards than supermarkets or department stores.

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Greeting Cards

I love a good Diana cover

The cover of the latest issue of The Australian Women’s Weekly made me nostalgic for the days of when a Diana on a cover would guarantee extra foot traffic and terrific sales. We have pitched this issue on social media and at the counter to leverage the nostalgia interest. Supermarkets and other non newsagency retailers will, of course, do nothing special to promote this issue.

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magazines

The New Daily on News Corp…

The New Daily has published analysis by Rod Muir on the latest News Corp numbers.

Audiences deserted Rupert Murdoch’s News Corp mastheads in 2019 with its tabloid tub-thumper The Daily Telegraph losing a massive 15.5 per cent of its readership across both print and digital editions, according to research house Roy Morgan.

The performance was reflected in the second quarter’s financial results, which saw the group’s Australian mastheads suffer a 9 per cent revenue hit for the three months to December 31.

“The results were affected by a sluggish Australian economy, uncharacteristic softness in book publishing, and foreign exchange fluctuations,” said News CEO Robert Thomson.

The piece includes this table of Roy Morgan data on new masthead performance:

The latest newsagency benchmark report has similar results for newspapers. While The New Daily piece focusses on the ‘reporting’ published by News, I think the over the counter results reflect a challenge with the medium itself, particularly with the daily print product.

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Media disruption

2019 vs. 2018 newsagency sales benchmark study results

Growth opportunities on show in 2019 vs. 2018 full year newsagency sales benchmark study results.

SUMMARY
Newsagency businesses in the benchmark study data pool focussed on new traffic generators fared well in 2019 compared to the performance of traditional newsagency businesses. 4 of the 5 traditional categories experienced year on year declines while all of the new product categories delivered growth.

Newsagencies focussed on change through new product categories are the future of the channel. New product categories usually offer a significantly better margin, better sell-through rate and better basket efficiency compared to traditional newsagency lines.

New product categories will evolve, too. What is strong today will be challenged by another category tomorrow. Change, substantial change is the new normal in retail.

THE DATASET
This newsagency sales benchmark study represents a comparison of sales data from 161 newsagency businesses for the 2018 and 2019 calendar years. These businesses are representative: city and country, high street and mall, banner groups and independent. The only thing connecting the businesses is that they use the Tower newsagency software. Note: Each data point below is the average, mean, of all data for the data point.

OVERALL PERFORMANCE METRICS.

  • Transaction count. Down 3.5%.
  • Sales revenue. Down 5%.
  • Basket depth. Down 3%.
  • Basket dollar value. Down 3%.

CORE PRODUCTS.

  • Newspapers. Over the counter unit sales. Down 10.5%.
  • Magazines. Over the counter unit sales. Down 12.5%.
  • Greeting cards. Revenue. Down 3.5%.
  • Stationery. Revenue. Down 9%.
  • Lotteries. Revenue. Up 23%.
  • Tobacco. Revenue. Down 19%.
  • Agency. Parcels, gift cards, betting account top-up. Down 4%.

SPECIALTY PRODUCTS.

  • Gifts. Revenue. Up 11%.
  • Toys. Revenue. Up 7%. Includes puzzles.
  • Plush. Revenue. Up 6%.
  • Collectibles. Revenue. Up 5%.
  • Craft. Revenue. Up 3%.
  • Coffee. Revenue. Up 17%.
  • Books. Revenue. Up 6%.
  • Calendars. Revenue. Up 6%.

Despite there being plenty of bad news at the department and category level, this latest study reveals plenty of good news. It encourages confidence around pursuing change, embracing new product categories and leveraging these to help redefine the focus of the business.

While the newsagency shingle remains for many businesses in our channel, movement away from what that shingle has stood for is key to the future.

Print media is a problem.
With margins slim – 25% for magazines and around 12% for papers for many – the impact of the continuing decline in sales is significant. The only to make papers and magazines work is to reduce costs associated switch carrying these products – retail space and labour. Changes here can encourage further decline. This is why more newsagents are wondering when they might quit print. 

Unless there is a change to margin percentage and an improvement in magazine cover prices, I suspect more in newsagents will exit print, unfortunately.

The growth categories.
Looking at the product categories for which there was growth – gifts, toys, plush, collectibles, craft, coffee – less than half the businesses in the dataset offered more than two of these. Even with the easy category of gift, more than a 25% of those reporting do not offer gifts, which shocks me.

City vs. Country.
Regional and rural businesses continue to perform better. This is across the board. It has always been thus. I think this is due in part to a lower retail space cost, stronger local shopper support and less competition.

Upside opportunities.
Toys, crafts, coffee, gifts, books and plush offer upside, as has been the case for several years. The best success comes from dealing with suppliers who do not usually supply the newsagency channel. That said, what each of these category labels mean varies significantly between businesses.

The role of online.
While there has been growth in the contribution of online, in an average business it accounts for less than 4% of non lottery revenue. There are some achieving more than 10% but they are small in number. Too many newsagents and missing out on the online opportunity.

Is a newsagency a good investment? 
My answer to this question continues to be yes. There is traffic value remaining in core products and opportunity to leverage this in other product categories.

The success of any newsagency business is more reliant on the retailer than on the channel itself. A poor retailer will run a poor newsagency. A good retailer will run a more successful newsagency.

New traffic, better margin, genuine growth in business valuations all come from focussing on products not recently traditionally aligned with our channel.

I own three newsagencies. I am glad I do. I am pleased with their performance.

Finally, I am grateful to all newsagents who shared their data for inclusion in this study.

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

Impressive Bookshop by WH Smith

Bookshop by WH Smith at Gatwick airport is impressive. While the product mix, table fixtures and shelving are not that different to the usual book retail in airports, the colour, signage and lighting choices give Bookshop a fresh and noticeable look.

Book retail in transit locations is strong. Range and ease of shopping are key. Giving an experience that takes you out of the usual airport rush and noise is important.

I like Bookshop. What they have done with this is fresh compared to the traditional high street retail we see from WH Smith.

Here are some photos that illustrate these points.

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Book retailing
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