Author: Mark Fletcher

Several newsagents have commenced a trial this week selling Sports Acumen betting account recharge. Sports Acumen is an ACT licenced betting agency offering Fixed Odds and Spread Betting markets for Aussie Rules, Rugby Union, Premier League Soccer, Horse Racing, American Football, Baseball, Basketball, Boxing, Cricket and more. Newsagents facilitate account top up. They are not actually involved in providing betting services. They are a natural retail partner for Sports Acumen because of their traffic and well established lottery connection. Newsagents attempted to get involved in this space in 2004 with Betcard and have been looking for a new partner ever since that fell apart. With Australia Post involved with the soon to launch Betfair, newsagents are expected to embrace Sports Acumen once the trial is over.

The call from the police Saturday morning was a reminder of the hidden cost of the current magazine supply model. The police had executed a search warrant at the home of a suspect and, along the way, found around $800 worth of magazines – around half from my shop going back over the last year. The frustration is that the titles were outside the top 200. Magazine distributors scale out based on return data and not over the counter sales. This means that the theft will be seen by my suppliers as sales and most likely have lead to increased supply.

Managing theft of magazines in a newsagency is challenging since electronic tagging costs between 10 and 15 cents per copy and is labour intensive to implement. We know we lose around $200 a week. It’s a cost of business. My frustration is the knock on effects.

Having just done over newsagents by slashing commission on recharge product down to 5% (while maintaining Coles at 16%), I’ve heard that Vodafone is preparing an offer for newsagents based around SIM card sale. If what I have heard is right, they will be offering above average commission and other benefits in return for premium counter space. The only way Vodafone can fix the problem they have created with newsagents is to lift commission to something close to what they pay Coles.

Tattersalls mystery shops its outlets and provides feedback on each visit. In the latest feedback we’ve slipped behind our previously average position. The measurement points include: whether the employee serving has a uniform; whether they wear a name badge; whether an up sell is offered; whether they ask if you have a Tatts card. There are plenty more. It is a good process and keeps business owners focused on making sure these things are covered.

In the same period as this last mystery shop we increased our Tattersalls sales by 17%. The Tattersalls rating is based on one visit while our sales growth is over the whole period. Without wanting to dismiss the Tattersalls rating approach, I’d prefer the sales success we have achieved even it means we’re below average on the rating.

Some in Tattersalls would have me believe that my poor rating means I am not a good representative. Smarter ones would say, ignore the ratings, 17% growth is well above average. Keep doing what you are doing.

Asking customers about an up sell is not that important for every sale – employees need the flexibility to be spontaneous. Just go to a Coles petrol outlet and see what happens when you are forced to offer cheap candy to every customer. It’s reverse evolution in action. Humans have become monkeys.

Gordon and Gotch canceled a range of poor performing magazine titles last year. It is disappointing to note that many of these poor titles have been picked up by a Gotch competitor. This means that the titles newsagents were glad to see cut are now back in force. Newsagents receive no payment for poor performing stock whereas the distributor involved receives fees for distribution and management. Newsagents also have to pay to return the unsold stock at the end of the month.

It is time to decide if I want my newsagency to continue to try and be a retailer, wholesales and distributor or to specialise in one of these areas. My delivery run is a reasonable size but not of the scale to justify the capital investment for the coming flat wrap push so if I want to stay in home delivery I will need to purchase additional territories. My retail business is strong and growing. The nature of that business is that I have more control (despite my complaints here from time to time) and I get a faster return on capital invested. What I do know is that I cannot continue to operate the traditional newsagency: retail, home delivery and supplying sub agents. News and Fairfax tell me those days are over and I’m okay with that.

My dilemma is shared by thousands of newsagents across the country It was a natural consequence of the deregulation brought about by the Howard government in 1999. Unfortunately, newsagents are not farmers, auto workers or miners in Beaconsfield Tasmania. There is no deregulation assistance or support. We’re having to navigate the issues alone including weathering any write-down.

I expect to make a final decision sometime next week.

This is a story which should be on one of the nightly TV current affairs shows. The images would be of secret backroom deals, angry customers, children in tears and big business call centre staff more immovable than the great wall of China.

For decades newsagents have sold partwork publications – magazines which publish for a set number of issues. Newsagents are the only retail outlet for these. Current partworks include Funny Bones and Midsomer Murders. Newsagents love partworks because customers sign up for the series and these regular visits underpin the habitual visit which is crucial to the newsagent retail model.

Partworks are supplied to newsagents with colour brochures inserted encouraging newsagent customers to go direct to the supplier to subscribe. While newsagents have complained about this, the main partwork importer in Australia, Bissett Magazines, claims subscriptions account for less than 5% of total sales. Newsagents give over their real estate without charge and often actively promote new titles. This raises the profile for the Bissett imported product. It’s very cheap advertising. The pay off for newsagents is customers signing up to get issue #2 and so on. If only it worked out that way.

The problems begin with issue 5 or 6 of almost any partwork you want to look at. Supplies to newsagents are cut. Often dramatically. When this happens, Bissett Magazines and their Australian distributors, Network Services (part of PBL) and Gordon and Gotch, say this is because the title is far more successful than their trial (usually conducted in South Australia) indicated it would be. They claim to be surprised and embarrassed that they cannot service all the requirements. There are usually three or four partwork titles a year where supplies are cut this way.

Newsagents are left unable to satisfy firm orders from customers. Customers get angry – some call Bissett and subsequently sign up for a subscription while others vent in store and yet others let their kids throw a tantrum because the newsagent has let them down.

The problem with partworks is systemic and not operational as Bissett and Network claim.

I want to share one personal experience to illustrate the problem with partworks and prove that newsagents are being ripped off by an inadequate system or something far more serious.

Funny Bones has been very successful in my shop. I have orders for 12 customers. Firm orders. We can sell another 5 or 6 copies on top of this. Network, in their wisdom and with the assistance of their IT technology and access to my sales data daily for years, decided to but my supply. Yesterday I received 4 copies of the latest Funny Bones issue. There is no business case for such a cut. I know o other newsagents receiving more stock of Funny Bones than they can move and Network would know who they are because they, too, provide daily sales data. Regardless, the Network team and their massive computer system cut me back. I have 8 customers who will not receive their Funny Bones. Contact with network says, no, sorry, no stock left. That’s the end of the matter. An angry email to the Managing Directors of Network and Bissett found another 5 copies for us late yesterday. It surprises me, in situations like this, that they can be completely out of stock and then find stock to help when one complains to the right people.

I know from my own research that I can call Bissett and order a subscription to Funny Bones. Yet I cannot get current stock and back order stock for my newsagency. This makes me suspicious about the claim than only 5% of all partworks sales are subscriptions.

A conspiracy theorist would suggest that newsagents get plenty of the first few issues of partworks to build title recognition and that the real game in town is to win subscription sales as that is where the real money is made. I don’t believe that, or don’t want to believe that – the on going mess with partworks makes me wonder.

I would have thought that the Trade Practices Act would have something to say about getting newsagents to promote partworks and then drying up the supply so that newsagents cannot supply so the consumer goes elsewhere. It does not make sense to me when I can prove that I sell out every time and the ‘experts’ cut my supply. They are taking hundreds of dollars revenue away from my business and causing considerably upset for my customers. They are starving me of oxygen.

No one wants to own this problem. Bissett says it’s their distributor at fault. The distributor says it’s Bissett. Bissett also says it the South Australian test prior to national launch which has let them down. My customers blame me. Bratty kids blame their parents.

I have offered to review future partworks and place firm sale orders for the whole series. This was rejected. I have offered to bypass the distributor and pick up my supply direct since the Bissett office is a few minutes from my shop. This was rejected. It’s almost as if the faulty supply model suits Bissett and Network. But that’s too ridiculous to contemplate.

I am a retailer. The partworks supply model denies me the opportunity to be a good retailer. It makes me look stupid. It turns customers against me. The only people profiting are the magazine distributor and Bissett because the costs of calls, customer anger and attempting to get backorders eliminates the profit from the initial sales.

Bissett and the magazine distributors need to get this sorted out. They risk newsagents pulling the plug and that would hurt the model as no other retail channel would provide the high exposure real estate support (at no cost) of newsagents. Maybe newsagents should pull out of partworks anyway.

Sometimes you really have to break something before it can be fixed.

Reuters via Publish.com has this story about significant developments in this area. In the e-newspaper world there is no daily purchase, no opportunity for the newsagent to up sell the newspaper customer into candy, lotteries or magazines. I know the reality here in Australia is years off but that time will pass quickly. Newsagents need to make business decisions today as if e-newspapers are months, not decades, away.

The Online Publishers Association has published the results of new research showing that the Web is clearly a “mass media”.

NEW YORK, NY — June 6, 2006 — The Online Publishers Association (OPA) today announced the results of a new research project, “A Day in the Life: An Ethnographic Study of Media Consumption.” The observational media usage study is being discussed throughout the OPA’s 2006 Eyes on the Internet Tour, which will visit Atlanta, New York City, Boston, Chicago, Detroit, Los Angeles, Dallas, and San Francisco.

The unprecedented observational research tracked the real-time media use of 350 people, recording their actual activities every 15 seconds. The results show that the Web is now clearly a mass media — ranking right alongside other major media when it comes to reach and duration of use. And when it comes to at-work media use, the study found that the Web clearly dominates (with 54.6% reach, compared to television’s 21.1%), and is the only medium that ranks among the top two at both work and home.

It would be reasonable to read this as but another marker on the road of mainstream media disruption which is taking us to somewhat unknown places. It would also be reasonable to note that this is US research and that it’s a pity we do not have equivalent Australian research.

We’re insulated here. Our efficient newspaper distribution model delivers higher newspaper and magazine penetration. I would expect Australian research to show that while the web does not rival TV it is growing.

The research reflects my personal experience. I get most of my news online. The newspapers I read I read for perspective. The TV news I watch I watch out of curiosity.

The folks at The Guardian in the UK have decided to ride the wave rather than chase it as this report from Jeff Jarvis shows. The Guardian has announced that it will publish stories online before it publishes them in print. While they are not the first newspaper to do this, their decision is gain much attention and lead more online for news. It will help them navigate the future for their print edition in more proactive circumstances.

From a newsagent perspective we need to be aware of these developments because things will move faster here. While the US and UK are trail blazing and are a long way in front, we are catching up fast. Both Fairfax and News are investing heavily in their online news outlets and this will kick up the pace of change for newsagents.

Unfortunately, too many newsagents and those who influence them remain in denial about the impact of the Internet and mobile technology on newspaper and magazine sales. Our relevance is built around the daily/weekly newspaper/magazine purchase habit. It will not be enough to bring in other product. Newsagents need to bring habit based product with a frequency approaching that of the newspaper and/or magazine purchase. This is an extraordinary challenge for a disconnected poorly led and uninformed channel.

Further to my post last month about the May catalogue offer from Australia Post this month’s Relax…at Tax time with Australia Post catalogue. A review of the catalogue shows another 12 pages of, mainly, product not covered in the Postal Act: Books (including Andrew Denton’s Enough Rope); Computer printers; Printer ink; Printer toner; Anti virus software; Post brand calculators (made in China); Customised rubber stamps; White boards; Padlocks; Luggage locks; Dymo label maker; Post branded stationery (made in China); Pos brand blank CDs (made in China); Shredder; Copy paper; Laminator.

While chemists are busy fighting Woolworths and Coles, newsagents are fighting tough competition from Government owned Post Offices which have moved aggressively into traditional newsagency lines.

All but one page of the 12 page Relax…at Tax time with Australia Post catalogue is for non postal service items. See for yourself here.

A visit to any of the Government owned Post Shops will further prove that pursuing stationery sales is a key growth strategy for the Corporation, especially the sale of Post branded stationery made in China.

Australia Post is leveraging its Government protected and supported brand to compete more aggressively with independent Australian small businesses like mine. The playing field is not level and no one in the Government cares.

I’ll call them New Age titles even though some are not. Newsagents are being supplied these is growing numbers and they are not selling. Titles like Hard Evidence, New Dawn, Life Extensions, Strange Times, UFOlogist, Creation and Spheres. I have more than 25 of these ‘New Age’ titles on my shelves at the moment with a total value of around $1,500. A couple of years ago I would have had less than ten such titles.

So, why the growth in this ‘fringe’ category? Many of the titles relate to fear and conspiracy. They don’t do much for my shop and the area does not attract browsers.

My frustration is that someone somewhere is making a decision on ranging product which has nothing to do with the value of the product or how it may or may not suit retailers. This is why newsagents need a say in controlling new titles, from a ranging perspective. We need to develop a centralised function in association with the three magazine distributors to stop problems like I have with these ‘New Age’ titles occurring.