Owning the World Cup
Newsagents have (or had?) an opportunity to own the World Cup. We have an excellent selection of magazines providing good coverage, several one-off titles, daily newspapers with stories and a small range of support materials including bracelets. It seems to me that someone, not sure who, could have brought all this together into a World Cup centre which newsagents cold have established in store for the next six weeks or so. While some newsagents will do this off their own bat, many will not and a national approach could have seen newsagents take initiative which builds national pride and generates good sales.
In my own shop we have located four key World Cup focused magazines next to the newspaper stand for the duration of the campaign. We’ve dressed this in a way which indicates that we are the place for up to date World Cup news.
You won’t see this activity, bringing together magazines, newspapers and other items, in supermarkets, convenience stores, coffee shops or petrol outlets.
Compact format magazines
Compact format magazines are gaining popularity. Originally only found in children’s titles, they are popular with publishers in the hair and fashion categories. 
Small format magazines are a challenge to display in that most existing retail fixturing is designed around fill size magazines. These small titles barely peek up from the magazine pockets. Another challenge is when publishers try and try and grow beyond their own new small border. Take this issue of Glamour. It’s a compact title but demanding, this month, more space because of the giveaway included.
Anecdotal customer feedback is that the compact titles are frustrating except in the shopping guide space. Most seem to prefer the regular size titles.
The giveaway addiction of magazine publishers
Magazine publishers seem to be addicted to giveaways. Just about every day newsagents receive a new issue with some promotional product attached to the cover or in a sealed bag with the magazine. The marketplace is so cluttered that these giveaways no longer represent special value. They are the norm. In fact, in many cases they get in the way of a purchase since sealing the magazine in a bag either stops it being browsed or leads to the bag being opened and damage done. Take a look at Who this week and OK! Australia this month. Both have the same coffee sachet. A rip on the sachet and you lost four or five magazines with damage.
New Woman has upped the ante this month with its umbrella giveaway. It’s walking out the door. The challenge was stacking the product when it arrived – another problem for retailers with chunky giveaway product on magazine covers.
GQ is a problem this month with the American Crew grooming products. Newsagents can only fit one copy in a pocket and when you stack them flat they fall everywhere. The problem is compounded when you have fifty or more titles on sale at any one time with giveaway product attached.
Magazine publishers chasing a point of difference might consider breaking their addiction to giveaways and focusing on their product. I know retailers would be happier.
The oversupply of Reader’s Digest to newsagents
Further to my April 28 post of Reader’s Digest oversupply, it’s been pointed out to me that a major supermarket group has cut Reader’s Digest from its shelves. Thus must leave thousands of copies to be placed elsewhere. Newsagents, being the least place of resistance in the magazine supply chain, are the victims. Of the fifty newsagents I have had contact with on this matter, only one is being supplied with an economically viable quantity of Reader’s Digest . Most have been hit with unnecessary supply increases which drain cash from cash-strapped newsagents. The only reason a newsagent should be supplied more stock of any title is when the sell through rate of the title passes an industry agreed threshold. I’d suggest that a sell-through threshold of 90% for titles outside the top 200 is reasonable. To increase supply when the historic sell-through is 30% is a breach of trust and, I suspect, the Trade Practices Act.
Newsagents are the only retailers carrying titles outside the top 200. They have little or no control over the titles they receive and the volume. They rely on magazine distributors to scale out based on current sales data. The Reader’s Digest experience suggests that sales data is not being used to determine scale out.
My software company’s newsagency management software warns newsagents about oversupply. Unfortunately, many newsagents do not act on this because they have given up trying to rectify oversupply issues. It was only after I bought a newsagency ten years ago that I started to understand how de-motivating some aspects of the magazine supply model can be – especially for titles outside the top 200.
Online tipping point for stationery
Our eight month old online ink and toner business achieved more revenue in the first seven days of this month than we will do in the entire stationery department of our newsagency for the whole month. A check of online search stats shows that huge numbers of companies and individuals are trawling the Internet looking for office supplies. We’re seeing people through our online business who would never purchase in a newsagency. The benefits are that we are able to conduct this business without shopping centre rents and without diverting attention from our core retail story; we can advertise like the bug guys; we can specialise for little capital outlay. Newsagents need to rework their stationery story if they are to compete with the new wave of online stationery offerings.
Confusion among Age customers
Some confusion among those purchasing The Age Wednesday when they saw this Post-It Note advertisement on the front page. At least a third asked what it was about and while the interaction was welcome, it’s not our job to push AXA. Plenty ripped the ad off and handed it to us. With some forethought and appropriate reward newsagents could have played a part in the AXA advertising campaign.
Arianna Huffington on magazines
A fascinating blog post by Arianna Huffington on Magazines and the Internet. It’s worth reading as are some of the many comments – some excellent views for those interested in the impact of the Internet on publishing. As Huffington says and I have written here many times, content is king – now more so than even thanks to the many publishing platforms available.
The Internet provides an alternative publishing platform for the titles which do not justify printing, distributing and displaying in retail stores. The challenge is getting publishers of these poor performing titles to take the step and stop costing the industry millions in efficiency.
Huffington has made a name for herself for in citizen journalism circles. She was in the news a few months back for some “issues” with something claimed to have been written by George Clooney and published at her Huffington Post.
Why print classifieds are dead
Bill Burnham has written an excellent piece about Google Base. He writes in detail about the threat Google Base poses to more established classifieds sites. All of this is bad news for newspaper publishers relying on print and more traditional online models for classified revenue. There is no doubt that the online classified space in the US is years ahead of here. However, it will not take years for businesses like Google to revolutionise the marketplace here. This is the risk for all who derive income from newspapers and from our fledgling online classified operations.
Electronic newspaper update
Another company to watch in the race to produce viable electronic newspapers is Plastic Logic. Coming out of Cambridge University’s Cavendish Laboratory, Plastic Logic is gaining newspaper publisher attention for their work.
Starve me while you make my competitor fat
I’ve had my TV Week supply cut by 22% this week. This is because I have not been selling out. The cut to supply takes be below my net sales. However, magazine sales being what they are we will not sell out of the lower quantity because customers tend not to want to buy if there are only one or two left on the shelf. So, the 22% cut becomes a self fulfilling prophecy. In the meantime, the supermarkets in my centre return more TV Week product that I get supplied at the start of the week. It’s a supply model which I don’t understand at all.
Footnote (11/5): ACP Magazines has responded to our request and lifted our supply of TV Week to a better level. This is a good outcome as it allows me to better promote the title rightt throguh to week end. This will encourage us to further push the title.
Pacific Magazines goes direct to 150 petrol outlets
150 newsagents have lost BP outlets as customers with the decision by Pacific Magazines to supply their titles direct instead of through the newsagents. My post from a week ago has been confirmed. My understanding is that Pacific felt they had to act to protect their BP revenue. Last year they lost retail shelf space in Coles and Mobil outlets because they refused to go direct. To lose more shelf space to ACP Magazines would have impacted significantly. The Pacific move protects their revenue stream, provides BP with 25% commission and cuts the existing newsagent suppliers out of the loop.
While I am disappointed by the decision, I understand. Pacific had no choice – either go direct or lose sales altogether. They have been running trials since 2004 and this decision has only come after a long review of the direct supply trial results.
The Pacific decision is a victory for BP and indirectly for Coles, Woolworths and Mobil. It’s a loss for newsagents and small business. Coles has driven this push for direct supply of magazines from the outset. They demand margin. Whereas newsagents used to service their magazines daily, Coles would rather extract better margin and have a poorly maintained magazine display. Their actions and those of their colleagues demonstrate poor social responsibility.
Sub agents, like BP, are important to many newsagents. They help justify the maintenance of a delivery infrastructure. The erosion of sub agent revenue by the Pacific decision this week and the ACP direct supply decision in 2004 (which hit more than 850 newsagents) has eroded sub agent revenue for newsagents to a point which will see more newsagents get out of distribution altogether. This is the breakdown of the most efficient newspaper and magazine distribution system in the world. It’s a breakdown as a consequence of deregulation driven by the current Federal Government.
The high cost of newspaper and magazine returns
I spend more than $150 a week on freight to return unsold newspaper and magazine stock to publishers and distributors. That’s $7,800 a year, the equivalent profit from 28,363 copies of the Herald Sun or $97,500 lottery product sales or $31,200 in magazine sales. It’s an operational cost newsagents are having trouble reducing because of supply policies, especially for magazines outside the top 200.
The Australia Post conga line
The conga line of disgruntled customers snaked from the sales counter through the store and into the mall at the government owned Post Shop opposite my newsagency on Friday last week. I notices because a customer fronted at my counter declaring “I’m desperate for four stamps”. I looked across at the conga line and understood her desperation. I sold her the stamps – for no margin because Australia Post makes that just about impossible. My new friend told me it was like that at Australia Post every week when she bought stamps or other things. She was angry about poor customer service at the counter and long lines. Sure I encouraged her, why not? I took the opportunity to remind her that this was a Government owned shop and that the service level was under their control as the sole shareholder. She liked my idea of playing music for those in the conga line to get some rhythm going as life passes them by while in the line.
Fast Car magazine and their honey pot fixation
This image is taken from the current issue of Fast Car magazine. “Sweet Cuntry Hunny” is the label on the jar and the browser is encouraged to “flip me over and check out my goods”. On the flip side the photo is repeated with the text: “Vicki’s honey pot exposed”. Given that there is no warning associated with this title it’s on display in the car section for all to see. Most unfortunate.
Bark continues to bite
Bark magazine, launched mid 2005, continues to sell well. Sure it’s not a high volume weekly or monthly (the title is bi-monthly). It is, however, reinforcing the range point of difference for newsagencies. On the other hand, Bark is an example of the challenges newsagents face – it’s hard to give the title space to grow in the animals category because of the clutter of other, some lesser performing, product. We’re having impulse success bringing Bark out to the front of the shop.
Memo to Richard Branson and Planet Ark: newsagents do it too!
A year ago I arranged for newsXpress newsagents to install the Planet Ark toner cartridge recycling bins as part of our environmental strategy. Despite our efforts the latest Richard Branson led Planet Ark cartridge recycling campaign focuses on Australia Post, Dick Smith, Harvey Norman, Tandy and Officeworks. It’s as if the commitment from our 67 small business stores is irrelevant.
If Planet Ark wants small business to become more environmentally aware they ought to start treating us like they do big business in their advertising. I find the Branson campaign offensive.
High retail tenancy costs hurt small business
When rent is 13% of your turnover, if you own a newsagency, you’re in trouble. Given that newspapers and magazines (60% of what you sell) have a fixed price and GP (between 20% and 25%) the challenge is to sell better margin product and increase sales overall. Consider the 25% for a moment. 13% goes in rent, 11% in wages, between 3% and 5% in theft and 3% to 6% in operational overheads. No one factor creates the challenge but unless you get your rent right your foundation is weak. This has been on my mind as we absorb another 4% rise. This is on top of the 17% last year. Traffic in the centre is flat at best yet we’re being asked to pay more. The price of most of what we sell (newspapers and magazines) has not kept pace with inflation over our ten years owning the business. Wages have risen at a rate well above inflation. So, we’re being hit on several fronts.
This is why newsagents, especially in shopping centres, are challenged. Operating alone, it is difficult to address the rent, range and management issues. At least by getting together through groups like newsXpress we’re able to leverage numbers in our favour in dealing with landlords and suppliers.
Chasing an $8,000 credit
Based on sales performance we returned $8,000 worth of magazine stock last month which was not due for return at that time. We had given the titles a good shot keeping the product on the shelves would have held us back from better displaying more successful product including product from the distributor in question.
The distributor disallowed our credit and said we would get the refund next month. They have the stock and the paperwork and our cash. The reaction from one of their call centre people was that “early returns are a privilege”. It took three levels of escalation and some pleading on our part to get the $8,000 credit allowed this month.
This happens all the time to newsagents. Payment for oversupply and a huge battle to get a refund for underperforming stock returned early.
No wonder newsagents complain about magazine cash flow.
Changes in lottery traffic present an opportunity for magazine publishers
Newsagents are awash with traffic from punters buying tickets in the various lottery jackpots. The Tuesday game, OzLotto Super 7’s is often jackpots now that the game has bee ‘tweaked’ and sales grow with each jackpot. Powerball on a Thursday regularly jackpots. This makes Tuesdays and Thursdays stronger traffic days than they were in the past for newsagents – something which publishers, and magazine publishers in particular, could leverage. In the case of my shop, for example, our customer traffic was up 100% yesterday on an average Thursday because of the Powerball jackpot of $15 million. That didn’t go off so next Thursday we have a $22 million jackpot. While I have plenty of product to to up-sell with, maybe a fresh women’s weekly would do well on a Thursday – leveraging this increased traffic.
NSW newsagent lottery business under risk
NSW newsagents are facing losing lottery business to supermarkets, pubs and clubs if my information is correct. It’s been suggested to me that supermarkets, especially, stand a good chance of getting lottery business which until now has been the almost exclusive domain of small business newsagents. Newsagents rely on lottery traffic to sell other items. Lottery purchases are part of the habitual newsagent visit each chip away at that risks consumers forgetting about newsagents and purchasing their newspaper, magazine, greeting card, stationery and cigarettes elsewhere.
The Government owned New South Wales Lotteries needs to consider any move away from newsagents very carefully. Newsagents have built the lottery brand and it is only through their efforts and exceptional customer service that lotteries is as strong as it is. To then take a chunk of that business and gift it to supermarkets and others would be a huge blow against small business. What government would do that?
New life for current affairs magazines
I’ve thought for more than a year now that current affairs magazines were close to death. Sales data told the story: down, down, down. Since the death of Kerry Packer, however, The Bulletin has improved in terms of appeal and sales, Time is selling (and promoting) better and The Monthly has realised it has to connect with the consumer. While the category remains tiny in the overall magazine space the data I am seeing suggests it is growing. We need more weekly categories in magazines to strengthen the habit. Consumers are responding to more commercial covers and what appear to be more relevant stories. Better covers mean that smart newsagents can safely put the title in a high traffic area such as near the newspapers or even on the counter.
Time is doing a great job promoting its weekly to newsagents including providing a cover shot in advance of product for those running in store LCD displays. It’s small efforts like this which support the retailer and boost sales.
While on The Monthly, Alan Jones is on the cover. The cover shot, while interesting, won’t help sell copies of the magazine because he is not a recognisable as he would have been in a more regular shot.