Author: Mark Fletcher

I launched this loyalty program in 2004. Customers who purchase 11 magazines in eight weeks can choose a magazine up to the value of $10.00 free of charge. The average magazine purchase is $4.50 and the average redemption $5.00. This equates to a 10% discount.

Over at Coles, if you purchase $49.50 worth of magazines, you accrue around 10 FlyBys points. FlyBys points can be redeemed for gift vouchers. You need 13,500 points for a $100 voucher. That equals 675 points for my free $5.00 magazine. So, I need to spend $3,375.00 to get a free $5.00 magazine.

Which deal is better? The Magazine Club Card I offer in my small business newsagency and has been rolled out across newsXpress stores or the FlyBys offer from Coles?

State Governments ought to regulate to force businesses to prominently publish in store and on receipts a present value for each point accrued.

Small businesses, like mine, ought to promote the benefit of their loyalty campaigns by directly comparing the reward per dollar with the likes of FlyBys. While occasional bonus offerings make FlyBys points more attractive, this is not happening enough. Most small business loyalty programs I have seen reward sooner and with more value than their big business counterparts.

Newsagents deliver newspapers and magazines to many other retail outlets. These outlets have long been called sub-agents. For a 50% share of gross profit newsagents deliver the stock, carry the account and refill stock as needed. It has been an important part of the newsagent business model and a low cost way of getting magazines into more outlets. In 2004 ACP delivered a blow to newsagents by going direct to many national brand petrol and convenience outlets. Much was made at the time of the fact that their main magazine publishing rival, Pacific, was not going direct.

I’ve been told by several people now (a newsagent and two people on the petrol side) that Pacific is a week away from going direct. If true, this will be a bigger blow to newsagents than the ACP move in that newsagents have drawn considerable strength from Pacific and their support for many years. The emotional impact will be considerable.

I don’t begrudge the ACP decision in 2004, nor the Pacific decision (if my sources prove to be correct). Their masters, Coles, Woolworths and national petrol chains are powerful and demanding. They want full commission on the sale of a magazine and if you are told that your national weekly title will be off the shelf in a matter of days unless you agree to a direct account then you’d make the decision. Coles and Woolworths are large, fat and hungry and they don’t care how many independent small businesses they push to extinction in their pusuit of a higher share price.

ACP copped a huge bagging from newsagents and some commentators for their move in 2004. It will be interesting to see the reaction of newsagents over the next few days to Pacific. To their credit, ACP delayed the financial impact for six months and put a compensation package on the table to mitigate the impact of the change. Pacific will need to at least be as generous as ACP.

Newsagencies in Australia were created by publishers in the 1880s. Our businesses are complex and finely balanced. The chipping away which has occurred, especially since the Howard Government driven deregulation in 1999, has harmed the model and made business challenging. The biggest challenge is that newsagents are disadvantaged by magazine supply arrangements which hark back to pre-deregulation. The problem is with the titles newsagent competitors refuse to carry – titles outside the top 100 sellers. An average newsagency has 1,000 titles – 65% of which are cash-flow negative. A smarter move by all involved in the 1999 deregulation would have been to negotiate new magazine supply arrangements.

If Pacific does go direct to major petrol and convenience outlets, magazine distributors must address the issue of supply arrangements for titles outside the top 100. Newsagents cannot sustain the continued challenge to their business model and sustain inequitable supply arrangements for unprofitable titles.

Some reading this will say boo hoo to newsagents. If you’re one of them. pick a newsagent, any newsagent and take the time to find out about their business. Look through their financial data. Then decide if you would invest your own money in the channel?

Newsagencies are unique and socially important businesses. They provide a personal community connection which only chemists come close to. To lose them would play into the hands of Coles and Woolworths and one day, down the track, you would realise what has been lost.

Further to my earlier report about the industrial action by some magazine delivery drivers this week, I note the action was apparently due to rising fuel costs and refusal for them to pass on these costs.

Also, I have heard that some outlets affected seem to have been treated differently than others. For example, one retailer received replacement stock by courier while others nearby had to wait almost 24 hours. In another case, a newsagent, even though on a round affected by the action, reportedly received their stock on time.

In another case, the same driver delivers for two courier companies to the one area. One courier company has the contract for newsagents and the other for major outlets such as supermarkets and convenience chains. This is why newsagents were without magazines in some places while their competitors were fully stocked. It begs the question of why publishers did not use the alternative company to get newsagents covered.

Newsagents cannot afford to be without Take 5, That’s Life or Australian Women’s Weekly while their major competitors have stock. The industrial action this week has hurt many small businesses.

Industrial action by delivery drivers stopped magazines getting to many newsagents yesterday. Many newsagents in many shopping centres were without current stock while competitor supermarkets had stock – magazines are delivered to supermarkets in different runs and were far less affected. The harm of this action is that in newsagencies more than 50% of sales of weekly titles occur on the day of issue. This means that newsagents will have lost hundreds of dollars in sales for Take 5, That’s Life. I don’t care about the grievance the drivers have with their employer, it is appalling that they hurt small business newsagents and give a free kick to supermarkets.

I would expect a knock on effect from the action since future supply figures are based on sales data and the fall this week will not be understood by computer models unless someone intervenes and quarantine data.

Sue Dunlevy, writing in the Daily Telegraph (Apr. 21) complains about the amount of time one has to spend in the queue at supermarkets to get service compared to the “corner shop”. Dunlevy poses a valid question:

CAN someone please explain to me why we can play movies in our cars, send emails from McDonald’s and take photos with our phones, but we can’t get rid of the supermarket queue?

At newsagencies, service is faster. Sure there might be a queue, but I bet it moves much faster than at a supermarket. As Dunlevy points out in her article, you’re more likely to see the owner manning a register in the busy time at a corner shop (and a newsagency). At Coles and Safeway in the busy time you’ll find managers a long way from the check out counter. Newsagents are often at their counter.

Supermarkets are built around check out queues. Look at their configuration. It’s about regimentation, control. Newsagents offer a more flexible and customer friendly shopping experience. It’s this regimentation which bigger companies like. Look at Vodafone, they have Coles on 16% commission and newsagents on 5% commission yet newsagents provide better service. Apple did a deal offering music download recharge for iTunes exclusively through Coles while newsagents could have provided better service.

Dunlevy goes to the edge with her criticism:

It’s worse than a pap smear and more stressful than a visit to the dentist – but you have to endure it at least once a week to feed your family.

The alternative is to find a local shopping centre with good newsagent, greengrocer, butcher and small supermarket. You’ll get local (faster) service, access to greater range and less stress from the slow moving queues at Coles and Safeway.

Over the last ten years newsagents have innovated and brought new products and services to their counters, they have embraced technology to improve the accuracy and speed of transactions. They have enhanced customer flexibility. If they can do this at the small business end and still usher customers through quickly them why not supermarkets?

Dunlevy’s article is encouraging reading from a small business perspective. Good on the Daily Telegraph for giving space to this issue.

And while we’re on queues I can’t let the topic pass without observing that Australia Post is as bad as ever. The line snakes through the government owned outlets with either side of the line appropriately littered with impulse purchase items (which have nothing to do with postage).

Dunlevy ends her piece suggesting it would be good if consumers took action and abandoned their full trolleys. While that may be impractical, a good start wold be to buy newspapers, magazines, greeting cards at newsagents. The price is the same, the range far better and the service faster and more enjoyable. A dollar spent on a newspaper, magazine or card at a newsagency is, I suggest, more efficient for the economy than a dollar spent at Coles or Safeway.