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

Author: Mark Fletcher

New Matilda article changes tune on newsagent deregulation

When first published Wednesday, Nicholas Gruen In Re-imagining economic reform, published at the New Matilda, wrote that (among other things) that most economists agree that newsagents “still need some old fashioned deregulation “. I emailed Gruen asking him to elaborate on this. He responded with: “Perhaps it would be worthwhile investing some of your own time explaining what claim you are referring to, what your own perspective is (if any and so on). Do you have any idea what I have in mind regarding the suggestion?” I quoted his words back at him and included: “I’d be interested in knowing what old fashioned deregulation newsagents need. Since it’s a published article I consider it reasonable for you to justify the opinion. My perspective does not matter. However, I own a newsagency.” I note that yesterday, the article was changed and the reference to newsagents removed.

There is a misconception in many circles that newsagents are protected. They are not. We were deregulated in 1999. Supermarkets, convenience stores, petrol outlets, coffee shops all get magazines directly from the suppliers. They choose the titles they carry. Most carry the top 100 or so titles. Newsagents don’t have the luxury of controlling what they receive. We know from the recent cash flow study that 65% of magazine titles in newsagencies are cash flow negative. This would not be the case if newsagents could control the titles they received and the quantity. The government deregulation push which was overseen by the ACCC has left the small business channel severely disadvantaged.

Footnote: late last night Nicholas Gruen emailed me saying, in part: “The list was from an article I wrote a few years ago, and I thought it was current. On reviewing the situation, I find to my dismay that there has indeed been considerable deregulation since I last looked! Please accept my sincere apologies for my oversight. I know it can be irritating to read things in the press that are inaccurate and do my best to be accurate and failing that to correct inaccuracies when I become aware of them.”

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Newsagency challenges

Auto Supermarket magazine closes

ACP has announced that the current issue of Auto Supermarket magazine is the last to be published. It’s not surprising given the inroads being made by online offerings where new content is available sooner, navigation is easier and the publisher costs lower. ACP will maintain its connect with buyers and sellers through the various websites it’s parent owns, newsagents currently have no such connect with online classifieds.

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Media disruption

Newsagents lose money on Betcard

Betcard was touted to newsagents as the next big thing. It was going to revolutionise gambling. In NSW especially the state newsagent Association, NANA, got right behind the opportunity. It seemed a sure thing since newsagents were told that Saatchi and Saatchi (as reported in B&T) and Channel Sports were behind the betting play. Newsagents were asked to prepay for Betcard stock. More than two years on, newsagents are chasing a refund for the cards they purchased. There’s not a word from Betcard nor the companies touted as being behind Betcard nor from the NANA Directors who so strongly supported Betcard to newsagents.

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Newsagency challenges

Newsagent has magazine supply contract canceled and wins award

Pendle Hill Newsagency has had their magazine supply contract canceled by Network Services Company because the owner did not complete a one week training course as required by the contract. While I am not about to get into the rights and wrongs of the Network decision, it is worth noting that the newsagent last night won an award at the Holroyd District Business Awards. They were nominated by their customers. So, the people who matter most to any business reckon that these folks are doing a good job. Whether they attend a mediocre industry training course ofr five days is irrelevant since there are other ways to measure if they are good business operators. Rather than unilaterally canceling the contract, decision makers might have benefited from visiting the shop first. ph.JPG

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Uncategorized

Are lotteries moving out of newsagencies?

There is noise among newsagents that lotteries are moving away from them to clubs and big business. Getting a straight answer from Tattersalls, Golden Casket, NSW Lotteries, Lotteries SA and LotteryWest seems to be a challenge. If newsagents lost lottery traffic it would severely impact as they rely on habit driven lottery traffic to pull sales of newspapers and magazines – fixed price low margin products as are lottery products. Governments, State and Federal, ought to be interested in this. Newsagents have done an excellent job making lottery products accessible across the country. Now that brands are well established it would be grossly unfair to move the products to other channels.

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Newsagency challenges

Social networking evolution

The folks at JibJab have been testing JokeBox for several months. It’s a free social networking site where you can upload jokes, funny emails and the like and share them with others. In the three month beta 25,000 items were posted according to Paid Content. Independent retailers used to comfort themselves that there is nothing like across the counter customer interaction. While the Internet is yet to replace this, sites like JokeBox take this interaction further. On another level, what’s good about JokeBox is that it’s personal. I can be at the centre of the entertainment and for many this will be compelling.

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Media disruption

Explode magazine the ‘most popular’

I get more comments about my blog entry on Explode magazine than any other. Every few days another comment lobs in my inbox. 80% are from teen males and positive and 20% from girls or parents and negative. regardless, Explode is a popular title. The impression I get is that teen males talk about Explode among themselves and this is where the slow but steady sales growth is coming from. The passion they express in their comments about the magazine surprises me. I was somewhat critical of the content and many went ballistic. I’ve been critical of many magazines over the last 16 months of blogging and Explode responses outstrip those for other titles by far.

The comments, over the last four months, range from this from a teen boy:

who ever wrote this is a moron explode is an excelent mag but u dont see it this is a short letter just saying ur a loser without brains this is however from a 13 year old i love the mag but for now good bye moronic ass

To this from a girl:

what makes the magazine so excellent? it it even educational? coming from a 13 year old i see you obviously haven’t developed brains just yet, who’s the moron now? how do you think 17-18 year old girls feel by being exploited for little boys like you to just stare at. it’s quite obvious that girls develop maturity alot quicker & could possibly be the reason that in most relationships the boy is older. find something else to read

To this from another teen boy:

im a teenage male and i buy the teenage Explode magazine and i think that the explode magazine has made males read magazines more therefore more are reading not less

While there’s no doubt that Explode is exploitative, I appreciate that it is pulling a demographic into my shop and therefore educating a new generation of newsagency shoppers. The challenge is to retain these people as magazine consumers versus Explode website visitors. The website is excellent and mirrors the tone of the magazine perfectly. Right now the more valuable content is in the magazine. All it takes is a financial model to make the website more valuable than the magazine itself.

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magazines

The intersection of the online rise and retail fall of magazines

“Only Women’s Day and People’s Friend today, my daughter gets her fix online now.”

The mother spoke with a tinge of sadness in her voice. They shop regularly together and visiting the newsagency was a treat because they all found what they wanted. Mother, daughter and mother’s mother. The daughter is more satisfied now with Girlfriend and other sites online than a magazine.

As the three women left the shop I mused that it would be handy to track traffic to websites like that for Girlfriend and to plot these compared to retail sales. There must be an intersection which publishers watch for. Based on this brief comment at the counter I felt out of date.

Young girls and boys are smart and if they can satisfy their interest in up to date news and information online then why buy a magazine. This where plotting the intersection would be valuable. It doesn’t take long for habits to change. For the short term we need to work harder at building the magazine buying habit among people 25 and younger. We need to help mothers pass on traditions to their daughters.

Most magazines are not affected at the moment. But at the fringes there is enough activity to measure.

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magazines

Newspapers talking about the future of newspapers

It’s interesting to compare this story in The Australian last Thursday with this story at the website for The Sacramento Bee published on Sunday. While the story by John Lehmann in The Australian is upbeat and glosses over then impact of the Internet and disruption generally on newspapers, Dale Kasler’s piece at The Sacramento Bee is sobering and provides examples of how the economic model of newspapers has changed.

Newspapers reporting about the future of newspapers is a challenge. Overseas you’re more likely to see stories like those by Kasler, whereas here in Australia Lehmann’s approach is more common. I wonder if that’s publishers protecting each other or whether it is ignorance and fear.

The economic model for newspapers has changed. One only has to look at their investments in the last year in online businesses to understand the where publishers see the future. That is not to say that newspapers will die. Rather, they will morph from their current focus to a new model based more on analysis and opinion. This will bring a different type of advertiser. Stories like that from Lehmann perpetuate a spin which hides the real story.

I’d like to see Australian journalists report more completely on the impact of the Internet on newspapers. The better we understand the impact of change as being experienced in the US, and to a lesser extent Europe, the better we can manage and, indeed, embrace change here.

I own a newsagency with two retail outlets. I’m not concerned about the impact of the Internet on newspapers. This change presents an opportunity I’m ready to embrace.

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Newspapers

Hesletine proposes magazine levy in the UK

The online press gazette, in Heseltine proposes magazine distribution levy, reports that the former deputy prime minister believes the industry should raise an “administrative levy” to help smaller shops sell more magazines. It claims he is backed the Periodical Publishers’ Association. Hesletine is quoted: “I was appalled by how bad the relationship was between publishers and newsagents. It didn’t make any sense for the producers not to see eye-to-eye with the front end. Nobody benefits from inefficient distribution, least of all publishers.”

With 65% of titles carried by Australian newsagents cash flow negative for newsagents, it would not be surprising to find that newsagents here start to organise themselves for similar financial support from publishers. Sales of popular titles suffer from the financial and operational drain on newsagents by the specialist less popular titles. That is, the very point of difference which publishers and newsagents crave about newsagencies is starving the channel of resources to compete with supermarkets, petrol outlets and convenience stores which sell only the top performing titles.

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magazines

Easter newspaper frustration for customers

The Age in Melbourne yesterday (Good Friday) and today was pretty much the same newspaper except for the main news wraparound. Home delivery challenges of what is effectively a duplicate product notwithstanding, retail customers expressed their frustration in my shop today at the waste of paper and for being charged a premium Saturday rate for a product they already purchased the day before. The message from the customers I spoke with was if you’re going to sell on both days then product a different newspaper for each day.

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Newspapers

Predicting the death of software developer magazines

Eric Sink likes to predict the end of businesses. This entry at his blog predicts the end of software developer magazines. His criteria are sound as are his conclusions. Computer magazine sales are in free fall and software developer magazines are leading the pack. Given the timely information about software development available online compared to in print, it makes sense to kill these titles before they cause all involved to loose too much money. Newsagents could use the space saved to better display titles in growing categories such as crosswords, crafts, women’s weeklies and fashion.

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magazines

Google AdWords cold turkey

Eight months ago we launched an online ink and toner supply business, Inkfast, to see what we could achieve with a purely online business compared to selling the same products in our newsagency. Inkfast was advertised primarily on Google with some recent work with Yahoo. We’re at over $40,000 a month in ink and toner with most customers of the sort we would never see in a newsagency. The cost of customer acquisition has been falling steadily since month three to the point where we decided to rest the Google campaign and see what happens. Such a pause is timely going into Easter. It will be interesting to see the impact.

A key learning for us from this online business is how smart newsagents can leverage their infrastructure for access to customers their bricks and mortar business cannot access. Inkfast has been grown on a tight budget. Less control on our advertising spend would, I am sure, lead to over $100,000 a month in ink and toner sales. Leveraging these business customers who would not usually shop in a newsagency into other products is the next phase of the development of this business.

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Newsagency challenges

The sick magazine distribution system in Australia

How many hair magazines in a newsagency is too many? Six? Eight? Eleven? I’ve been in several newsagencies this week and each has eight or more different hair titles on their shelves and one with eleven. Only two of the titles come close to paying their own way. Newsagents are losing money on the rest. I’d suggest that average consumer interest in hair would be satisfied by a maximum of six titles and probably four. Newsagent could cut their range in half and start to make money out of the hair segment. This is where the problems with the magazine supply model kick in – getting supply of a title cut is difficult for newsagents even if they are losing money every month. If a distributor decides to cut a title and not carry it at all, another distributor is likely to pick up the title and push it out to newsagents – continuing the cash-flow problem.

Newsagents are overloaded with underperforming titles. The segments where this is most evident are: hair, cars, weddings, computers, computer games, science, crafts and music. It is in these segments that the return on investment is the lowest and newsagents are almost powerless to correct the situation.

The problem is so serious that the ACCC ought to look at the supply model. Newsagents are the only businesses not being compensated for their time and resources in the event of a title not selling.

I have talked here before about Cosmos magazine. That title is a good example of the problems with the magazine supply model. Here it is ten months into the life of the title and most newsagents are still losing money. Many have hundreds of dollars invested in the future of the title. These are small business operators unable to pay themselves an adequate wage yet the magazine ‘system’ forces them to invest capital in a magazine launch like Cosmos.

The system is sick and newsagents are running out of cash.

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magazines

More newsagent frustration at Gloria Jeans deal by News Ltd

Continuing noise among newsagents about the News Ltd deal to place their newspapers at Gloria Jeans outlets. Several newsagents have complained that the new arrangements not only take sales from their stores but are loss making in terms of labour cost. Newspaper publishers could achieve incremental sales if they treated newsagents as business partners, removed restrictive business rules and rewarded success. Incremental newspaper sales are available in newsagencies if the publishers want that.

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Newspapers

An update on our in store trial of LCD advertising panel

We have been using our large LCD panel for in store promotion for three months and while it’s too soon to individual products results, there is strong anecdotal evidence that lottery products benefit from this type of promotion. People are in line, they’re reminded of a super draw or a jackpot and it’s an easy purchase at the counter whereas they have to leave the line (not that the line is that long) to grab a copy off the shelves.

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We’ve embraced the LCD unit for a local focus and have included photos of employees – all to underscore our focus on customer service. We feel this is more appropriate that only using it to push product like you see at supermarkets and elsewhere. We’re going to use it for a Mother’s Day feature – if we can get some our customers to agree to having their photos taken and displayed on the screen. We don;t see this screen as being only about advertising. We’re also playing with Flash to make better use of the LCD capabilities and we expect this to improve customer engagement.

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Newsagency challenges

What is the News Ltd strategy for newsagents?

I’ve been thinking more about the deal between News Limited and Gloria Jeans to sell their newspapers in the coffee outlets. Much has been made of leveraging off the “coffee experience” in pursuit of incremental sales for News. My feeling is that News sees newsagents playing less and less of a role in the retailing of their product. News has a right to draw such a conclusion and make appropriate changes to their retail strategy. However, as a newsagent partner I’d like them to let me know because in my small business I and my team are busy chasing same store growth. We’re winning too. Our biggest competitors and the outlets News is supporting with its initiatives.

I invite News Limited to engage in open dialogue about the role they see for newsagents in the future. Not through newsagent industry associations which are likely to filter information (like the Australian Newsagents Federation did in yesterday’s Gloria Jeans announcement). No, News should to talking direct with newsagents so that newsagents are appropriately informed when making business decisions. For example, Victorian newsagents are being told to put in a newspaper stand which costs upward of $3,000. Why invest such capital in a product being pushed to more and more retail outlets?

I know from my own experience that I can get a much better sales kick from a $200 stand than I would from the $3,000 stand.

Good luck to Gloria jeans. I just wish News would work more strategically with newsagents.

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Newspapers

UK publisher calls for financial support for newsagents

The Guardian carries a story reporting that former UK Deputy Prime Minister and owner of Haymarket Publishing Group, Lord Heseltine, is urging the magazine industry to provide financial support for local newsagents. The story says, in part:

The former deputy prime minister believes that the industry should raise an “administrative levy” to help independent retailers sell more of their magazines.

Although the details of such a fund are still to be worked out, Ian Locks, chief executive of the Periodical Publishers’ Association, said Lord Heseltine’s suggestion had “a lot of support”.

Newsagents in Australia are challenged in carrying magazines which their competitors choose not to carry. We know from recent cash-flow research that around 65% of titles are cash-flow negative. Any support from publishers to underpin the viability of such range in retail would encourage newsagents who might otherwise be looking to reduce range. It will be interesting to see if Lord Heseltine’s proposal gains traction in the UK.

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magazines

Newspapers and coffee

A few hours after my post this morning about how newspaper publishers might be damaging the golden goose by pursuing petrol and coffee outlets for newspaper sales, News Limited issued a press release trumpeting their relationship with Gloria Jeans. My view is that the News Ltd strategy is flawed on several fronts. It disrespects and diminishes the value of the newsagent retail channel and it increases browse without increasing sales.

In a newsagency newspapers are the premier product whereas in Gloria Jeans they are the low GP add on. Newsagents actively promote newspapers and all their promotions. At Gloria Jeans promotions will always be about margin, that is, coffee.

I don’t see the sense in creating specialist retailers (which newspapers did in newsagents in the 1800s) and then bring about their break up by facilitating more competition through deals like this one with Gloria jeans.

While News needs to put the needs of its shareholders first, newsagents need to do the same. This decision by News will make newsagents question the News commitment to the newsagency channel. News will make more if the release newsagents from stifling rules and reward newsagents for above average growth. Many newsagents will become entrepreneurial if these changes were made and the result would be solid sales growth.

Here’s the full press release.

Newspapers and coffee
Monday April 10, 2006.

Coffee and newspapers in the morning – it’s a combination that’s hard to beat. Now News Limited and Gloria Jean’s Coffees have teamed up to make it an even more irresistible way to start the day.

From today (Monday, April 10) The Australian, The Daily Telegraph, The Weekend Australian and The Sunday Telegraph will be for sale in over 120 Gloria Jean’s coffee houses across NSW.

This national program will see the 174 Gloria Jean’s coffee houses in other states progressively start to sell The Australian, The Weekend Australian and the News Limited metropolitan and regional newspapers in their area over the next six months.

“This deal gives the readers and coffee drinkers what they want,” said News Limited circulation director, Mr Mark Webster.

“Recent consumer research has identified that the growing numbers of Australian coffee drinkers are significant newspaper buyers and that at the same time, drinking coffee while reading the newspaper is a habitual pleasure. It is a formidable combination.”

Gloria Jean’s Coffees is wholly Australian-owned and locally operated. It is the country’s largest specialty coffee retailer, and was recently awarded Australian ‘Franchisor of the Year’. Gloria Jean’s Coffees expert baristas serve nearly 1 million customers a week – whose favourite drinks are cappuccinos, lattes and gourmet iced chocolates.

More than 9,515,000 Australians aged 14 and over read at least one News Limited national, metropolitan or regional newspaper each week.

“Through our partnership with News Limited, we are enhancing the ‘coffee moment’ experience at Gloria Jean’s Coffees,” said Gloria Jean’s Coffees Australia CEO, Mr. Mike Devlin.

“Our coffee houses are a community meeting place where people come together to share delicious hand-crafted coffee in a warm, ambient setting and escape the daily grind. Now they can also relax with the very best in news, views, gossip and sport in Australia and from around the world.”

Mrs Rayma Creswell, CEO of the Australian Newsagents Federation, said the federation supported the initiative. Newsagents will have the opportunity to grow their overall sale by exclusively supplying Gloria Jean’s Coffee houses within their territories and sharing commissions as they currently do with other sub-agents such as service stations, convenience stores and supermarkets.

“We support this because it ensures newsagents will continue to play a pivotal role in the newspaper supply chain. This opportunity provides the majority of newsagents with opportunities for growth in their overall sales. This is about meeting consumer need, it’s about reacting to consumer trends and it’s about ensuring that we maintain involvement and grow our businesses – businesses we rely upon as a cornerstone to long term sustainability,” said Mrs Creswell.

Mark Webster said the goal was to make newspapers more accessible to consumers.

“We expect to increase impulse sales by encouraging new readers to give our newspapers a go whilst also increasing the frequency of sales to existing casual readers. Newsagents, News Limited, Gloria Jeans Coffees and our customers should all benefit from this initiative,” he said.

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Newspapers

Why newsagents are better for newspapers than petrol and coffee retailers

Some newspaper publishers in Australia are aggressively pursuing petrol and coffee outlets as part of their retail strategy, to the detriment of their relationships with newsagents. This is a mistake and this past weekend is perfect evidence of this.

Buying coffee is a leisure activity. It’s discretionary. Depending on the queue, I can satisfy my interest in news by browsing the newspapers as I wait. No purchase necessary. Also, since I am on the go, I’m less likely to buy a newspaper to juggle with the coffee.

Buying petrol makes me grumpy with the prices rising and falling as a mark of how far the oil companies think they can dupe the government. (Not a big challenge based on pre-Easter prices.) I’m not happy by the time I get inside to pay and face a long line of people who are usually paying with a card and therefore further delaying me. Newspapers are more often than not near this line and there is no push for me to consider the purchase – they prefer to push, push and push candy.

In a newsagency I’m in the purpose built retail space for newspapers. The newspapers are better displayed. Newsagents actively engage with in-store promotions. The overall environment is more conducive to supporting newspapers. Take this past Saturday for example. Thanks to the $21 million super draw newsagencies had more of a carnival atmosphere. There were plenty of happy shoppers thanks to the possibility of them winning $21 million. This happy demeanor means they spend more and newspapers are one category to benefit.

Newspaper publishers ought to try harder to re-connect with newsagents. They have a better opportunity for growth from their existing partners than trying to create a new relationship with more demanding corporates like petrol and coffee chains.

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Newsagency challenges

Beading is the new scrapbooking – magazine sales strong

There is no magazine category more attuned to fashion than crafts. For ages it was quilting and then scrapbooking took over as the popular segment in the category. Now it is beads magazines. Sales are very strong thanks to new titles and the phenomenal growth of beads at retail – Kleins, Diva and others. Smart newsagents will use the bead magazines to anchor the craft area to make it more appealing as well as co-locating the titles at the counter. We’ve been doing this in my newsagency in recent weeks with excellent success.

This is where newsagents can excel – driving what other retailers would consider ‘fringe’ titles to underscore newsagents as having the depth of range to satisfy interests in areas such as beading.

Craft magazine customers are more likely to buy more than one title compared to most other category customers.

Scrapbook titles did well for two years and is still reasonably strong. Let’s hope beading stays popular just as long.

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magazines

Who owns the maps wins

The Telstra owned Sensis owns what many online developers consider to be the best online mapping data and this means that if you want your site to offer the best mapping interface you’ll need to deal with Telstra. My only concern with this is for those businesses seeking to compete with Telstra’s Trading Post and other businesses. You’re having to support your competitor in order to get close to their capabilities. Sure it’s businesses and maybe I need to get over it. However, that a competitor can present a barrier and risk in such a way is concerning at least. While others are in the mapping space for some reason they don’t offer the quality of the Telstra mapping data.

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