Author: Mark Fletcher

We have finally found the sweet spot to make calendars sell in my store. A $2.00 price point. $19.95 and $24.95 calendars are being sold for $2.00. And I’m not alone. There are several stores near mine in the same boat. $12,000 in stock being sold for under $1,000. It’s a shame and a lesson.

It is a year and a half since ACP Magazines went direct into key petrol and convenience outlets so I thought it was time to see how the move was traveling. I have visited six key petrol outlets in suburban Melbourne this week. I know four locations well and in particular how the local newsagent used to range magazines and newspapers.

Today, a year and a half on, in each case, 20% of magazine pockets were empty, category segments were not being respected (car magazines mixed with women’s magazines); and, newspapers were either out of stock or messy.

Whereas newsagents used to visit these stores at least once and often twice a day to re-stock and merchandise, now the outlets are left to do this for themselves and from the five stores I have just visited it’s clear they are failing. In each of these same five stores, their confectionery displays were excellent – well stocked, tidy and better located in relation to traffic flow. I wonder if this has something to do with margin.

Sellers at eBay have listed Simpsons pins at the centre of a major promotional campaign for the Melbourne Herald Sun newspaper. In a major embarrassment to the publisher, pins are listed, including photographs, which have not been released for sale to Herald Sun readers yet.

Over the counter at a newsagency the pins sell for $2.00. At eBay they are listed at $4.00 plus postage. The seller lists that they have two of each of the sixteen characters plus another eBay item of the full set of sixteen. It’s odd that they have been able to list this when stocks are embargoed by the publisher.

Given that each pin costs $2.00 and the required newspaper purchase another $1.00, the sell price of $4.00 does not make sense.

With kids across Melbourne angry that they cannot get the pins they want because their newsagent has sold out, I would expect comment from Herald Sun publisher, the Herald and Weekly Times, to comment on how their promotional products can be on eBay already and what they intend to do about it.

More NSW newsagents are expressing their frustration at being told they must supply News Ltd newspapers to Gloria Jeans outlets no matter how close they may be to the newsagency.

I cannot see the sense in News putting newspapers into an outlet so close to the newsagency. There is good data demonstrating that newsagency sales are lost to the new outlet – financially hurting the newsagent – and that the new outlet usually only achieves limited incremental sales.

Newsagents actively promote News product with in store displays and over the counter offers. Gloria Jeans will not do this. They are like the petrol and convenience outlets – newspapers play second fiddle to their main game. The cost to newsagents is greater than the benefit to Gloria Jeans and News Ltd.

I understand that such a move may be important in supporting a national advertiser (Gloria jeans) hwoever, burning a long serving and successful retail channel is a high cost strategy.

1. Pay an incentive to newsagents are above average sales growth.

2. Turn your back on product display rules from yesteryear and help newsagents display product more efficiently and attractively at the counter.

3. Reward loyal over the counter customers for more than, say, 5 purchases in a week.

4. Run marketing campaigns focused on engaging your customers with your product.

5. Provide electronic posters for newsagents with LCD displays to display relevant promotions.

6. Provide newsagents with a behind the scenes DVD from the newsroom – retail theatre sells products.

7. Offer newsagents flexible pricing with bonus rewards for up-selling a customer to purchase a newspaper.

8. Eliminate irrelevant outlets from the retail roster: Starbucks, Gloria jeans.

9. Support newsagents in a campaign of theatre surrounding newspapers: paper throwing competitions (through
to national championships); paper plane flying competitions; papier-mâché making competition; general knowledge quiz based on news; most creative use of newspaper content; etc. The more people engage the more they will feel good about the product.

10. Work with other traffic generating suppliers to newsagencies – lottery agencies, magazine publishers and greeting card companies.

I appreciate that the halcyon days of newspapers are over. That does not mean that we can soften the fall not only for the product but also for those who rely on newspaper sales for core traffic. While Rupert Murdoch may have a strategy for the future of News Corp., the channel his company helped create in Australia, newsagents, are yet to develop relevance for the digital age.

Newsweek this week carries an interview with Rupert Murdoch, Chairman of News Corp. For a 74 year old bloke Murdoch is teaching people half his age about change management and pursuit of customers regardless of where they are. For Australian newsagents there’s this: “We are going to be seeing more [profits] in newspapers coming out of electronic delivery.” In the interview Murdoch predicts US$1 billion in Internet related revenue by 2010.

The Age has a website where newsagents record stock requirements. A genius within their organisation, without reference to us, dramatically cut our supply for today to the extent that we received enough stock for an hour of trade. It’s Saturday, a big day for the newspaper. After some frantic phone calls we were able to get additional stock. For all the challenges newspapers face the last thing publishers need is some twit making a decision like this. This has happened several times since Christmas. It makes me wonder if someone is out to sabotage The Age.

Update (Feb. 6) Turns out it was our fault. The genius at The Age. decided to cut us by 70% of our usual retail quantity because they did not think we would sell them. The part that is our fault is tat we did not go in and check to see if they changed our supply figures. This is how The Age. scales out product. All other publishers have better interaction so we have a heads up of change. We’ve learned a lesson and now will go to The Age. website daily to see if they have changed the supply figures again.

Vodafone has signed on as a major sponsor of the Wallabies, Brumbies, QLD Reds and Western Force in what is reportedly a multi million dollar deal. Vodafone has just cut newsagent commission by 37.5% while maintaining commission for Coles at 16% and, reportedly, Australia Post at 11%.

Newsagents now earn a merge 5% from Vodafone recharge sales. A $20.00 recharge earns $1.00 for around five minutes work. Coles is paid $3.20 for the same transaction. Newsagents hand the recharge revenue over daily whereas Coles gets to hold the cash for a month.

Vodafone’s commitment to Australian small business is well demonstrated by their attack on small business newsagents. Newsagents have more outlets and are open, usually, longer hours yet Vodafone has hit them hard. Maybe this is necessary so they can fund their rugby sponsorship.

Vodafone is demonstrating poor corporate social responsibility by financially hurting those least able to weather a cut in commission. Newsagents need Vodafone support more than rugby teams. Our businesses employ more people, Vodafone logos in our retail network are seen by more people every day than at a rugby match. We support Vodafone at the point of purchase, when recharge is top of mind.

The rugby sponsorship is about making Vodafone look good to the public. What the public does not know is what is going on behind the scenes. It’s like fashion and sweatshops. Thanks to news reports we are more aware of the pressure of some major brands on workers in poor countries to produce high fashion products for a few cents so they can be sold for obscene profits. Vodafone is our on the rugby field touting itself as a good corporate citizen by sponsoring this loved sport while at the same time ripping 37.5% commission from newsagents – not supermarkets, not Australia Post, but newsagents. Yeah, the poor and the voiceless are at the mercy of Vodafone and Vodafone has demonstrated how they deal with these folks.

Newsagents have been let down on this by the Australian Newsagents Federation (ANF) – a national association which has a commercial relationship with the company through which newsagents transact Vodafone recharge business. The ANF has failed to gain any ground in its meetings with Vodafone or Bill Express (the aggregator) on this matter. Indeed, following one meeting with Vodafone, the ANF bereted newsagents over lack of discipline and tried to explain that Coles offered better discipline and this was why they earned more than three times what newsagents earn on Vodafone recharge.

If Vodafone wants to be judged a good corporate citizen by Australians it needs to be fairer to small businesses like newsagents. It needs to reinstate a more equitable commission structure. It needs to demonstrate respect for newsagents as valued retail partners and not sweatshops to be exploited so they can fund expensive sports sponsorships.

See my earlier comments on Vodafone here, here, here and here.

Representatives of News Limited have been visiting newsagents in NSW asking them to appoint the local Gloria Jeans coffee outlet a sub retailer for newspapers. From what I can tell there is no discretion about proximity of the Gloria Jeans to the newsagency or other retail outlets selling newspapers already services by the newsagency. It seems that a national deal has been struck by News Limited and Gloria jeans and newsagents have no opportunity to bring their local knowledge and business acumen to the situation.

It would be interesting to know whether usage clauses in Gloria Jeans’ leases allow the sale of newspapers.

Newsagents are the best outlets to sell more newspapers if that is what News Limited wants. Taking sales from newsagents by putting newspapers into more outlets like Gloria Jeans will not deliver the kind of growth newsagents can achieve. (Okay so News will say they are attracting incremental sales from this new outlet. I disagree.) Gloria jeans will not do special in store display or actively support newspaper promotions. Hell no other retailer supports the many special newspaper features and events like newsagents.

By getting their product into more and more outlets publishers are diluting attention of consumers and this can only hurt newsagents.

Newspaper sales in my newsagency were up by more than 10% 2005 compared to 2004 and that is in a mediocre centre with flat traffic. This is because we made decisions right for the business, decisions which were against publisher policy. In a dead shopping centre my results are proof that the right marketing can boost sales in a newsagency. This is where newspaper publishers ought to be focusing their attention – on the newsagency channel rather than outside it. Their attention should be on engaging with newsagents as business people and not as servants. They should reward success and they should fix their cover price problem.

In posting this I risk upsetting News and other newspaper publishers. They don’t like public negative comment about their tactics. I don’t like hearing about a poor decision which will hurt newsagents. Our small business channel has enough challenges. We don’t need a national publisher facilitating the loss of more traffic from our stores. This blog entry is a plea for active business engagement with News rather than competition.

See my earlier post about newspapers in Starbucks.

I’ve heard a couple of rumors about Australia Post looking for a loyalty program it can offer its retail customers. There is talk of accruing points based on products purchased which can be redeemed for gifts. If what I’ve heard is true it is more evidence that Australia Post sees itself more as a retailer than a postal service. The sooner the government divests itself of this retail chain which competes aggressively with small business the better.