Author: Mark Fletcher

Lottery sales account for considerable traffic in Australian newsagencies. While this traffic is not as efficient as I would like – 60% of lottery sales include no other products – it is important core traffic and revenue for our businesses.

It seems odd to me that the lottery commissions do not work together on seasons. For example, take Christmas. People like giving lottery tickets and scratch tickets as small gifts – you know how it is, an opportunity to dream what if?

I’d like to be able to sell scratch tickets which can be redeemed interstate and regular games which can be redeemed interstate. Making this available would increase sales. I know from my own newsagency that possible lottery sales as gifts are lost when customers realise that product sold in one state cannot be redeemed in another.

This is the net cash flow month by month for one newsagency for the three magazine distributors (Gotch, Network and NDD) and two main magazine publishers. We have separated these publishers out because including their data with that of their respective distributors skews the results.

The summary and magazine title level reports which feed data to this graph run to 80 pages. For each month for each magazine there are four columns of data: sales this month; stock expenses this month (last month’s invoices less last month’s returns; operational expenses this month (reflecting the cost of real estate and labour at the title level); and, net – which is graphed. Supporting this is magazine sell through data – so there are many angles from which the situation can be analysed at the newsagent level.

The graph and associated reports are produced by software created by my company.

I have analysed cash flow using this new approach for two newsagencies with another eight to be considered this week. I suspect that many more than this will need to be analysed for reasonable conclusions to be reached.

This project began because too many newsagents were reporting being in a cash crisis. Good newsagents of long standing. While they suspected and complained about magazines, none had hard evidence. Sell through rates alone do not provide the full picture – at least not the picture their respective bank managers required. At least one of these newsagents now has evidence crucial to making a case of attention from their suppliers.

While most businesses can manage their cash because of the operational controls they have, this graph demonstrates the considerable swings month to month experienced by newsagents. Newsagents have inadequate control over supply and return and therefore over the cash impact. These huge swings make it challenging for newsagents to manage their cash well and they are heavily penalised by some companies when late – setting in chain a domino effect which can take months to recover from. The graph also demonstrates a considerable negative cash flow – to an extent that many newsagents have to borrow to cover cash requirements.

I am hopeful that once the report is finessed we will be able to sit with the magazine distributors and discuss the cash flow implications of current arrangements and consider more equitable arrangements which take into account labour and real estate costs for low selling and long shelf life products as this is where the most cash damage is done.

After an extremely busy time at my newsagency today I noticed ten A5 booklets on the floor promoting magazine subscriptions. Art first I thought a marketer had come in and spread brochures from a competitor about. Some investigation revealed that these 15 page brochures are in Woman’s Day today. So while we’re chasing hared for retail sales, our top selling magazine is chasing just as hard to pull retail sales out of our shop.

While I understand the need for publishers to pursue whatever sale and distribution model is right for their business, I am disappointed that I am not able to offer discounted subscriptions (with fair compensation). The right offer would help me boost sales, help the publisher achieve more subscriptions and give customers a good over the counter Christmas offer. This is a good example where partnership would work.

I cleaned up the 15 brochures and another 20 from the magazine rack – happy that they fell out of the magazines when customers picked up product for purchase.

Washington Post chairman Don Graham has been reported as saying for the first time this week that the future of news is on the Internet, not in print newspapers. Graham’s keynote address for UBS Bank’s annual Global Media Conference focused on how the Internet is dramatically changing the way he runs his company.

Courtesy of washingtonian.com, here are some key quotes from Graham:

“Our Web competitors, Google in particular, are coming up with clever new products which are designed to make our life harder,” Graham said. “Young readers are less inclined to read us than I would have guessed.”

“The business is changing faster than I expected,”

“This year for the first time I have come to believe that we will be able to tell you about certain subjects better on the Internet than we will be able to in print,”

I am certain that newspaper publishers in Australia hold similar thoughts. They must pursue the revenue model which is best for their business. This will impact their over the counter and home delivery product. The speed of impact will depends on many local factors. But we are only talking about time here.

I would like to see publishers engage in dialogue with newsagents – not their industry associations who will filter and confuse the message – direct with newsagents so that they (newsagents) might develop appropriate business plans.

While newspapers and newspaper traffic is important to Australia’s 4,600 newsagents, unless there is a dramatic reengineering of the product, it faces becoming non core in terms of traffic and revenue generating for newsagents).

The newsagent channel in Australia was created by publishers. It would be respectful for them to engage with their child one more time to discuss what looks to be a challenging and confusing future. Too many newsagents have no knowledge of the impact of the Internet on newspapers overseas.

The impact of the Internet on newspapers presents an opportunity for newsagents. While I accept there will be a downside, I see more upside as we re-invent and re-invigorate our businesses to a model for the future. And while this will have a place for newspapers, it will also have a place for other traffic generating products and services which ensure relevance of the locally owned operation into the future.

The last three weeks have seen a spate of attacks in Sydney and Melbourne against newsagents. A newsagent in Cabramatta was killed in tragic circumstances three weeks ago (SMH report); several newsagents in Sydney were robbed last week (NSW police report) and this week newsagents have been robbed in Melbourne this week.

Newsagents are soft targets. We’re open long hours; carry reasonable amounts of cash; are family businesses – therefore less sophisticated in prevention; and have small shops which enable easy entry and exit.

This spate of attacks has woken the channel and taking preventative action is a topic of much discussion among newsagents. The industry is also rallying around the newsagents directly affected as only the independent small business channel can.

Purchase 11 magazines in eight weeks from my newsagency you get a free magazine of your choice up to the value of $10.00. The average magazine purchase is $4.50 and the average redemption $5.00. This equates to a 10% discount.

At Coles, purchase $49.50 worth of magazines and 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 a free $5.00 magazine. So, one needs to spend $3,375.00 to get a free $5.00 magazine.

From time to time FlyBys offers bonus points but a check of the Coles website and considering the range of product in store, current bonus items account for less than .5% of the products they carry.

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

newsXpress stores have now adopted my magazine club card promotion. (I am a shareholder of newsXpress.)

Consumers like buying cards in newsagencies. Since cards are a fixed price wherever you buy them, except Big W who discount by 10% but have a lousy display, there is no price barrier attached to the newsagent shingle as there is with stationery.

The card companies and others good research indicating that 50% of card sales in newsagencies are destination sales – consumers have sought out the shop for the purchase. The research also shows that men are comfortable purchasing cards in a newsagency. At Christmas the numbers for cards in newsagencies are even better. Card sales are through the roof this time of the year.

The lost opportunity, in my mind, is that we (newsagents) lack an offering which leverages the additional card traffic this time of year into other sales. I realised this yesterday when putting in some time behind the counter in my shop. I’d like something which either encourages an add-on sale of another core product – magazines, newspapers, stationery, lotteries – or draws the customer back very soon. While we will have something running in my shop from the weekend, it seems to me that suppliers from outside the greeting card category could have been working with card companies on an offering for a channel wide promotion. It would have been a good win win.

The more cross category promotions we run the better for all involved.

Since my post here on Monday about the falls I have seen in these three magazine categories I’ve heard from many newsagents reporting similar falls. The only category occasionally up is Adult. In some areas sales growth of 10% is being reported. I’d say that this feedback takes it beyond anecdotal and a trend to be thoughtfully addressed.

Over the weekend I received the following feedback from Vincent Jennings, the CEO of the Irish Retail Newsagents Association outlining how they handled a cut in Vodafone commissions similar to those inflicted on Australian newsagents by Vodafone:

greetings from Irish republic. The Irish Retail Newsagents Association had a battle with Vodafone over 4 years ago. The commission for e-top up had stood at 10%.Vodafone reduced the commission paid to the suppliers of the terminals(our suppliers),this was passed on to us. The I>R>N>A> led the way in recommending a handling charge, equal to the lost margin to all e-top up agents. The retailer still gets their 10% margin, his trade did not desert him(it is a convenience item) and despite High Court threats, extensive and expensive campaigns against the extra charges from Vodafone ,attempts to divert trade away from our members(we control over 85% of this trade)websites from Vodafone to sell their top-up ,links with banks to provide through ATM s we still manage to sell the vast majority of top ups in the country. If airlines, ticket agencies and other enterprises, many of them with greater opportunities for profit than our sector can implement handling or service charges why not the newsagent? The great are only great because we are on our knees, let us arise!

best of luck vincent jennings,

c.e.o. I.R>N>A>

Newsagencies are small businesses. They can ill afford the 37.5% cut in commission to 5% by Vodafone – especially in the light of at least one national supermarket chain getting a 16% commission.

I complained to the ACCC that Vodafone was able to pay the supermarket because the newsagents have taken a hit down to 5% but the ACCC has decided not to take the matter further. This is another blow to small business. There is no doubt in my mind that Vodafone could not afford to do this if newsagents were not gouged.

An excellent cover story from Business Week on the MySpace generation using the social networking tools on the Internet to replace so much that previous generations have taken for granted – newspapers, face to face conversation, letter writing, over the fence talking. It is timely with the release of MySpace classifieds. As background to the Business Week story is this 20 minute podcast – an interview between the journalist and editor. This podcast is an excellent use of the medium by Business Week and it provides helpful context for some of their cover story about the MySpace generation.

News Corp. seems to have done well with the MySpace investment.

Jeff Jarvis has written a seminal blog entry about the future of newspapers. It’s a challenging read for anyone earning an income newspaper and magazine publishing and or distribution.

Jarvis quotes Guardian Editor Alan Rusbridger, talking about new presses they have just purchased: “They may be the last presses we ever own.” From there he talks about key media companies around the world and quotes their leaders as they talk about their move online. Part way through the piece he makes this observation: I’ll say it again: Distribution is not king. Content is not king. Conversation is the kingdom. It’s about relationships. He illustrates the point with Rupert Murdoch’s purchase of MySpace. MySpace is about relationships – as the Business Week cover story this week points out. So News is more of a relationship company than a publisher. It’s through being the medium in supporting relationships that the revenue model News has is supported.

Before our eyes, media companies like News, the Guardian, Random House and others are reinventing themselves while newsagents remain dormant and even oblivious to the challenges ahead.

Newsagents need to re-invigorate and re-invent if they are to have a future. That starts with a deeper community connect. The Internet can never replace human contact. We need to find good margin product and cost effective consumer traffic which fits with what we are known for. And we need to do this yesterday. And we need to have as short a distance possible between our stores and the manufacturing point for product. Middlemen cost us too much.

It is unfortunate that Australia’s newsagent associations have been silent about the approaching tsunami brought on by the media disruption of the Internet, mobile devices, citizen journalism and social software. It’s not too late for them and others to provide Australia’s 4,600 small business newsagents with leadership.

Jeff Jarvis makes sense in his blog entry. Unfortunately too few here in Australia will read it and even fewer will discuss it in the context of our unique channel.

Disclosure: I am a shareholder in newsXpress which is building a strategy for its member newsagents in navigating the changes.