Author: Mark Fletcher

The aggressive move by Vodafone last week to slash newsagent commissions continues to cause a stir – especially now that it is out that a national supermarket chain earns 16% commission on the same Vodafone product newsagents are paid 5% to sell. Newsagent anger is being fanned by the discovery that the supermarket pays recharge revenue monthly whereas newsagents pay overnight. More newsagents are getting customers to sign a petition to take to Vodafone in support of their small business and the battle against supermarket giants. There are 3,000 newsagents offering Vodafone recharge and the newsagent peak body, the ANF, has been unable to leverage this footprint to a good outcome for newsagents on this matter.

The Government owned and protected Australia Post retail network released strong retail results in its annual report yesterday. While the newspapers today are running with the story of falling postal revenue, they miss out on the 50% growth in Western Union money transfer business, their flat but healthy bill payment business (170 million transactions) and the 8% growth in retail products. Much of this growth in retail products (including all philatelic merchandise, packaging, communications products, greeting cards, gifts, stationery and office products) was achieved through competition with newsagents. Australia Post operates 863 government owned stores which compete head to head with newsagents.

A few short years ago these stores sold stamps and postage specific products. Today around 65% of their retail space is taken up with items which newsagents have sold for over 100 years.

The government competing with small business in this way is appalling and makes a mockery of their small business policy.

Newsagents would be very happy with 8% retail products growth.

Coles Myer and Woolworths control retail in Australia. This means they control suppliers and landlords. Their power is far reaching, way beyond what I imagine I am sure. It reaches from their shelves through the checkout out past their petrol pumps down the freeways and past factories, past the wharfs where they bring so much of what they sell in and down to the farms where they dictate what is grown and at what price.

The public faces of each of these companies does not reflect their long and powerful tentacles. The public faces are TV and print commercials of happy people working and shopping in their businesses. The carefully crafted advertising front humanises Coles Myer and Woolworths and while often the in store experience does not match the advertised image, we’re drawn back – such is the power of the image in the advertisements.

While there have been some minor skirmishes which scrape the images of these giants, they remain well thought of by consumers. This is despite their all powerful and profit motivated control over so much of our economy. Their respective benign public images have allowed them to extend their reach without challenge. Their move into petrol and convenience over the last two years is a good example. They now dominate in a category where they had no footprint just a few years ago. They have leveraged their P&C offering to create a smoke and mirrors loyalty scheme which bounces consumers between supermarkets and petrol outlets as if they are the silver ball caught on a pinball machine between two bumpers.

Newsagents have seen their businesses eroded by the power of these two retail giants. Whereas fifteen or so years ago they did not carry newspapers, magazines, stationery and greeting cards, today these two stores are very strong in these core newsagent categories. Newsagents have allowed the supermarkets to get away with it. They have been scared by their might.

This week newsagents are watching supermarkets do it to them again. We have discovered that a supermarket chain has leveraged 16% commission for product which newsagents receive just 5% commission for. Initial research indicates that newsagents sell more than supermarkets. Yet their commission is barely one third.

At some point someone in government is going to wonder when Coles Myer and Woolworths amassed this power and who let it happen. They will realise the damage to communities across the country. They will realise the jobs lost. They will lament the loss of small business stumblings, entrepreneurship and creativity which trained so many. They will wonder why their constituency has given up.

Newsagents can compete with Coles Myer and Woolworths by respecting and rewarding employees; engaging them in building the business; ensuring that the business has a bright and knowledgeable face for customers; that the product range is good; that prices are fair; that the business actively engages with the local community; that customer service is more than a policy – that’s it’s action every day. We need to out humanise these retail giants and provide a connect with consumers such that they feel the difference shopping in our businesses.

This is how we beat the giants. With small personal steps. Every day. While they can buy better and spend more promoting their businesses they cannot provide better service than an owner standing at the counter ensuring the best customer experience possible every time.

This is what newsagents need to be working on.

In the meantime we should also be educating our politicians and our customers about the social and economic risks of these and other retail giants having more control than they have today.

Newsagents were told to get together so we could compete with the big guys. We now have 3,000 in a network offering bill payment and telco recharge product. Our nearest network competitor is Australia Post. Here’s how the value of unity has played out in terms of telco recharge commissions:

This table shows telco recharge commissions negotiated by one supermarket chain compared to newsagents. Even though newsagents represent 3,000 stores and offer easier to access and better quality customer service, this means little to the telcos.

While I accept that a supermarket chain will always negotiate a better deal than a network of newsagents, the difference is offensive. It tells me how the telcos view newsagents and demonstrates their preparedness to use newsagents to pay for the bloated commissions to the gorilla supermarket.

Newsagents have every right to be offended at the commissions being paid to this supermarket chain and to be questioning the future value of recharge in their business. At 5% commission newsagents are not even on a minimum wage payment whereas the supermarkets are in a nicely profitable zone. The rich get richer and while one can remind oneself that this is the way of a free market system, Vodafone and the supermarket chain have an obligation to be socially responsible. A 16% commission for them compared to a 5% commission for newsagents for the same product is greedy.

Vodafone and their telco colleagues are providing an excellent incentive for supermarkets to grow business and a disincentive for newsagents. yet if you read the pitches they send to newsagents they urge effort to grow the business. I respectfully suggest that the best encouragement to grow the business for newsagents would be a fair commission structure, one which can be compared with what this supermarket chain is paid without causing embarrassment.

The executives at this supermarket chain and at the telcos ought to be embarrassed for this exposure of their co-operation to harm small businesses, their employees and their customers.

3 mobile yesterday introduced their mobile TV offering. Initial programs include: Forget The Rules – an interactive show where viewers vote on the ending; live Sky Racing; live CNN; ABC Kids, Cartoon Network and the live 9 network coverage of the Johnnie Walker Super Series. The pitch at their website is watch what you want when you want. As a first cut at TV on mobile phones we’re bound to be excited by this innovation. What I am most interested in what is next along this road. The mobile phone is a different channel to TV and cannot be compared to TV. It’s a channel I’d expect to see newspaper and magazines publishers play in. It’s also a channel newsagents need to somehow connect with if we’re to maintain relevance in the news and information sector.

I have received a copy of an invoice showing that a major supermarket chain receives 16% commission on Vodafone recharge business. Newsagents have just been cut to 5% from 8%. Australia Post licenced outlets have just been cut from 8% to 7%.

While supermarkets offer starter kits to attract new customers I doubt this warrants a 16% commission. If I offer these kits in my newsagency I can get 8% commission. Supermarkets (based on the invoice I have) get double that and I doubt they do great starter kit business.

This invoice tells me how much Vodafone values the 3,000 newsagents who offer convenient recharge for their customers; how much they respect the capital investment newsagents have made so they can offer efficient recharge service. Vodafone prefers supermarkets and Post Offices over newsagents. Vodafone prefers big business over small business. Or, maybe Vodafone was just out negotiated by the supermarket chain.

Vodafone has judged the newsagency channel, those who work in it and those who shop there by their actions. 5% commission is less than minimum wage. It is offensive compared the 16% paid to this supermarket.

On this invoice I can see that the supermarket did around 60 Vodafone recharges. There are newsagents who would do this volume of business.

The other difference seems to be payment terms. Newsagents pay their recharge aggregator daily. This supermarket seems to pay weekly if not monthly. This provides them with cash on which they can earn interest.

None of this is good corporate citizenship by Vodafone. It increases the divide between big business and small business. It demonstrates lack of respect for the small business channel. It puts at risk jobs in the small business channel.

Vodafone is a guest in our country. They have an obligation to be socially responsible. The only way they can redeem the situation is to urgently review their newsagent commission position.

PMP Limited announced to the ASX yesterday that Brian is to join the company as CEO. Evans’ appointment to PMP will be welcomed by some newsagents who are keen for stronger competition in the magazine distribution sector.

News Corp and Fairfax both want newsagents in replace current newspaper display units with a new $3,500 unit. While the new unit will lift the standard in some stores, in others it will change something which is not broken. Instead of asking newsagents to spend $3,500 I’d recommend they ask newsagents to spend $200 on a small TV/DVD to be placed directly above the newspaper stand. We’ve done this with the Symply Too Good cookbooks and the sales results are wonderful.

The TV/DVD cost us $198 and Annette Sym has kindly provided a looping DVD promoting her books. From day one sales are up.

I appreciate that newspapers getting news related content to thousands of newsagencies could be problematic. Instead, I’d suggest a series of DVDs featuring columnists, the writers unique to the newspaper. Each ‘film’ could run for, say, 3 minutes. Give browsers a flavor of the columnist, their interests and have them talk about a relevant topic they write about. This builds a connect between columnist, newspaper and consumer. I am certain it would drive sales. It supports content only available in that newspaper and hopefully not available online. A new DVD every month with four or five items on it is all we would need. The investment would be small and the incremental sales worth it.

Publishers need to invest in a quality retail distribution channel if they want to drive sales. This pursuit of convenience purchases may generate a small kick in sales but the gain is not worth the cost of disrespect it shows to the existing specialists.

Our small experiment with the $168 TV/DVD player and the Annette Sym cookbooks shows that at least a trial is warranted.