Author: Mark Fletcher

Some newsagents have removed Vodafone signage from their stores in protest at the Vodafone decision to cut commission by 37.5%. Others are talking of refusing to offer Vodafone recharge. This channel of indepedent small business operators is reacting because the Vodafone decision is another in a long line of decisions by big suppliers cutting into margins.

Newsagents are reeling after Vodafone announce a 37.5% cut in sales commission.

Around 2,600 newsagents have invested heavily in technology, delivered valuable in store real-estate and increased sales significantly. The reward for all this effort? The 37.5% cut in commission.

Under the new pricing newsagents receive 5% for Vodafone recharge sales.

Vodafone says that newsagents will make more because of growing sales an that the higher commission is competitively unsustainable.

Newsagents have high operational costs: around 11% of turnover goes in wages; rent – between 6% and 12% (depending on location); theft – between 3% and 5%; overhead – 5%.

While Vodafone recharge brings traffic to newsagencies, most customers want the recharge and nothing else.

To lose 37.5% of revenue having just invested in equipment and real-estate is a body blow to small business newsagents and something Vodafone could have managed better.

Why newspapers are finding new routes to new markets is a good analysis of significant changes occurring in the UK newspaper distribution space.

While our marketplace is difference we are experiencing change, significant change. What the MediaWeek analysis does not cover is the impact on the small business newsagents. The impact of loss of traffic will be significant. The big question is when. Phillip Meyer says newspapers will vanish in 2040 (in his book, The Vanishing Newspaper), newsagents say they will never vanish. Regardless of your position the channel is being impacted. Publishers are leading the change and newsagents need to understand the impacts of their moves and to take initiatives to mitigate the impact and find new traffic.

Princess Mary is a godsend for weekly magazine publishers and newsagents. Put her on the cover and sales jump. In my own store I know Mary can add between 15% and 25% in sales. While yesterday’s New Idea has been out barely 24 hours I can tell from the sales data that this issue, with Mary on the cover, will be at the high end of the range. Mary is our new Diana since the content almost does not matter – the key is the photo and the prospect of more inside.

Last week’s imported Hello! is another example of cover power. Kylie Minogue was on the cover and it was a sell out in five days whereas we would usually return 30% of supply.

While the science of magazine covers is not a new discussion, it is important to newsagents and other retailers as it helps us attract new shoppers and that underpins our relevance compared to online, for the moment.

In just four months we have seen thirteen new Sudoku magazines published covering twenty individual issues. This is a new segment within the magazine category, a segment quite different to traditional crosswords. Sudoku sales are strong and smart newsagents are leveraging of newspaper traffic to grab these sales.

While on the one hand I comment and even worry here about the impact of technology on newspapers and magazines and in particular newsagents, on the other hand I’m happy to cheer this bricks and mortar success with Sudoku product. No other retail channel could have launched a new magazine segment like Sudoku as successfully as newsagents have. The success underscores a value proposition newsagents have for publishers in launching titles – as long as we have the core traffic necessary.

2005 started with barely a whisper on the pages of newspapers and magazines about the impact of blogging, podcasting, better mobile devices, 3G and broadband in homes. It was as if the changes being talked about so openly in Asia, Europe and the United States was not relevant to Australia. The whispers gained some volume following Rupert Murdoch’s speech in Washington in April to the American Society of Newspaper Editors. Then, in the last month, it’s as if someone has said it’s okay to talk about this stuff, it’s okay to speculate about our future. The whispers have become a shout.

Most of the capital city dailies have run stories about the impact of the Internet. The Age, the Sydney Morning Herald and the Australian Financial Review have written the most from what I have seen. This month’s Marketing magazine has an excellent if brief round up including an excellent piece by Martyn Thomas about whether newspapers will survive beyond 2040.

While I would have liked newspapers and business magazines to have paid more and earlier attention to the impact on mainstream media of technology and other changes noted above, their coverage now is welcome. I wish newsagents would pay the same attention to the changes going on around them. The old arguments about why people like newspapers over a computer screen are redundant. Newsagents and others ignoring the changes need to either get a new line or develop a business plan to help their business navigate the change.

The changes are inevitable as we can see from elsewhere in the world. What we need to understand and navigate is the impact.

Footnote: Maybe publishers could have frank dialogue with newsagents about what their experts see as the likely impact on the news and information supply chain.

It’s not even a week old and the Google blog search is having an impact. This move by Google is the legitimisation necessary to bring more eyeballs to blogs. The Google ‘endorsement’ makes blogs another medium. Traffic is growing thanks to the Google search and bloggers are talking about it.

What was once an understood commercial media landscape has been turned on its ear thanks to faster, better and lower cost mobile devices and mobile coverage; self publishing tools; and a desire for citizens to create content. There are entirely new channels (online communities, podcasts, blogs etc) attracting advertising and this is what’s behind many of the acquisitions by publishers in the last few months. Thinking abut these and, in particular, the News Corporation US$1.7b shopping spree on online businesses, I wondered what Australian newsagents should/could invest in to shore up consumer traffic and therefore revenues. Here’s my (incomplete) shopping list:

Australia Post government owned retail network. (I know the government says it’s not for sale – maybe we need lobby for it to be put on the market.)

Content download business: music, films etc. from a kiosk in our store

WiFi network – providing Wireless access from our shops.

Internet service Providers.

Online advertising business.

Online news network. (We could create this based on our broad geographic spread.)

Mobile device retail – create our own brand for a store within a store concept.

Hair salon chain.

Coffee chain.

Build a ‘how to’ business – based around a selection of products we sell (or could sell) and embracing ‘community’ and ‘interaction’. Our stores could be the place people connect rather than all this impersonal online stuff. Games. Jigsaws. Painting.

The next juice concept – create the retail traffic generator, it’s cheaper than buying someone else’s success.

This list is by no means complete. My point is that we need to be ‘acquiring’ customer traffic and we need to be doing that now. Our future is in our hands. None of our existing suppliers are going to make investments which support our channel unless it suits them commercially. We control our future.

DISCLOSURE: I own a business developing a new product/service which may lead to a new revenue stream for newsagents.

Alpha #3 has been out a week and early indications from newsagents I speak with is that it is not selling as well as issue #2. While I’m no expert on these things I’d say Alpha is in trouble. Consumers are confused by the low price ($2.00) and by the requirement to buy the local News Ltd Newspaper. Newsagents are bearing the brunt of consumer frustration when they want to purchase the magazine and are told that they have to buy a newspaper as well. There is strong anecdotal evidence supporting my views not only from across my own counter but also from other newsagents.

Alpha is a great product but it needs urgent surgery to succeed. By the way, ther have an excellent blog for the magazine.

This is what I wrote a few weeks ago and what I still believe today:

If I were in charge of Alpha I would increase the cover price to $7.95 – the quality of the product supports such a price; I would include teaser articles some of the features in the News Ltd newspapers with a coupon at the bottom of the article encouraging an Alpha purchase for $5.95 discount.

This approach does two things. First, it pitches the price of the product where it should be based on quality. Second, rewards the consumer for their interest.

Okay, since the magazine is published by a newspaper publisher I’d do something else. My third strategy would be to offer a competition entry with purchase of the magazine and I’d promote this on the coupon in the newspaper. Maybe a car giveaway each issue or a holiday or a hit out with a tennis star or a training run with a footy club. Who knows what the prize should be?

As it stands Alpha will die unless there is a more integrated and considered marketing strategy. Newsagents are working hard but the $2.00 cover price and lack of support for building what is a new niche is making it challenging. I want it to work.

On a pocket return basis I have Alpha taking 10 pockets at present and the return I anticipate for the month is $55.00. That does not pay the cost of the real-estate. A higher cover price with a lower sell through would be better economically.

It’s good to see the New York Times charging, from Monday, for access to some content online. Times Select membership will cost US$49.95 a year.

There is a long running argument about whether access to content online should be free. That newspaper publishers have provided free access online to what is charged for in their physical product has, in my view, devalued newspapers. This move by the Times respects the work of their contributors and the value of their masthead.