Author: Mark Fletcher

Walk through the magazine aisles of any newsagency in Australia today and you’ll find magazines with shopping bags, chocolate bars, aprons, chocolate bullets, pens, pencils, tampons and more chocolate attached.

While free product samples are a great way to draw attention to a magazine and offer added value to the purchase, it makes retailing the product challenging. Usually it’s easy to navigate. However, right now it’s peaking. We have more free product attached to magazine covers than I can recall in the last 10 years.

Donna Hay offers a tote bag; recipes+ offers raspberry bullets; Good Taste offers Lindt chocolate; Fresh Living offers a free Lovatts Crossword book (which we sold last month!!!); Vogue Girl offers Maybelline mascara. This is but a small selection of the giveaways.

What I’d do differently to allow the product to be merchandised well and out of respect for other product occupying adjacent shelf space is put giveaway product behind the counter. I appreciate that some retailers would be frustrated with this – however, the outcome will be better in store. As it is at present, this stock burdened with giveaway product on the cover gets battered quickly and this turns consumers off.

The government owned Australia Post has negotiated a phone recharge commission with Vodafone of 7% on behalf of its Licenced Post Office (LPO) retail network. I assume the commission is the same for government owned post office outlets.

Independent newsagents have been told by Vodafone that their new commission will be 5%.

There are more newsagents than LPOs. The difference is that the newsagent network is made up of 4,600 independent stores whereas the LPO network, while privately owned, has the government owner Australia Post as the Master Franchisor.

This is another example of government ownership being used to the benefit of Australia Post and to the detriment of independent businesses like newsagents.

The government has no business owning and operatuing a retail network.

Newsagent/Publisher contracts are stopping newsagents from passing on the high cost of petrol. These contracts restrict the control newsagents have in passing on reasonable operational cost increases. This means that newsagents have to carry the higher fuel costs and in some cases it is making the home delivery of newspapers unprofitable.

While News and Fairfax can increase advertising rates to cover higher operating costs, newsagents rely on publishers to adjust the cover price and to allow a fuel surcharge to be applied or delivery fees to increase.

This is an untenable situation as it leaves these independent and often cash strapped small businesses carrying an unfair burden while their much bigger suppliers benefit.

What newsagents want is an urgent and open discussion about fuel and agreement on reasonable trigger points for delivery fee adjustment reflecting the high price of fuel.

Following the Vodafone announcement of a 37.5% cut in commission paid to recharge retailers (to 5%), I have been looking into the retail efficiency of phone card retail. While my sample size is small at present – 5 newsagencies – it seems that phone recharge is purchased alone 75% of the time. That is, in only 25% of cases did the customer purchase something else.

While one could argue that this result is a commentary on the effectiveness of the retailer in creating an environment which drives up sell, it also says something about the convenience factor in the recharge space. Consumers run low, they buy recharge wherever they can get it. This is why telcos have recharge retailers on every corner.

One argument put by at least one telco supporting a reduction in commissions paid to retailers is the traffic they draw to the store. My survey of five stores and their sales data over the last six months demonstrates that consumers are unlikely to purchase anything else.

All this adds consideration to the Vodafone decision and will focus newsagent attention on the dramatic cut by Vodafone for some time to come.

Australian newsagents are getting louder in their criticism of Vodafone and their decision to cut retailer commissions from 8% to 5%. Many are taking removing signage and sending Vodafone customers elsewhere. While the value of such militant action in a commercial situation could be questioned, it demonstrates the hopelessness these newsagents feel for unilateral and hurtful decisions like the one taken this week by the executives at Vodafone.

I wonder if anyone is taking notice?

From editorsweblog.org: free newspaper circulation up 33% in Europe in first nine months of this year. Comment: in most countries, free newspapers do not use the existing newspaper supply chain.

news.com has story of a Forrester Research report finding that U.S. online retail sales will grown from US$172b in 2005 to US$329b in 2010.

Newsagents are losing ground. As a channel we have no online strategy. This means we’re not preparing for the move of news, information and entertainment products (newspapers and magazines) online. Nor are we competing for online stationery, lottery or greeting card sales. We ought to be leading the charge online on some of our product categories.