Author: Mark Fletcher

Business 2.0 has a story about 11 veture capitalists and business ideas they would like to fund. One idea, from Jim Lussier of Norwest Venture Partners, Palo Alto, enviages what could be the newspaper of the future:

“A kind of souped-up Craigslist for every neighborhood, everywhere. Just type in a zip code, and this website will present not just garage sale listings and classified ads, but headlines and photos from dozens of local news sites run by busybodies willing to provide free content and keep it constantly updated.”

Who needs local newspapers filling letterboxes?

Thanks to the work I do with my software company, Tower Systems, I am privy to business performance data from many newsagencies. I’d note that in the last six months the magazine category has been performing worse than for years before. Not the whole category, only what I’d call the fringe titles – that is, titles not in the top 500 sellers. At this end of the marketplace newsagents are given five or fewer copies to sell and in many cases I see they are lucky to sell one copy.

What seems to have changed in the last six months is that newsagents are getting more of these titles in terms of range a volume. In only a few cases in this expansion of stock on the shop floor leading to sales growth. The key benefit is to the cash flow of the distributors driving this. (I’d note it’s not all magazine distributors.)

So while publishers of top selling titles actively seek and encourage other retail outlets, publishers reliant solely on newsagents for retail presence are facing fewer eyeballs and responding, or so it would seem, with more product.

We used to sell two or three copies of the Melbourne Observer, a weekly tabloid newspaper. Now, we’re selling between 60 and 100 copies a week. This jump in sales has occurred in the last two months. It has happened as a result of the product being re-worked to better connect with a specific demographic. It helps that the local talkback station discusses the newspaper regularly on the overnight shift. Melbourne Observer customers are not your usual newspaper customers so we’re seeing some welcome additional traffic.

Business Week reports that Sony is to increase to 300 the number of comic titles available for mobile phones in Japan. 300 titles! They’re using technology developed specifically for accessing manga comics on mobile devices. It costs around A$4.00 to download five titles.

Amazing. Who needs a traditional supply chain?

Today’s Australian Financial Review carries a report that Alan Jones of 2GB is to product daily podcasts. Jones certainly fits the demographic which US researchers say is the one most interested in podcasting. It’s good to see someone with a media profile playing in the podcasting space in Australia. Come on newspapers!

The new Sony PSP device launches tomorrow and by all accounts all initial supply stock will sell out in an hour or two. Many stores have considerable backorders. This report from The Times in the UK outlines the sales expectation there.

I’m interested in the PSP because of its multimedia and wireless capabilities and the impact on easier access to news and information.

Here’s a list publisherd by the Newspaper Association of America’s New Media Federation of newspapers podcasting. Twenty four are listed and I am sure there are more. I like the Denver Post offering the best.

The stacks of free newspapers at the Qantas Club usually disappear by 7am. Yesterday in Sydney there were fresh stacks (Sydney Morning Herald, The Australian and the Daily Telegraph) at 10am and again when I was back there at 3pm. I’ve never seen that before.

So predicts the New York Times.

Watch for plenty more announcements about similar convergence.

If you recharge your prepaid phone this month at some petrol outlets they will give you a free Chupa Chup. If you recharge at Australia Post three times they give you a discount. Go past K-Mart and they are aggressively promoting recharge. Same with tobacco stores, supermarkets and just about every retailer. The recharge marketplace is oversupplied.

On the one hand Telstra, Optus, Vodafone and 3 want newsagents and others to demonstrate loyalty in a range of ways yet they continue to go into more outlets as well as their own retail locations. The way to win loyalty from existing suppliers is to support them, give them traffic, support their desire for a point of difference. This will elicit greater support in return.

In my newsagency recharge is just another service whereas early on it was a point of difference.

Good story from Bega District News about the local MP, Andrew Constance, taking a job at a local small business for a day to better understand small business. He is one of several politicians participating in Pollies for Small Business as part of Small Business Month.

I am interested in this story for two reasons.

1. I’d like more politicians to take this step, especially those in Federal politics. I’d like Helen Coonan, the minister responsible for Australia Post, to spend a day at my newsagency and feel first hand the frustration of competing with the government owned Australia Post shop opposite.

2. Australia Post is connected with the Pollies for Small Business program. That surprised me. Well, sort of. I appreciate that there are many small business owners who operate Licenced Post Offices. Australia Post, the government owned business, also operates plenty of their own retail outlets where they compete aggressively and, I say, unfairly, against small business.

It is cheap and cynical for Australia Post to connect with small business through this campaign. If they really cared about small business they would stop trying to harm newsagents. They have stalked our channel for more than ten years and have leveraged their exclusive postal traffic into good business for stationery, greeting cards, Western Union and other areas which newsagents had first.

I’ll repeat my mantra: the Federal Government should divest itself of Australia Post retail outlets to individuals and small businesses. Only such a sell off would prove the government’s credentials to small business owners. I am certain that any politician spending a full day in my newsagency would agree with me.

I am tired of having the government competing directly with me for customers and no one doing anything about it.

blogofdeath and commenced a podcast service offering obituaries. Here’s the current list.

Brad Robertson, Vice President of Business Development for the Des Moines Register, has an excellent blog entry about the need for newspapers to target readers. Yeah, readers. Not people lured by a DVD or a competition but people who want to read the newspaper. This is what advertisers want as well. I know from my own sales analysis of data from more than 100 newsagencies that competitions create a spike and maybe help a publisher meet audit goals but long term sales growth only comes from focusing on the product itself.

I have spent the last week relaying the magazines in my newsagency. On Monday I spent several hours researching performance of each title by a range of measures. More than 40% of what I had on the shelves was not covering the cost of the real estate. I had 12% more titles that I could physically accommodate. Popular titles in some segments were being held back because of insufficient space and the doubling up of product in display space designed for one title.

So, Monday afternoon I decided it was time to make decisions as a retailer and not as a warehouse for product sent by magazine distributors who are paid a fee to distribute.

The result, a week later, is a fresh magazine presentation. All 1,500 titles in the store look good, they each have their own place and there is even room for professional displays. Time will tell if sales suffer. I expect they won’t. In fact, I expect the strong titles in each segment to increase sales since customers will be drawn to them thanks to how we are able to display them now.

It is inappropriate in this deregulated marketplace for newsagents to carry the cost of small circulation titles. If someone wants to pay for the space in my shop that’s fine but since it’s my money I am reclaiming my retail space to be allocated as I see fit to best serve the needs of my business. This means that successful suppliers will be happier because their sales will increase.

So much of operating a newsagency in Australia is reacting to the demands of others imposed by the stock you receive each day of the week. It is a balancing act with each new product demanding your time, your promotional space and your shelf space. Suppliers do not work in together and the newsagent is left to make balancing decisions themselves. This is a tough job made tougher by frequent calls from suppliers wanting to know if you have done this or that or whether you have their product in the right place to receive your reward points allocation.

The newsagent channel is cracking at the seams because of the supply problems and 95% of the problems are with the titles accounting for less than 10% of the sales.

I fear it will take some business collapses before people who should be working on this take notice.

We have been running an in store loyalty program for magazines for eleven months now. Year on year sales are up close to 30%. That is way way above the industry average. Customer reaction from that campaign suggests to us that it would work with newspapers. The trouble is we can’t get a publisher interested in trialing a campaign with us.

We have a couple of strategies:

Customer pre pays for x copies with a discount built in for their up front commitment. To redeem a copy we scan a customer card or they give us a code and we enter that in our computer system. It would take no more time than transacting with cash.

Customer received a coupon with each newspaper purchase and x coupons will redeem a free newspaper. Coupons have an expiry date on them.

It makes sense to me that you should reward loyalty to a product with lower cost access to that product. Hence these two ideas. There are more but I’ll save them for a publisher who wants to talk about the idea.

My message here is that we want to grow newspaper sales beyond the 10% we have already achieved year on year. We want 20% growth. It’s there if we can negotiate the right consumer offering which will attract sales which otherwise no one gets.

The Union-Tribune’s own website announces that “in an attempt to maintain readership of its classified advertising in the face of competition from growing Web sites” they will offer free classifieds for items sold by individuals up to the value of $5,000.

The Union-Tribune is the first major city newspaper to make an offer of this size. This offer dwarfs the Daily Telegraph and Trading Post offers currently playing out in Sydney.

Watch as many US newspapers follow this lead on free classifieds. I anticipate that Australian newspapers will offer higher value classifieds for free as a result of the US trend.

This model sees newspapers trying to match the offering from Craigslist. My sense is that you don’t compete by essentially doing what a competitor is doing.

Classified advertising is the battleground and it’s getting tough.

Newspaper publishers like their product to be displayed in the best way possible. While they allow supermarkets and petrol and convenience outlets to determine which this may mean, they ‘require’ newsagents to follow strict merchandising rules. For example, the new newspaper display module newsagents in Victoria are being ‘encouraged’ to consider have a price of between $2,500 and $3,500.

A better approach would be to focus on performance. Newsagents achieving above industry average sales growth ought to be left alone while those below average ought to be visited and their display evaluated.

The argument that the publishers want a common standard across the newsagent channel for the display of their product fail when you consider that they have pushed their product over recent years into all manner of retail outlets and thereby eliminating the common merchandising approach which existed until the 1990s.

If the push for the new display unit is successful it will be an example of unfair treatment of small business newsagents versus the might supermarkets and other national retail groups competing with newsagents for newspaper sales.

Following up my post a few days ago about inefficient foreign language newspaper sales, I spent a couple of hours yesterday observing the behavior of newspaper customer generally. I wanted to measure the number of browsers and the conversion rate of browsers to purchasers.

In the two hour period we had five browsers of regular newspapers (not including those who walked in and picked up the paper to purchase without browsing) and each converted to a sale. In the same period we had eight browsers of foreign language newspapers and one converted to a sale.

While this is unscientific research, it is interesting when considered with the hard evidence of the inefficiency of foreign language newspaper customers. It throws down a challenge to me and other retailers on these products to change what we do to boost sales and improve the broader business return from the foot traffic and the floorspace/labour investment.

At Om Malik’s broadband Blog there is an excellent discussion about, among other things, the challenges for Apple in the pricing model for music sold through iTunes. It discusses the pricing disparity of ring tones costing (US)$3.00 and iTunes songs costing (US) 99 cents. In a comment on the main posting, Charlie Sierra notes:

Seriously this showdown is the classic battle between distribution and content. So sooner or later they’ll get in each other’s business.

Buying content to boost the value of your distribution asset is the age-old Turner/Murdoch play. I sure hope Jobs has got some super secret talent hidden away for all the impulsive 12 yros.

While the Apple/Murdoch comment is a throwaway, it does make for interesting speculation and have some bloggers talking.

I was on The Age website today and on the home page there is a link to iSUBSCRiBE, the online magazine subscription business. At iSUBSCRiBE you have access to many magazines for home delivery at prices which deliver considerable discounts. Donna Hay – 40% off; Better Homes and Gardens – 20% off; and so on.

I appreciate that Fairfax, publishers of The Age, are at liberty to attract advertising revenue. I wonder, though, if they have an obligation to support newsagents since they are their key distribution and retail network? I wonder this especially given that the iSUBSCRiBE folks are able to offer cover price discounts for magazines whereas newsagents are not. Sure iSUBSCRiBE is offering a long term subscription for a discount. Newsagents do that too but they are not able to offer the discount – especially given that they only make 25% off the cover price for each sale.

On the one hand Fairfax say they support newsagents yet on the other they are happy to make money from a business which directly and aggressively competes with newsagents and which does so based on business terms which are not available to newsagents.

I wonder how Fairfax would feel if newsagents had an alternative offering for consumers which competed directly with a core business of the Fairfax newspapers? Would they sit by and allow newsagents to promote and develop this hypothetical business which competed with The Age and the Sydney Morning Herald? Based on the iSUBSCRiBE I’d expect them to.

Foreign language newspapers are sold alone in newsagencies more often than other newspapers.

Data from over 100 newsagents and representing several million shopping baskets from this year shows that on average 85% of foreign language newspapers are sold with nothing else in the sale. The percentage for city newsagents is higher than for rural newsagents.

This represents seriously inefficient business for the newsagent.

Newsagencies are run on the basis of multiple items per sale. It is only in sales where this is achieved that the low and fixed gross profit from small ticket item sales is palatable.

Foreign language newspapers take up more floor and shelf space that mainstream daily newspapers which only adds to the challenged circumstances of their life in newsagencies.

While one could and should say that newsagents have an opportunity to entice, pursue and extract add on sales from foreign language newspaper customers, I can say from personal experience that it is easier said than done. Not many of these customers like to engage with staff. We have tried promoting products and services tailored to what we feel might interest them and while some do take up the offer, the vast majority don’t so we don’t get in their way.

A report in yesterday’s Sydney Morning Herald said that the ABC’s new lifestyle magazine, Goodlife, aimed at over 35s would be sold in supermarkets. If true and newsagents have been left off the retail roster then bugger them I say. If it’s an error in the report then bugger the SMH. It’s tough enough for newsagents let alone being forgotten in stories.

I hunted all over the ABC website and cannot find out their distribution plans.

Newsagents are important to the ABC. Our channel sells and promotes Gardening Australia, Delicious and Limelight. Gardening Australia and Delicious are both are strong titles and both are achieving growth in market segments which are challenged based on the latest Roy Morgan research readership data.

One only has to look at the launch success of Notebook and Real Living in the newsagent channel to gauge the value of newsagents getting behind new titles in ways supermarkets and other magazine outlets never support magazines.

Sony announced yesterday the availability of a firmware upgrade for its PSPâ„¢ (PlayStation®Portable) system. From the Sony announcement: “the firmware 2.0 upgrade will allow users to take advantage of the unit’s built-in Wi-Fi* capability and to wirelessly search the Internet from Internet Access Points or “hot spots”. The upgrade will also provide increased Wi-Fi security and personalization tools together with photo sharing and expanded video and audio playback options.”

This much anticipated announcement makes the PSPâ„¢ the new must have toy for the boys who want to be browsing anywhere and everywhere while playing games and doing all things multi media.

The screen on the PSPâ„¢ makes it the most attractive portable wireless enabled Net browsing device.

Watch for news and information content packages specifically for the PSPâ„¢ and similar devices. By that I mean, watch for magazines and newspaper brands publishing material online for accessing via the PSPâ„¢.

Plenty of reports today (including this one) about the Playboy decision to produce a digital edition of their magazine.

Here’s the Playboy press announcement:

PLAYBOY MAGAZINE GOES DIGITAL
Playboy Enterprises Expands Its Online Offerings
to Tap into Growing Consumer and Advertising Market

NEW YORK, August 24, 2005–Playboy Enterprises, Inc. (PEI) (NYSE: PLA, PLAA) announced today that Playboy, the world’s best selling men’s monthly magazine, will launch a digital edition beginning with its October 2005 issue in conjunction with Zinio Systems, Inc., the worldwide leader in digital publishing and marketing services.

“Since the first issue in 1953, Playboy has been about lifestyles, and our readers have been among the earliest adapters to cutting edge trends and technologies,” said Playboy Founder and Editor-In-Chief Hugh M. Hefner. “The tens of millions of consumers around the world who consider Playboy to be the gold standard for entertainment for men will welcome our digital edition.”

Playboy Enterprises’ Chairman and CEO Christie Hefner added, “We see this as a natural extension of the Playboy brand. We have worked with Zinio over the last six months, offering subscription and single copies of our popular special editions, and the response has been extremely positive. By launching Playboy digital, we are offering consumers worldwide a digitized product identical in every way with Playboy’s print edition.”

Hefner continued, “The increased distribution and worldwide access will also increase our loyal advertisers’ reach to consumers, and provide additional advertising sales opportunities as we are able to meet the growing demand of companies to market online by offering ad sponsored links. From the company’s perspective, digital Playboy will be a much more cost-effective way to distribute our content and count toward ABC rate base. Moreover, because of our success with Playboy.com, we see significant opportunities for cross promotion and bundling between our Cyber Club and digital Playboy.”

Playboy readers around the world can buy a digital subscription or single copy by logging on September 13 to www.playboydigital.com or www.zinio.com. (Please note that the Playboy URL will not be live until September 13.) A subscription or single copy will be delivered instantly via the internet through a download to a PC, laptop or Mac. Digital copies will be received by subscribers automatically each month and can be read online or offline.

The digital edition will premiere on September 13, the same date that the print edition is available on newsstands in every market around the country. The issue includes the Girls of the Pac 10, a video game feature and pictorial of video game femme fatales, as well as the Playboy Interview with George Carlin.

“The preeminence of Playboy’s brand makes this a big moment for digital delivery,” said Scott L. Kauffman, President and CEO of Zinio. “The creation of Playboy’s digital editions is a strong endorsement of Zinio’s ability to generate new readers in this dynamic medium.”

With 62% market share, Zinio has over 2 million subscribers in nearly every country in the world.

The Sydney Morning Herald carries an AAP report that Federal Government Finance Minister, Nick Minchin, was asked yesterday at the National Press Club whether Australia Post would be privatised. He listed the various government businesses which are for sale or being readied for sale and commented: “There are a few other smaller business that could be considered but we’ve not turned our mind to Australia Post and we have no policy to do so.”

That the government owns a retail network that competes directly with independently owned small business newsagents is appalling. Australia Post is a tough competitor. They target newsagents with their promotions. They have only commenced this competition in fairly recent years. They are leveraging the goodwill of the postal service to hurt this already challenged small business channel.

While the mail delivery and stamp production should be controlled by the government, the retail network should be completely sold off. Some have been but not all.

Nick Minchin and the Government are wrong on this. Their refusal to even consider the sale of the retail network is proof of a lack of commitment to small business. Here they are profiting from exacting commercial success in a competition with newsagents.

A true free enterprise government would allow free enterprise to operate rather than allowing its own retail stores to profit from the customer traffic which MUST go to their retail outlets because of draconian controls on the sale of postage stamps.

Nick Minchin and the Federal Government ought to sell the retail network to individuals or to small businesses. This would demonstrate support for the small business sector.

My own newsagency is directly opposite a government owned Australia Post shop. They compete aggressively for stationery, greeting cards, phone recharge, Western Union and bill payment. They do so on unfair terms. They get better landlord treatment. They have guaranteed traffic. They control how their store is laid out. They leverage their government protected monopoly traffic so they can sell products which are crucial to my success.