Author: Mark Fletcher

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.

Organisers of the US Open will produce regular podcasts to update tennis fans as reported at their website.

This is interesting to me from two perspectives: it reduces the supply chain between subject (the open) and consumer; and, it is further evidence of mainstream acceptance of podcasting as another medium.

It is further evidence of the dramatic shift in how when and where we access and consumer news and information.

While the giveaways and competitions continue more frequently than ever (or so it seems) with capital city newspapers from all publishers, rural newspapers go about the business of relying on content to win sales.

An unscientific survey of 15 rural newsagents this week has revealed that not one of the rural newspapers they sell has used a special giveaway or any similar one off device as a retail or home delivery sales promotion in the last two months. These rural newspapers relied on content and the track record established by the masthead.

The sales data I have seen for many rural newspapers shows strong year on year sales growth. Maybe that can be attributed to their focus on being newspapers and not competition delivery platforms.

Rather than spend money on DVDs, CDs, posters, stickers and the other come-ons used by city newspapers to boost sales, publishers would do well to run focus groups with newsagents. Customers talk with newsagents. This over the counter feedback coupled with newsagent feedback will provide some valuable guidance which would satisfy customers, publishers and newsagents.

Trading Post in NSW shows how smart it can be in responding to the Weekend Shopper (News Ltd) free classifieds for items under $300 deal. It is copying the idea.

A smart publisher would add value making purchasing the title an imperative and placing your advertisement for a fee an imperative.

The Trading Post strategy is not smart but then neither is the Weekend Shopper idea. To compete with online advertising newspapers have to act like newspapers. But then newspapers are but part of the business they are in and maybe they can afford to sacrifice in order to protect what they see as the golden child.

The Age has another giveaway this weekend. A yoga DVD apparently.

I had a customer ask a couple of days ago when the next CD or DVD was coming out with a newspaper. I asked why. “Because that’s when I’ll buy it” was the answer. Okay it’s anecdotal and a one off. However, all these giveaways which are unrelated to news only serve to confuse consumers about what the masthead (brand) stands for and I have evidence from one customer to support that.

Sonja Haller of The Arizona Republic reports about the considerable growth in the free classified marketplace in Phoenix which was started by the now worldwide famous craigslist.org. This story reports could just as easily have been written in Sydney or Melbourne where free classifieds are in in 2005. Yeah there are some rules but consumers seem to be embracing them.

I’m not a fan of FREE. It devalues the brand and the service you provide. However, with the craigslist model newspapers have had to come up with something which demonstrates them responding.

I’d rather see a response which offers a more valuable advertising proposition, something which makes newspaper advertising more meaningful than the online competitor.

Online advertising company Seek has posted exceptional results which do not augur well for newspaper advertising. Today’s Australian Financial Review carries the story (pg 11) and quotes Seek Director Matt Rockman claiming 31% growth in online employment advertising versus a 6% decline for print media in the same category.

While publishers can and will replace this lost revenue by playing in the online space, their traditional supply chain faces more complex challenges. We either need to find new products and services to offer or create product which we control. Focusing on new products and or services carries the risk of being beholden to suppliers. It would be unlikely that newsagents (in their current structure) would be a key channel for any new product and or service of significant value. Therefore, my attention would be on creating products and or services which we own.

The advertising shift reflected in the Seek results will continue as will the greater influence of mobile devices in producing access to newsagent information. These changes go to the core traffic generators of newsagencies. The successful newsagents will be those who have already started building elsewhere to replace the traffic and build relevance.

Full report at FT.com. Heseltine is chairman of Haymarket, a supplier to newsagents. He is responding to the draft report from the Office of Fair Trading which, if adpoted, would radically change distribution arrangements.

Two government owned retail post offices I am aware of have changed their retail ‘story’ in the last week.

Punchier stationery displays. Greeting cards at the very front.

I know from consumer feedback at one location that this is generates confusion since there is no postal service message at the front of the shop except the Australia Post logo.

Newsagents were in the stationery and greeting card space well before Australia Post. Post should either sell each of its retail stores (to individuals) or get out of all ancillary product and focus only on postal product.

Having the government trade off their postal product monopoly in an effort to take revenue from my small retail business is offensive. What other country in the world would allow a government owned operation like Australia Post to enter a well established and well served marketplace and compete with small business owners?

A government concerned about small business would fix this right away.

I spent half an hour watching the behavior of people at a local Starbucks the other day. I to see if The Age newspaper was selling there or more often being browsed and returned to the rack.

I’ll declare my vested interest: I own a newsagency and am frustrated that The Age is being sold in Starbucks for half price – in competition with existing full price outlets.

In the half hour I watched, no one purchased The Age; several picked it up and put it back and two took it to their table, read and returned it to the stack.

Beyond the confusion the dual pricing in close proximity brings to a brand, there is the possible lost sale because of poor policing of the browsing and reading at the table. The price of the newspaper is the price of the newspaper. The content is no less valuable in store A compared to store B. While one cold argue that it’s an up sell financially supported by Starbucks you have to wonder why then it’s not promoted more aggressively.

I wish publishers would discuss these strategies with their distribution network prior to implementation. My experience is that all this move has done is shift sales from one location to another.

Vnunet.com reports that a survey by CLX shows that it’s not young people who are driving the growth in podcasting, but the older generation.

If accurate, this survey challenges some of what is being written about podcasting being a medium embraced by young people.

CLX surveyed 8,000 US consumers and that’s a decent dataset to work with.

I’d like to see more surveys. In the meantime podcasters will need to consider the implications for what is being produced. At the same time, mainstream media companies yet to enter podcasting might see this research as encouragement to enter the fray.

I still see podcasting as a medium which sets stories free. It provides another dimension which takes a story off the page and thus has the potential to attract more people to the brand.

Bad news for major city US newspapers according to Nikki Finke writing in the LA Weekly. (Source: Common Sense Journalism.)