Author: Mark Fletcher

Further to my earlier post, I have now determined now many titles of the 1,650 titles I carry which generate above the required $5.00 per month gross profit return. It’s 35% based on July 2005 sales.

That is, in July, 65% of the titles we carried generated an uneconomic return for my business.

This strengthens my claim that newsagents ought to be paid a service fee equal to the cost of real-estate and labour for the title on their business or they ought to have the opportunity to permanently stop supply.

This independent owned small business channel is drowning in stock at one and, for some titles, starving from lack of oxygen (supply) at the other end.

The Federal Government in 1999 led us to the trough of deregulation and did a half baked job. The years since have been very tough on newsagents yet they continue, struggle many, without the benefit of the subsidies of other industries.

While I have talked about digital magazine technology here before, the University of Texas is soon to publish the first edition of a video magazine about the season of their football team. No physical magazine, pure online. Using video technology to truly lift the stories off the page.

By cutting production costs and eliminating a more traditional supply chain, the economics of special interest publishing dramatically change.

I think about this in the context of the current economic model of niche magazines in Australia – magazines carried by newsagents and which sell one copy per issue. There is doubtful commercial value for newsagents in carrying these titles.

Read more on the Texas U plans here.

Wired News carries a story about television and podcasting and outlines several plans for mainstream TV networks to embrace podcasting. It also lists podcasts of programs such as Meet The Press and Nightline which are doing well on iTunes rankings.

Maybe it’s a population thing but once again Australian media outlets are slow at embracing the mobile world. Podcasting unlocks a new audience yet our mainstream media outlets are not playing.

The 100% Federal Government owned Australia Post launched their BIG Savings for business sale on August 8. It runs until August 21. The sale is promoted through a four page colour catalogue.

My newsagency – newsXpress Forest Hill – competes with a government owned Post Office directly opposite our front door. We sell stationery, they do too. We sell greeting cards, they do too. We have Western Union, they have it too. We offer a bill payment service, they do too. We sell phone recharge, they do too.

Their big glossy sale catalogue offers big savings on house brand copy paper for $5.75 (our price is $5.50); HP C8727A black ink cartridge for $29.95 (our price is $28.95); HP C8728A tri colour ink cartridge for $34.95 (our price is $33.95). I could go on but you get my message.

That the government of Australia owns and operates retail businesses in areas well serviced by independent retailers like me and others is appalling. That they leech off the postal service traffic (which must go to their outlets) is an appalling advantage I cannot compete with.

But that they claim big savings in this campaign is a crock. Maybe big savings off their prices but not off prices in my independent newsagency and other newsagencies like mine.

And interesting sideline in the four page catalogue is the amount of house brand product they now sell. Eight items. I wonder if this is done as leverage to get all Post outlets carrying the product as someone cleverly suggested to me. Why our Australia Post is engaging in this is beyond me. They are a postal service, not a retail chain.

But then if you’re building the chain for privatisation then it’s important. Are they privatising? I don’t know. Should they privatise? Yes. BUT: not as a national chain. each government owned Post Office should be sold to an individual or a locally owned independent business.

Having the government compete with independent retailers who were there first is offensive and demonstrates a lack of regard for small business.

Just as today’s new apartment complex is potentially tomorrow’s ‘ghetto’, newsagents carry pockets of what I’ll call ‘ghetto’ magazines. Poor magazines. Magazines at the end of the food chain. In fact, these magazines don’t even make a living. Well not for the newsagents at least.

While other retailers competing with newsagents get to cherry pick what they carry, newsagents carry the range. This can mean anything up to 2,500 titles. My store has 1,700 pockets for magazines. We carry 1,650 different titles at any one time.

Each pocket costs me $2.95 per month. Add to this a reasonable labour cost per pocket per month and I’d estimate a per pocket cost of $5.00. I need to make $5.00 gross profit per month per pocket just to break even.

Now I want to share with you the numbers for two magazines.

Moto Posters. Cover price: $5.95. Distributor: Gordon and Gotch. We usually sell one and until two issues ago used to receive two copies. In their wisdom, Gotch now allocates three copies to us. The one copy we sell generates $1.48 in gross profit for us. This is a loss making magazine. Once we factor in the cost of capital in holding the stock we return for credit the picture becomes worse. The current issue arrived in our shop on June 8, 2005. It has another couple of weeks to run before being returned. We will then wait at least a month and probably longer before we receive a credit for the unsold stock. This means we will carry the cost of the unsold stock for four months.

Make Girls Costumes. Cover price: $2.99. Distributor: Retail Distribution service (RDS/NDD). We usually sell one copy, occasionally two. We are sent three of each issue. For each copy we sell we make 74.5 cents gross profit. The current issue arrived in store on May 11. Unsold stock is due to be returned next month leaving us five months to carry the cost of stock which will not sell. Five or six months capital invested for a 74.5 cent return if we are lucky.

There are some who will say these are extreme examples. I would disagree. They are real examples. Live, in my newsagency today. Sure there are other examples I could write about which show good profit generation for my business and efficient use of my pocket real estate. However, it is unreasonable to rely on profit from high volume titles to support ‘ghetto’ magazines.

Each magazine title in a newsagency has to pay its own way.

Supermarkets, Petrol and convenience outlets and others compete with newsagents for magazine sales. However, it is not competition in the true sense of the word. These other retailers competing with newsagents take the cream. I’d estimate that they choose less than 5% of all available titles – these are the titles which generate an estimated 85% of all gross profit earned from the magazine category.

With newsagents finding it challenging to get sufficient stock of the high volume titles and being over supplied with the poor performing product, it is only a matter of time before the magazine category is radically overhauled in newsagencies.

The solution is that magazine publishers and distributors start to respect the real estate and labour investment newsagents make in their speculative titles and supply models each month. It is time for a minimum monthly return per pocket guaranteed to newsagents. The fee could be based on a formula which takes into account the monthly rent.

In my newsagency I want to charge a per pocket servicing fee of $5.00. This is the minimum. I’d want to make at least $7.50 per pocket before I would agree to reducing the publisher paid pocket servicing fee. The alternative is to cut the magazine. However, I don’t control what I receive. If I could cut these under performing titles I could use the space for more successful titles or for other product categories.

I’d be interested to hear what other newsagents, magazine publishers and magazine distributors think about this.

So, while city fathers tear down ghettos to make for a better city, newsagents and their trading partners ought to consider removing ‘ghetto’ magazines from sale since the capital, real estate and labour cost reduces resources available to boost sales of titles which might otherwise have a strong future.

Mark Fletcher
newsXpress Forest Hill

I’d love to see the tabloid TV shows tackle this one.

At the government owned Australia Post store opposite my shop they are offering 256MB USB memory sticks for $75.00 each. We have them for $55.00. Comparable on quality, brand name but NOT on price.

While I’m happy for Australia Post to be more expensive, their pricing policy ought to attract the same scrutiny from the tabloid TV ‘current affairs’ shows as they given to pharmacists on their markup policies. (Recent comparisons were made between pharmacy prices and supermarket prices with pharmacists looking greedy even though the comparison was biased in the supermarket favour.)

Unfortunately, punters locked in long lines through Post Offices waiting for mail services at the back counter will get lured in to buying stationery items.

This is why the government ought to sell off its retail network to independent business people so that the unfair advantage of the postal services counter is not used by the government against businesses like mine.

Of course, if Australia Post undercuts my price on USB stick I’ll have another crack complaining that they are using revenue from their mail business to underpin unprofitable markup policies for stationery.

Having my own government competing with my business angers me. They have no business selling stationery, greeting cards and other items carried in newsagencies like mine for decades prior to Australia Post entering the space. They have an unfair advantage and no one seems to care.

What started as a strategy by newspaper publishers to boost consumer interest has grown into a magazine segment.

Just three months ago Lovatts launched their Sudoku magazine (pictured above). They were first. They have been quickly joined by a bunch of publishers. An average newsagency today has eight different Sudoku titles in stock. I’d estimate that the stock holding is worth between $250.00 and $800.00 depending on the size of the newsagency. That’s an unbudgeted expansion of stock investment for newsagents.

Beyond the significant cash flow challenge for small business newsagents is what to do with the new segment. Many put Sudoku product in their crossword section. Lovatts know their product and encourage newsagent to display Sudoku as close as possible to newspapers. This is what we do and it works.

Sudoku presents newsagent suppliers with an opportunity to work together to facilitate segment wide marketing and management. The current approach leaves too much to chance with the end result a lower sell through rate and a higher capital burden for newsagents.

I’d like to see one publisher take the lead and bring the other players together so that newsagents can create a strong Sudoku story. Here’s my wish list:

An in store display strategy which brings some theatre to the Sudoku offering.

Training materials (maybe a DVD or video) for employees so they better understand the Sudoku offering.

Over the counter promotional materials.

Co-operation on point of purchase display materials.

Advertising for the segment linking back to newsagencies as the specialists.

Staging events to broad awareness of Sudoku as being more than a newspaper run promotion.

I am sure there are more ideas which could be added to the list.

In return for newsagent commitment to build this segment ought to be a commitment from all suppliers to give newsagents exclusivity over Sudoku product.

The current approach leaves too much in the hands of individual newsagents and while some will do well at developing this new segment, there is more to be gained for the channel and for suppliers from a national supplier driven strategy.

The Sudoku opportunity is made for the newsagent channel.

Go to almost any newsagency this week and you see a display promoting the 10th anniversary edition of Marie Claire. Look on the shelves and you see the 400 page magazine stacked along with the free gift on the cover.

Now go and look in the other outlets with Marie Claire. Little or no support featuring the 10th anniversary. In some cases product is shoved in fixtures which don’t hold a 400 page magazine. In other cases little care is taken to protect the free gift.

This is a perfect example of the value of the newsagent channel to publishers. The complaint add on promotion for products outside the norm.

I’m a newsagent. I like these promotions. I like that I can demonstrate my point of different.

It annoys the crap out of me that elsewhere in my business, for selected titles, magazine distributors offer terms which are inequitable.

We are in very advanced negotiations to buy a controlling stake in what we think is a wonderful search engine. Rupert Murdoch Aug. 10, 2005

It’s an interesting quote from Murdoch at News Corp’s 4th quarter results and briefing.

The Pacific Area Newspaper Publishers’ Association (PANPA) has just held it’s annual conference and today’s Australian newspaper reports several interesting items from the event:

Andrew Jaspan of The Age talked about the need for newspapers to have brand clarity.

At least five speakers quoted the Rupert Murdoch speech to the American Society of Newspaper Editors in April where he said newspapers had been ‘caught napping’ by the digital revolution. (Following the speech News Corporation has dramatically ramped up its Internet strategies.)

The challenges faced by newspapers (and their supply chain), often discussed in this tiny space in the blogoshpere are: faster, easier and funkier mobile access options; disconnect with the younger demographic; relevance; lack of brand respect; growth in citizen desire for involvement in reporting news; and, a dramatic new paradigm for advertising which challenges the economic model of newspapers.

Newsagents are well placed to have a conversation with publishers about these matters since we are at the coal face every day and interacting with current and would be newspaper consumers.

Technorati is a respected authority on what’s going on in the world of weblogs. So what they measure and report on matters.

Here’s a summary of from their State of the Blogosphere issued last week:

By sheer volume blogging is important in personal, social, corporate and community information sharing. Some rely solely on blogs for news. Others rely on blogs for the gossip fix.

Blogs are part of the media mix despite what some mainstream media outlets say. (New York Times, Aug. 5.) The advertising support higher profile blogs attract is testament to the importance marketers place on the eyeballs scanmning blogs.

Jeff Jarvis at BuzzMachine brings together several items in a blog entry about changes impacting newspapers and, in particular, classified advertising. Jeff quotes several sources and offers his own comments including these gems:

In short: Newspapers will compete with Google’s AdSense and try to grab the auctioned pay-per-click advertising that is going there. Newspapers are trying to hold onto local in this new ad universe. They are also hoping to grab new advertisers at a lower cost: The bet in hyperlocal is that the small advertisers who could never afford newspapers could now take advantage of ads that are affordable because they are highly targeted and have next-to-no cost of sale and production.

For newspapers, it’s already clear that the classified marketplace is being replaced. But this also has big mplications for Google.

All relevant in the context of the free classified model launching with Sydney’s Daily Telegraph this weekend.

I guess selfishly I’m happy for newspapers to play because it makes the papers I sell relevant in the changing marketplace. On the other hand, I wish there was more focus on the relevance of the newspaper as a newspaper.

Australians love magazines and they are taking to new and revitalised offerings if these experiences in my newsagency and newsagents I talk with are anything to go off.

The latest to achieve good results is Notebook from FPC Magazines. We have sold 70% of allocated Notebook stock in the first seven days – without any major in store display other than a counter unit and co-location across two segments. In most cases Notebook was purchased with another title.

Looking at sales of other magazines in the segment, Notebook has not impacted them.

I would be interested in the sales data from the non newsagent outlets carrying the tile and whether they have achieved similar sell through in the same timeframe.

The challenge for a newsagency like mine where we carry almost 2,000 magazine titles is to do new launches justice while also providing appropriate support for titles being refreshed (and re-launched) and regular titles.

NASA has reported (Aug. 7) that Mission Specialist Steve Robinson sent this podcast from space. The podcast was recorded as the Shuttle flew over the southeast tip of Indonesia.

NASA specifically calls the recording a podcast. This further legitimises podcasting as a medium for publishing material. It makes podcasting more interesting and puts it on the radar of more punters. It will also increase coverage of the new medium by mainstream media. It makes podcasting more mainstream.

That podcasting is barely a year old and already it has a NASA seal of approval is phenomenal. I was talking with someone just a few months ago who said pod what? Today they’re playing, downloading music and news shows to their taste from around the globe.

The Age carried the story with this opening paragraph:

Technology experts who predicted that podcasting would “take off” have been proven right, literally, with a Discovery shuttle astronaut transmitting a message from space.

This is the story to me. The coverage in mainstream media of the NASA podcast. Especially when it is mainstream media (like Australian newspapers) which has been (for the most part) slow to play with the medium.

Podcasting is changing the way people consume news and information in addition to music. Indeed, music was a no brainer. It’s the use of the medium for news and information which interests me the most. The NASA podcast, while done for publicity I am sure, underscores the importance of the medium and can only strengthen its future.

Read this article by Michael Grebb at Wired News about IPTV and you can see we’re closer to a future of on-demand, personalised TV and movies. It seems that all previous attempts to harness the Internet for television type offerings have been trials for what we are about to see.

No wonder there is much interest among the Foxtel partners and side players in the plans of Telstra and others in this space.

It will be interesting to see the government play its hand, if it does at all.

While I watch the Herald Sun Monopoly promotion draw to a close and The Age/Starbucks 50 cent deal override the values of this respected broadsheet, I am enjoying reading the research undertaken by the Readership Institute at Northwestern University.

The Readership Institute at the Media Management Center, part of Northwestern University, partnered with the Minneapolis Star Tribune to create front and inside pages that drew an enthusiastic response from younger adults. News and advertising content were tested with a total of 340 young adults in March 2005. The tests showed that hard news and advertising – handled in this a new (reader-intensive) way gets much stronger (2:1) results than the current approach to telling and selling news and advertising.

You can find a good overview of the study and findings here. Check out the rest of their website and you will find copies of their presentations to two recent major newspaper industry conferences as well as copies of the front and news pages tested as part of the study.

This is smart research by the Readership Institute and smart engagement by the folks at the Star Tribune. They have found a way to engage with the under 30 consumer – a kind of a holy grail for newspapers. They have found this by talking with prospective customers.

As a retail newsagent I would rather be working with a publisher using research to understand audience and build their readership than competitions which provide a short term boost at best.

It is tragic seeing customers buy two or more copies of a newspaper when a competition is running and discard the copies in the bin once they have retrieved the entry coupon.

These are newspapers. If people are not buying them to read them then what’s the point? Sure there are technology challenges. Maybe engagement customers and prospective customers will help publishers, editors and the retail channel find ways to snare sales we’re currently failing to achive.

It is interesting to watch the growing involvement of governments in Australia and overseas in the broadband play by non mainstream media companies. How they react to what I expect is signifcant lobbying by media companies will speak volumes for their competition policy. My view is that when it comes to competition policy our current Federal Government has double standards.

News Ltd has announced that The Saturday Daily Telegraph will carry Weekend Shopper – a free classified liftout offering free ads for general buy-and-sell items.

While there are some rules (items up to $300 and location of advertiser) this is a major change to the newspaper classified advertising paradigm in Sydney.

With craigslist.org and other pure online plays becoming established in Australia the classified space is very much in play.

In researching further along the lines of my comments here and here about the newspaper brand, I have discovered The Readership Institute, a division of the Media Management Center at Northwestern University. In several places on their website they comment on newspaper brands and the importance of building the brand in securing a future for a newspaper. They provide a clear definition about brand, separating it from a slogan and keeping the branding activity away from the marketing department.

Here are some comments from Institute Director John Lavine and Director of Consumer Research Bobby Calder which I found interesting:

Lavine: Let me start by saying what brand isn’t in the context of newspapers. It’s not the newspaper’s name, or its flag, or its tag line, such as “all the news that’s fit to print.” It’s not necessarily what the newspaper thinks or wants its brand to be. It is how the consumer or reader perceives the newspaper, the images and feelings and meanings that are conjured up in people’s minds when they think about or look at the paper.

Calder: Branding is the activity that goes on inside the newspaper first, to come up with an idea that has great meaning for readers. You have to find out what, in their minds, is a great idea — something that is so linked to their lives and needs that it would make them use the newspaper more. These ideas must be informed by consumers and they have to make sense to consumers.

Lavine: You know what your brand is by discussing it with readers. Your brand is whatever your customers think you are. The composite of their experiences with you, their perception of you, their feelings toward you, and what they think about you — that is your brand. The more passionate your customers are about your newspaper, the stronger your brand is (and a strong brand is not necessarily a positive one.)

Calder: Understanding what your brand is and what it should be requires some specific marketing research. You begin by discussing it with consumers qualitatively and then doing research to measure the brand on a number of key perceptions you identified as being important to consumers. In general you want to look at results to see if your strongest perceptions are the ones you have intended to base your brand upon.

So branding is not about Monopoly or winning a dream home or a luxury car. Branding is about content more so than flash.

As a retailer of newspapers and someone acutely aware of the challenges of flat circulation, the work by Lavine, Calder and their team is most interesting. I see customers reacting to competitions more than engaging with the newspaper as a newspaper. I see (some) newspapers pitching themselves more as entertainment than news. I care about this because newspapers are the most important product I sell in my newsagency and indeed through all of Australia’s 4,600 newsagencies. Anything they do with their brand reflects back on my business and all newsagents.

I’d like to see Australian publishers engage with their unique distribution and retail newsagent channel and undertake research along the lines of that you read about at the readership Institute. The publisher/newsagent relationship is a valuable asset which could be better leveraged in pursuit of incremental sales. Brand building is a key activity in such pursuit.

My sense is that research would uncover frustration among consumers about the use of competitions to build sales and confusion about newspaper brands.

First report through from the Wikimania conference in Germany (Aug. 4 through 8) courtesy of John Burke at editorsweblog.org. The Wiki movement, while young, is fascinating and has the potential to shape how we access news and information, especially in the light of how some publishers are using the free paradigm to maintain a link between their brands and consumers.

In reporting on the conference and a keynote speech by founder, Jimmy Wales – in which he listed ten challenges for the free culture movement – Burke, considers how newspapers might respond and says that free access to Wikinews archives should make newspapers reconsider their current approach of charging for access.

It is easy to dismiss the Wiki movement as irrelevant in Australia by pointing to newspaper sales. This can only be considered in the context of Wikinews etc access from Australia. It is a channel which has only existed for a short time and already there is considerable worldwide support. Its influence will grow, beyond the organic growth, as media ownership becomes more concentrated.

Levi Brooks and Jason Farrell have launched must read blog which discusses business and in particular the changing art of reaching younger people. I like the writing style and the clear focus of their work.

The post, Thin Slicing the Good, the Bad, and the Ugly, is a good example of their comments. It discusses their proposition that their (young) “generation will not listen to traditional advertising with as much faith as other generations”.

This is a critical generation for business to connect with and blogs such as this one help facilitate better understanding.

In Podcast: David vs. Goliath at Business Week, Heather Green reports on the impact on independent podcasts of the Apple move four weeks ago opened iTunes to podcasts. Green relies on the iTunes rankings and while those figures speak for themselves, they do not include podcast traffic through many other outlets. To be fair Green notes this.

It is a David versus Goliath battle though, with larger companies having access to better production and promotion resources than the independents. This will challenge independent podcasters to create more cutting edge, relevant and valuable material.

Podcasting is a (relatively) new medium and needs to be treated as such by all involved. While independent producers have the challenge of resources, media giants face the challenge of being relevant to the podcast audience. Success will come to those who embrace the medium and take podcasts beyond a feint variation of what we can get today on radio or in the press. Take me to a new place and give me an experience I’ve not had before, beyond portability, and then you have something interesting.

The Herald Sun is running a Monopoly competition at present. It’s designed to drive sales with the offer of plenty of prizes.

I heard some anecdotal evidence from people in my retail newsagency that since the Herald Sun Monopoly competition started some customers were purchasing two or more copies of the paper. In one instance, a regular customer (who also purchases plenty of lottery tickets) purchased four newspapers, removed the Monopoly coupon and discarded three copies of the paper.

I’ve gone through the sales data and can confirm that the competition has resulted in a change in buying patterns in my retail outlet. We have more sales during the competition involving multiple copies of the Herald Sun than prior to the competition. Not a huge number more but it is certainly noticeable.

While I am happy to get an increase multiple Herald Sun sales, I cannot see the long term benefit for my business nor for the advertisers who would be hoping the newspaper is attracting additional readers. I can understand the reasoning for the campaign and accept that it is traditional in newspaper marketing terms. I wonder, though, if it is time for a change.

I’d like to see a newspaper marketing campaign built around the masthead and the value it stands for. A campaign which supports the habit nature of newspaper purchase beyond winning a new car or a trip – something which values the content and by association the supply chain which helps get that content to the consumer on time and in good condition.

This piece by Steve Outing at Poynter online from earlier this week about two early adopters using Google Maps and Google Earth to change up online real estate advertising is a must read for anyone deriving revenue from that space.

One of the challenges facing advertisers of how to get listed on the right sites given that there will be more and more outlets. Whereas in the past each city had a classified advertising newspaper of record, in this new world one can see that the same city might have at least several websites offering an equal or similar reach. I’ve got half an idea there about how Australia’s newsagents might connect with the online advertising opportunity but more on that another time.

Given the low cost / no cost associated with new technology, early adopters are only early for a short time compared to a few years ago. At least that seems to be the case in the US. Here in Australia we seem to be slow at adopting some of these newer technologies – in the advertising space especially.

Within a couple of clicks of entering www.oodle.com I was able to create this map of housing available in San Francisco. (Oodle brings together listings from hundreds of local and national sources and uses Google Maps techn ology to display their location.)

Once I have this capability on my mobile phone and based on my location at the time I have a very sexy new classified model. Sure, some people will enjoy reading classifieds as if reading a book. They are not as interesting as those who access the advertising in pursuit of a purchase.

The marriage of classified advertisements with Google maps is brilliant.

I’d like to see newspapers in Australia reporting on this online advertising phenomenon and in particular the rapidly changing classified space where mapping, mobility and lower cost are key drivers for online business growth.

What is really interesting in this space is the battle by newspaper publishers, particularly in the United States, to retail control of classified advertising.