Author: Mark Fletcher

I spoke at an industry conference last week about the shopping basket analysis data I’ve been collecting and analysing. The presentation was a call to arms for newsagents — proposing that they better measure their businesses and take a more professional approach to business operation.

Here are my closing words:

Our businesses are icons. We were created in the 1800s to distribute newspapers and magazines such as The Bulletin. We have a proud history and a deep community connect. Our future lies in tapping that community connect, focusing locally and standing for something.

Where our competitors think that big is beautiful and that one size fits all we like our independence, we like being local. We are standard bearers of Australian culture and that’s something to be proud of.

To ensure we have a bright future, we need to plan for it and to plan for it we need to measure and understand. Then we need to execute as business people, leading our businesses rather than working as if on a production line. Most of all we need passion. Being a newsagent is not a job, it’s a profession. Professional newsagents build better businesses and there’s data to prove it.

Newsagents need suppliers to treat them as professionals and to trust them. Part of the reason newsagents are traffic rich and efficiency poor is that suppliers demand control of the freeway to their product at all costs to more efficient use of the traffic they generate. For example, newspaper publishers have rules about what can be advertised news newspaper product, lottery companies have similar rules. If they worked with newsagents and with each other they could achieve incremental sales. There is data which supports this.

Beyond working on a more integrated approach to cross category selling, newsagents and their suppliers would also benefit from better use of the core point of sale technology. (I note that I own a business which is a major player in providing point of sale software to newsagents.) Whereas today lottery products are sold on separate terminals, by integrating this category with existing point of sale equipment it would be easier for newsagents to up-sell non lottery customers and herein lies an excellent business opportunity. The same is true with bill payment. We have separate devices for this and could be better served if our point of sale registers provided the tools.

While I am aware of some progress in this area, it’s crucial that all suppliers to newsagents study the traffic patterns and counter operation as greater co-operation would make achieving real sales growth easier. We ought to decide that the existing sales point is the business focus and build all new initiatives/technologies around that.

Interesting to see that Alpha is continuing to sell, albiet in small numbers, in newsagencies where there is still stock.

A frustration expressed by newsagents is the requirement that it is sold with local News Ltd newspaper. Several newsagents have commented publicly about experiences where they have seen or known of the product being sold in non newsagent outlets without such a cross sell requirement. This needs to be addressed by News for the next issue.

I’d like to see newsagents with stock left allowed to use these last two weeks of shelf life of Alpha issue #1 to sell the product alone. A fresh in store cmapaign might achieve a nice kick along in sales.

Since the blessing by Apple, podcasting has received enormous media coverage. Some of it insightful and driving deeper use of the technology and other of less value such as this piece in the latest Newsweek.

I continue to be amazed at the low take up of this technology in Australia.

This table shows the percentage of single item sales in the newsagencies included in this survey of 8,000,000 shopping baskets.

On the one hand the majority of the newsagencies are very busy. On the other, they are busy with inefficient and unsustainable business.

With 66% of newspapers in centre newsagencies sold alone one can quickly understand the implications for those businesses if newspaper sales fall due to waning interest in newspapers, competition from mobile devices providing access to news or thanks to newspapers being available in more outlets.

While I accept that many customers in centre and high street newsagencies will visit multiple times in a week and even in a day, the vast majority of business is single unit sales. This is inefficient. It also demonstrates a dependence by newsagents on what I’d call this freeway traffic to sustain their operations.

The publishers who created newsagencies (in the 1800s) would be well served in working with newsagents on this problem as would the lottery agencies who’s rules facilitate freeway access to newsagencies rather than a more retailer friendly meandering in store road which supports cross selling.

Newsagents are busy and they, in the main, don’t see the problem and therefore are not fighting with hard data to fix this problem.

I fear it will be understood by the stakeholders when it is too late.

This is a small business channel in desperate need of better data and stronger leadership to help navigate the issues not only as illustrated in this table but also the issue of tougher competition from the major chains who are out to steal the key traffic drivers to newsagencies.

I’m planning in taking the data and the message on the road to educate newsagents.

Great to see videos now online from last week’s Always On conference. This panel session on smart phones in 2010 is especially provoking – especially when they talk of phones not as devices but as social tools.

In watching this panel I couldn’t help but think that, yeah, they will have a significant impact on news, information and entertainment distribution. I also had the thought that they’re talking about these devices in terms of current technology and of course that’s dangerous given the speed with which these and related devices are evolving. For example, if the researchers playing in the e-ink / e-paper space get their way, phones will be left for dead in terms of delivering a better consumer experience especially in the news space.

My other thought watching this and other panels today from the Always On conference is how unaware so many in the existing news, information, entertainment supply chains are of these developments.

These four tables represent more data from our study of 8,000,000 shopping baskets of data from Australian newsagencies. I’d note that while we’ve looked at 8,000,000 baskets, across the period and for the newsagencies involved, it is a small data set and the results should be approached with this caution in mind.

The most concerning results to me are the fall in basket penetration for stationery in Centres and for magazines in high street. I’m not as worried about newspapers in centres since this is due to the aggressive push by publishers into more outlets in centres and due to the high percentage of newspapers sold alone.

Stationery is one area of newsagencies which the local owner controls in terms of ranging, pricing and displaying. There should be an increase in penetration rather than a fall.

While supermarkets and other channels newsagents compete with measure everything with pinpoint accuracy, newsagents do not. This data in our analysis has been gathered from a small selection of businesses over a long period of time and with considerable effort. The lack of data for newsagents to understand their businesses puts them at a disadvantage. Too many are too caught up in keeping their businesses operating to have the time and energy to understand its performance and make appropriate decisions for the future.

In my newsagency we are using the basket data to increase penetration and cross category efficiency. We have excellent traffic and we are focused on harnessing that for more balanced sales. This means breaking rules and promoting products in ways which frustrate suppliers yet which deliver the sales growth they seek.

It starts with understanding and that comes from accurate measurement.

Following on from my post yesterday… this weekend’s Australian Financial Review carries a well researched feature by Neil Chenoweth.

In They’re Back, the big boys’ second bet on the internet (you’ll need an AFR log in!), Chenoweth takes us through the activity of 2005 by several Australian and international publishers as they try and stake a claim in internet businesses allied to their publishing businesses.

This article is essential reading for Australian newsagents and others in the newspaper supply chain, especially in the light of claims by many publisher representatives that newspapers have a bright future and that the current supply model is safe. It documents a slew of recent internet related investments – demonstrating the importance publishers place on the internet for their future.

Just as publishers are investing to cope with a changing world, so ought newsagents. No supplier is going to act to ensure their relevance in the shift to mobile for delivery of news and information.

The Melbourne Age today carries a full page story, Don’t be throwing out the newspapers just yet by Roy Masters which focuses on Tony O’Reilly – an international newspaper proprietor and major telco investor among other things – and his view that newspapers have a bright future.

The article itself (which, frustratingly, I cannot provide a link to since The Age has locked access away for subscribers only), is reasonable. It pretty much follows the line of articles in many newspapers around the world this year – quoting other newspaper people about the bright future of newspapers. It does not offer balanced reporting on the topic.

The article focuses on O’Reilly’s view that TV and the internet are converging. While I agree with that, more is at play than the two converging. All media is converging. There are many experts around the world who can offer professional comment on this and they have done so in many places already.

A more balanced article would have questioned the narrow and self serving O’Reilly view and provided balance and even challenge to his view.

I’d like to see some robust open debate here in Australia about the impact of convergence, faster and lower cost mobile devices, citizen journalism and the changing economic model of news and information. Such debate, with appropriately knowledgeable participants would provide an opportunity for those of us at the fringe in the industry to become more informed and therefore better plan for the future of our businesses. Stories like the full page piece in The Age today do nothing to add to our knowledge.

We have been collating and analysing data from around 8,000,000 shopping baskets collected from newsagencies covering January through May this year and for the same period in 2004. This data is enabling us to get closer to some industry benchmarks.

The table above reflects preliminary analysis of the data in terms of sales where items purchased came from a single category. For example, sales including, say one or two newspapers. Sales where a newspaper and a magazine are purchase would not be counted.

This data suggests a serious imbalance in newsagency basket penetration. To have 75% of a product category, a very high volume product category, sold alone is unhealthy at best and dangerous at worst. This data demands newsagents and their suppliers urgently work together on deepening cross category basket penetration – for the efficiency of the retail channel, to strengthen the viability of the channel and to broaden the appeal of newsagencies.

The categories which need urgent work are newspapers and lotteries. These generate excellent traffic for Australian newsagents yet suppliers rules dictate where their product is located and whether other product can be co-located. Further, they dictate how newsagents can co-promote. These rules stifle retail creativity and restrict greater basket balance.

In the data I see traffic rich businesses. However, the traffic travels on freeways from entrance to product selection point, to the counter and out. No meandering around the store, no exit ramp to other categories for browsing. This has to stop for the future of the channel and therefore for the future benefit even of these high traffic generating categories of products.

We are preparing to present the data to the newsagents who participated and to workshop efficiency growth strategies.

Ben Kay who manages newsXpress Forest Hill (Vic) had a bright idea. He wanted to promote the hell out of the Neighbours special DVD in the Herald Sun this Saturday and a 20th anniversary Neighbours feature on TV Week next week.

Ben was keen because the hit Neighbours TV show is shot three streets away from the newsagency. Several cast members shop in the newsagency regularly. The shopping centre is used for filming shopping scenes used in the show.

News Corp’s Herald Sun team came on board with great promotional help. As have the team at ACP, publishers of TV Week.

To create a strong presence Ben wanted more and so contacted Network Ten for posters and other material. After speaking with ten different people and being pushed from pillar to post someone within the Network said “no”, we don’t have anything and there are all sorts of legal issues. At each point of contact the Network Ten people were unhelpful. It was almost as if why promote this?

All Ben was after was a few posters and maybe a cut out life size item for us to use in store. It would promote the Neighbours brand, connect with the product they have already endorsed and create a deeper connect with the community in which the show is filmed.

To illustrate the interest locally in Neighbours our newsXpress Forest Hill shop has received prepaid orders from customers wanting to make sure that their Herald Sun is kept for them tomorrow so they don’t miss the Neighbours DVD.

This is an opportunity lost. Network Ten blew it. The promotion in our shop could have been bigger bolder and more successful. As it is we have created tons of our own posters to make a strong presence.

We know from our analysis of around 5,000,000 shopping baskets in newsagencies for sales from January through May this year that Lotteries products are sold alone (i.e. with no products from other categories) 68% in shopping centres, 61% in High Street situations and 55% of the time in rural situations.

These percentages are unhealthy for newsagents and we need to work with lotteries commissions on how we can increase lottery baskets to include other products. At the same time we can reveal ways we could work in other categories within newsagencies to unlock incremental lottery product sales.

This can be a win win.

the challenge is to get each of the lottery agencies around Australia on the same page and working together on this.

The current rules in some states of not being able to promote other product at the lottery counter denies the opportunity for an integrated approach to retail and that’s got to be unhealthy for all concerned.

Whereas a year ago 48% of our Women’s Weekly sales were sold alone, today the number is 31%. Also, over the same period, we’d sell Woman’s day with Women’s Weekly 7% of the time, now it’s 1`2% of the time. This increase in companion business has been achieved at the same time as an increase in sales for the title of 30%.

The world is full of loyalty campaigns which reward consumers with fractions of cents for each dollar spent. Our campaign offers genuine savings in return for genuine loyalty. No faux campaign here. And consumers are voting by spending money.

I have been analysing the results in my newsagency of our now ten month old magazine sales strategy. Take 5 best illustrates the success of this campaign.

Year on year our sales are up 53%. That is phenomenal growth. But, the real success lies underneath these numbers. Whereas a year ago, 16% of all copies of Take 5 were sold alone, now that number is 10%. That is, fewer customers today purchase Take 5 alone than a year ago. Further, a year ago less than 1% of Take 5 customers purchased TV Week whereas today more than 5% purchase TV Week as well.

While we cannot know if we are poaching sales from other outlets, my suspicion is that at least some of the sales are incremental for the title because of the value proposition which underpins our loyalty campaign.

Our magazine club card campaign is getting our customers shopping the category with more depth. It’s also delivering loyalty.

Engadget is reporting of a Scottish group working on an e-paper project. The store includes this quote about the research from the local newspaper, The Scotsman: “potentially life-changing creation.”

Reuters reports that Apple has sold more than 500 million songs through iTunes.

The success of iTunes and the impact of file serving software has killed hundreds if not thousands of inpependent music stores and put some significant retail chains at risk.

The iTunes success is a business case which players in channels through which ‘soft’ product is sold (like newsagencies) ought to research. Too many in the newsagent channel have their head in a bucket of sand and ignoring the success of iTunes and the changes in mobile access space will only serve to limit the life of their businesses.

News is putting money on then table in pursuit of the new focus on the Internet set by Rupert Murdoch three months ago through their acquisition of MySpace.com. MySpace is a bit like rsvp.com which Fairfax bought last week. However, it also includes some interesting fringe technology businesses which add value of the News acquisition.

In April Rupert Murdoch addressed the American Society of Newspaper Editors and said, in part:

“Scarcely a day goes by without some claim that new technologies are fast writing newsprint’s obituary. Yet, as an industry, many of us have been remarkably, unaccountably complacent. Certainly, I didn’t do as much as I should have after all the excitement of the late 1990’s. I suspect many of you in this room did the same, quietly hoping that this thing called the digital revolution would just limp along.

Well it hasn’t … it won’t …. And it’s a fast developing reality we should grasp as a huge opportunity to improve our journalism and expand our reach.”

Now, three months on, we’re seeing movement in the News Corp. digital world. Fox Interactive Media is a first step on what in expected to be a new road of significant endeavor for News.

Today’s online model demands a shorter and faster supply chain between content creator and consumer than ever before. News has been slow to adopt to the opportunities of the wireless world. Now they are in the game it will be interesting to see how well they play. In Australia we’re waiting for some significant announcements from the Optus/PBL relationship.

TV stations continue to promote their news services as trustworthy and providing quality. You hear their advertisements in radio, see them on billboards and read them in print. Radio stations, too, promote the quality and depth of news and current affairs coverage. Not so much newspapers or am I not seeing content focused sell promotion? Sure newspapers use their own pages to promote themselves, but not outside, not to prospective readers.

I see plenty of promotions outside for houses, cars, trips and cash. I see Sudoku puzzles, CDs, DVDs, pins and stickers – being pushed by newspapers. But nothing promoting the quality and coverage of news.

I wonder about the impact of all this non news on the masthead. Surely it must be confusing consumers. The time newspaper customers become the most animated, except when their home delivered paper has been missed, is when there is a new competition or a coupon to clip for a sticker or pin. They like the games and I guess that’s why the publishers keep them coming.

It’s not about the news. But then again nor is their supply chain any more. Just as content has morphed from news to entertainment (for some newspapers) the supply chain has been moved from the specialists (newsagents) to all and sundry.

A few weeks ago I moaned here about the Sudoku craze and how it had overtaken newspapers. And it had. BUT, it’s spawned a new segment in the crossword niche. We have five Sudoku titles all traveling well and they’re generating new business. I don’t mind that.

I guess I long for well spent and successful effort in getting people reading newspapers for news again. Oh well, one can long I guess.

BBC3 is broadcasting each episode of the comedy series, The Mighty Boosh, online a week prior to broadcast. This is an interesting experiment to see what type of audience is attracted and the impact on the broadcast show.

By Eli Noam, professor of Finance and Economics at Columbia University and director of its Columbia Institute for Tele-Information
and published July 14 by the Financial Times:

Are people drifting away from news? Not really. What people are drifting away from is paying for news. And that will be hard to reverse beyond the most powerful or specialised of news brands. It’s happened to music, and now it is beginning to happen to newspapers. Yes, the technology will create many new tiny news media. But the overall result will be more media concentration – a lot fewer but more comprehensive mainstream news organisations as the integrator of most information. First, the paper element of their operations is beginning to vanish. And then, the news part, too, will become unsustainable. Today’s newspaper becomes tomorrow’s news-integrator.

Well, that’s how Noam finishes his piece. It’s a well thought out paper which offers direction and hope (if they pick up on the direction) for publishers but not so much for the current supply chain serving publishers.

What Noam writes makes sense to me. You’ve only got to consider the changes (local and international) over the last six months to see the direction.

The new News Ltd. magazine, Alpha, is doing good business according to stories from around the traps. Many newsagents have sold out while others are reporting strong sales.

The launch at a price of $2.00 (purchased with the major News Ltd. Daily) is working. While some are grumbling at the need to offer it to the customers, the up sell is getting newsagents engaging – and many are happy with the result.

We’ve gone all out in our own shop for Alpha with two significant displays. The sales results are good with strong sales on the launch day (last Thursday) and strong sales also Saturday. Even today, five days in we’re getting good business.

Alpha is creating a new niche since it’s not pure sports nor pure men’s interests. We’re finding strong interest from women – maybe because of the cover.

Alpha is a big test for newsagents as it challenges us to do more than put product on our shelves. It challenges us to engage with customers and prove that our channel can add value to a product launch. While non newsagents carry the product, I;’d expect newsagents to be more successful with the up sell because of the unique nature of their customer relationship. At least I hope that’s the case.

If Alpha sales are weak in newsagencies for issue #1 I’d expect ramifications for our channel.

BIGresearch, an Ohio based research company, has studied 14,000 consumers and their media influencers. Their press release provides a summary of their findings. Here’s a great quote:

“The 18-24 year olds are digital nomads who have adopted new media more readily than any other age group,” said Joe Pilotta, PhD, BIGresearch’s VP of research. “Not only do they use new media more, they are influenced by it much more than any other age group, when it comes to making purchase decisions. Which says that they have integrated new media in their daily lives,” said Pilotta.

No surprise. Good size survey and interesting data. This key consider group is mobile and content hungry but not bricks and mortar loyal.

I wonder how many such studies need to be undertaken before small business owners in the firing line of changes coming as a result of these trends act on their own business plans.

Whereas I can see regular activity from publishers in response to consumer, technology and societal changes, newsagents, who rely on newspapers and magazines for more than 50% of their sales, are not responding in a business planning sense.

podblaze.com has released a white paper on how to leverage podcasting as a marketing tool. It’s a quick read and provides a good starting point if you’re wondering what podcasting is and whether there is a context for your business.

Playlist Magaizne has a good story online summarising where some of the US major players are at with podcasting.

Cameron Reilly of the Australian based The Podcast Network (TPN) is reporting that the number of downloads rose from 91,965 in May to 205,766 in June.

That’s huge growth by any measure.

You can read the full release here.

TPN is following a publishing model and has a stake in each show available through its network. This makes their offering different to the traditional directory service. Some of their shows are a good example of what I mean when I have talked here in the past about setting the stories free from their traditional aggregated product such as newspapers and magazines.

Having an Australian platform gaining such traction at this stage is good for our voice internationally even if the production qualities of the AFL (local football) show could use a boost.

The News Ltd launch yesterday of Alpha – the slick sports magazine being sold for just $2 with News Ltd major dailies seems to have gone well from the newsagents I have spoken with.

Many have provided significant in store real estate to provide a strong presence for the new title.

In my own store we have strong displays in two locations plus we have Alpha at the counter and are offering it as an up sell. It’s a challenging product to up sell because most of our customers are female and over 50 so that’s a demographic issue for us.

The pitch for the product is strong with a good cover and good point of sale material. Where there is a challenge is what’s it about? That message is not as clear as it could be and this leads to a confusing message from newsagents in merchandising and pitching the product.

It’s early days since this product has a 30 day shelf life. The key in my situation will be the weekend sales. We’re planning a very strong pitch on Saturday.

Newsagency customers are very segmented. Eyes down, freeway into the part of the store they want, purchase, freeway out. Alpha is trying to get newspaper customers purchasing a magazine or vice versa. My experience yesterday is that we need to systemise that a bit more so that we get the sales uplift necessary to make it work for us and for News Ltd.

For example, there is a strong story at the newspaper display but not as strong a story and integration at the sports magazine display. At that place the story needs to be different to the newspaper stand story.