Author: Mark Fletcher

The challenge for newsagents is to find a business model with a bright future. It’s something I talk about with many people and few (including me) seem to have an answer. We talk about new products and services but they don’t seem to offer the traffic we need to remain relevant to consumers. Earlier this week I had an epiphany of sorts. Our future is not about products and services, it’s about how we engage with our customers and the broader community.

The Bendigo Bank is the darling of communities and investors – providing banking services where bigger banks closed down. Bendigo is thriving thanks to community support.

Newsagencies are community businesses. We’re local. For over a century we controlled the distribution of news and information. Those days are gone with newspapers and magazines getting into every store. Publishers seem to care less about how they are represented. There is no value add. So today we’re drifting and struggling to find and maintain relevance. Consumers don’t need us as they once did. Publishers don’t need us as they once did.

My epiphany is the vision of the community newsagency – the ultimate community owned business where profits earned remain in the community. The community buys the business from the current owners and morphs it into what the community wants. Locals will support that business over the petrol, convenience and supermarket outlets when it comes to newspapers, magazines, stationery and other product because they will be supporting their store.

It would alter our engagement with the community and might provide a model for other independent retailer channels to follow.

While there’s work to be done on the model, I put it out here for discussion.

Figures released by the Dow Jones Company today show that Wall Street Journal Online has 731,000 subscribers – 5.2% above the same quarter last year. The Journal’s online edition has a paid list larger than paid print circulation at all but six newspapers in the US. This is an online model working well.

Wall Street Journal online is a newspaper model without a supply chain. It’s efficient for the publisher and efficient for the advertiser.

In an interview discussion with Jay Rosen of NYU and published on the brillian PressThink site, Bill Grueskin, Managing Editor of Wall Street Journal Online said:

print and online would work like a family, with gently aging parents and striving college-age kids. Mom and Dad would support the kids for a while, then the kids would get jobs and chip in a few bucks every year, and finally, as the parents got older and earned less, their kids would contribute more from their quickly expanding incomes. And over time, the family would stay happy.

He said considerably more than this and the interview makes for fascinating reading. Here is one particularly fascinating exchange about craigslist:

Jay Rosen: Final question. Here’s what Tim Porter reported from yesterday’s American Society of Newspaper Editors convention. The scene was a panel on the future of newspapers:

One of the most telling moments of the hour occurred just as the meeting opened when Nachison and Peskin put a slide up of Craig Newmark and asked how many people in the room of several hundred recognized him or his name. Only a smattering of hands rose. A few more hands went up at the mention of Craigslist and its free classifieds.

What does that tell you?

Bill Grueskin: It tells me those editors need better optometrists. Or it restates the warning from your car’s side view mirror: Objects may be closer than they appear.

The message for retailers who rely on news and information product to generate important traffic to their stores, the message is get informed, get engaged and take control of your future. The big end of town is now onto what’s happening. I wonder when small business, particularly Australian Newsagents, will catch on.

Craig Newmark has set the newspaper advertising model on its ear with his craigslist.org business. It is an advertising model of and by the people. So it was interesting to read his remarks yesterday about newspapers.

“There is a lot of change coming and I want to make whatever contribution I can.”

This article in BusinessWeek online reports more of his comments.

The San Francisco Chronicle has lost millions of dollars in classified over the last five years advertising thanks to Craigslist and now other newspapers around the globe are under pressure from the free/low cost advertising model of craiglist. The guy who created this new model is well connected with the Net generation and his newspaper model will gain an immediate following.

Anyone in new newspaper business who does not know who Craig Newmark is and what craigslist is about is seriously behind the times.

Google has quietly released access to the Beta version of its video upload facility. You can check it out here. Anyone can upload. You retain copyright. You can charge what you like.

This move releases even more content to find places of interest. It reduces the barriers between content creators and consumers.

I can see the day when, through a service like this and other aggregators who will enter the space, consumers can download a story for a few cents which otherwise they would need to watch a TV show to view. Our portable devices and computers become a key and low cost access point for video based news and information.

Australian newsagencies grew up with the purpose of distributing and retailing news and information product. We established a world class network along the way and while we added other products and services, our connect with news and information remains our most important traffic generator and business focus. Through this journey we have been (for the most part) willing servants of newspaper and magazine publishers and distributors, another cog in the supply chain.

Now, thanks to broadband, the Internet and wireless technologies, the need for such a cost and labour intensive supply chain is changing. Yet we’re not about to close down. We need to find and create opportunities for our commercial relevance going forward.

Our future will be found in being locally focussed. Our local connect is a core value of newsagencies. We need to embrace that more. We need to stop watching this giant wave of change from the sidelines and jump on and ride it. We need to create content, product.

Imagine if you were the publisher of an online local newspaper which focussed on local reporting. No one size fits all here, such a venture would be about your local community with content developed by them and even supplemented by professional local writers. In such a model newsagents step out from being part of a challenged supply chain and become content creators, we start riding the wave. This model would make local news more valuable than the fluff of many local newspapers.

While taking such a step will not generate significant traffic for our shops, it will put us in play in this new online space in an exciting and leadership way. Our shops can become a beacon for the local community and help create a future model for our viability.

It’s easier to see the way forward from the front of the pack than from behind or under.

How do we do this? Watch this space.

Some competitors of Australia Post, particularly newsagents, have alleged that Australia Post is unfairly competing in the market by using revenue from its reserved services to cross-subsidise its non-reserved services.

And so opens a nine page report released by the ACCC on March 30 this year. This report makes for fascinating reading for anyone concerned about possible unfair competition between Australia Post, particularly their corporate stores, and newsagents.

The ACCC has established record keeping rules for Australia Post which will facilitate greater transparency of the financial operation of Australia Post and, in particular, the flow of revenue from reserved services. This will make checking for cross-subsidisation easier.

Australia Post poses a huge threat to the newsagent retail channel. We ought to be calling on the government to stop its monopoly based government owned retail channel from further encroaching on our independently owned small business channel.

This transparency order from the ACCC is welcome.

This local newspaper from Greensboro, North Carolina is encouraging readers to write stories and submit them to editors for publishing online. This is a model of community involvement designed to build the connect between publisher and readership and demonstrates how some are already embracing some of the principles Rupert Murdoch espoused in his speech two days ago in the U.S. The Wall Street Journal online carries more details on this story.

Here is the full text of Rupert Murdoch’s speech to the American Society of News Editors. Below are some further quotes from the speech:

At the same time, we may want to experiment with the concept of using bloggers to supplement our daily coverage of news on the net.

And with the growing proliferation of broadband, the emphasis online is shifting from text only to text with video.

While the technology still develops in this area, we today face the more immediate challenge of transforming our offline classified businesses into online marketplaces. And not just for the traditional cars, jobs and real estate categories. What we’re learning is digital natives increasingly are finding their dates, their plumbers and their restaurants online.

Read the whole speech – it’s fascinating.

“The threat of losing print advertising dollars to online media is very real,”

That’s Rupert Murdoch speaking in another quote from his speech to the American Society of Newspaper Editors.

“They don’t want to rely on a God-like figure from above to tell them what’s important,” he said. Not making these changes would mean the newspaper industry would “be relegated to the status of also-rans.”

This more fulsome reporting of the public reality check for News Corp. can be found in this report from MSNBC.

Then there is this amazing quote in this story on the Editor and Publisher website:

“I fear technology, and our response to it, is by no means our only challenge. What I worry about much more is our ability to make the cultural changes. We are too out of touch with our readers. We worry too much about whether we have the story than whether anyone wants the story.”

The commentary on this story will be worth reading in the coming days. Again, newsagents need to develop their own commentary.

Rupert Murdoch, Chief Executive of News Corp., speaking at the annual meeting of the American Society of Newspaper Editors, urged newspaper editors to embrace the Internet.

“The trends are against us. Unless we awaken to these changes which are quite different than those five or six years ago, we will, as an industry, be relegated to the status of also-rans.” Rupert Murdoch.

Murdoch cited this report from the respected Carnegie foundation which we discussed in a blog entry on April 4.

Newspapers across the globe are reporting the stirring of News Corp. with most taking the Associated Press feed as this report in the LA Times shows.

The core of the News Corp. strategy must be the elimination of barriers between their business and consumers, the elimination (or dramatic reorganisation) of the supply chain, the growth of the online model while protecting revenues as much as possible from physical product as much as possible.

Newsagents need to read the Carnegie report and plan for the future just as News Corp. is doing today.

While we focus here in the impact of changes on the distribution of news and information in print media, it’s valuable to check in with the impact of technology on radio. This article from newcitychicago.com is an excellent discussion on the impact on radio and unemotionally outlines potential ramifications for commercial radio as we know it. The parallels for newsagents are clear.

Why would you advertise a job in a newspaper? Online you can publish immediately and now with aggregators like indeed.com you’re getting seen way beyond the posted website.

Take a look at indeed.com and see how easily and quickly it aggregates data from over 500 job sites.

Job advertisements have been a key part of the rivers of gold classifieds of newspapers. No longer.

It was disappointing to see Today Tonight on the 7 TV network last night rip into newsagents among others on retail markups. This story on their website says:

Newsagents
Newspapers are marked up 25 per cent, stationary up to 100 per cent, cigarettes up 25 per cent and confectionary as much as 50 per cent.

Newspapers are marked up 33% by the publishers. Our on sale price is dictated by our suppliers. Every retailer charges this cover price. In fact, most of what newsagents sell is at prices set or recommended by suppliers. Stationery is the biggest category where we set our own markup. Here the range is from 5% through to 120% with the industry average 60%.

There is no shame in markups. Shame on Today Tonight for inferring there ought to be. The markup (gross profit) pays rent (around 12% of retail), wages (around 10% of retail), theft (around 3% of retail) and overheads (around 6% of retail).

A journalist doing their job would have reported that many items sold in newsagencies are done so with prices set by suppliers and that in many cases prices have not changed in years.

I sell the Herald Sun newspaper today for $1.00. I sold it 5 years ago for $1.00. In the 5 years my rent has increased 4% each year – I am paying $1,000 a week more rent now than 5 years ago – wages have increased by 35%, insurance by 30% and so on. A good journalist would have investigated the situation and not just accepted what the Australian Consumers Association fed them.

Newsagents do not have any form of government protection like chemists. We do not have a monopoly. Indeed the last six years have seen our core products of newspapers and magazines pushed to all manner of outlets with the result of less traffic in our shops. Such is the impact of competition.

Our 4,600 independently owned small businesses provide worthwhile local business employment for many, we’re a beacon in the local community, assisting in many ways.

This Today Tonight story is really part of the push by Woolworths to get pharmacies in their supermarkets.

Podcasting is technology which takes audio and sets it free for the world on the Net. It’s revolutionising radio as this quote from Paul Montoya, CEO and a 31 year veteran of the broadcast industry stated,

I was there when FM radio came into its own and saw the impact on AM radio. I have also seen the impact satellite radio has had on FM radio. I can now see the incredible possibilities that Podcasting can have globally on the way people listen to content. Now they can listen to programs they want to listen to, when they want to listen to it.

Read more of the story here. Connections to newsagents and independent retailers? None. Except that Podcasting will morph across into publishing and that’s where the impact may be felt. The BBC is embracing this technology having now undertaken their second podcast.

What we knew as radio last year has changed significantly already this year.

The folks at Google are not resting on their laurels for traffic. Google Ride Finder is a taxi locator now in Beta in 10 U.S. cities. The site plots locations real time.

Once in the cab, according to this story from the San Francisco Chronicle SFgate site, the passenger can access all manner of news and information using a touch screen.

It’s traffic generators like these which separates online plays like Google from the more traditional news and information sources – and that’s crucial as they are masters at leveraging that traffic for incremental sales.

The connection to newsagents? Less relevance for what we sell and a lesson in customer traffic generation and retention.

It’s astounding how much Australia Post is able to stay under the radar on matters of customer service. While Telstra gets beaten up with regularity over service for rural Australia, Australia Post continues to let consumers across the country down.

If this were Telstra the press and some more noisy Senators would be beating the drum calling for better service. Hey, folks, there’s a story here!

I don’t mind since I own a newsagency which competes with a Government owned post office (directly opposite) for stationery, greeting card, Western Union, phone recharge and bill payment products and services. But I still wonder how Australia Post gets away with it while Telstra does not. Of course, they do it by promoting their business around their delivery service – which is excellent – but it is in their retail sector where they are savage against family run businesses. They use the rivers of customers generated by their monopoly mail services and get them to buy products which would have otherwise supported the small business economy.

I guess the Federal Government needs the profits from the sale of a pack of paperclips more than I and other newsagents like me need it.

The retail arm of Australia Post is out to harm small businesses like mine and make mediocre service the standard. Australians should reject that! We deserve better.

The government should get out of retailing and leave that to small business owned who know a thing or two about customer service.

There is no doubt that newsagents face serious challenges. They are a key part of the news, information, advertising and gambling supply chains. In each of these marketplaces, online plays are shortening or eliminating the supply chain. While it will be some time before we feel the full impact of the changes, suppliers in the meantime are chasing incremental sales wherever they can and this means hurting the small business people who gave them life in the first place – newsagents.

Suppliers are taking products traditionally associated with newsagencies and putting them everywhere – dramatically diluting the value of the newsagent shingle.

Many newsagencies are starving because they are not sent enough magazines to satisfy consumer demand. This will reduce consumer traffic and potentially cause their businesses to die. Week after week we sell out of TOP 10 magazines barely 50% into their shelf life. That’s bad for business.

Many newsagencies are drowning because the lesser successful magazine titles are supplied in such abundance that more than 50% of what is sent is returned to be pulped. Newsagents cannot control what they are sent yet they have to pay for this stock and then claim back a credit which they get sometime long since the money left their account.

This small business retail channel is in trouble.

Is anyone listening?

Australia’s 4,600 retail and distribution newsagents need to create a business model which links them directly with consumers in the news and information area. As middlemen in the supply chain today we run the risk of being discarded when our economic relevance drops below a point of viability. Publishers have always ‘owned’ the relationship with their readers.

Newsagents can establish a direct consumer relationship by embracing blogging and citizen journalism technology and becoming a bricks and mortar conduit for local (community) news. While operating online, the resultant stories could be ‘published’ in short form and provided to the local community free from retail newsagencies.

This would underscore the role of newsagencies as local gathering places which makes sense since they are locally owned businesses employing local people and service the local community.

Further to my April 4 post about Bluffton Today, there are two other new and similar citizen journalism sites worth looking at.

YourHub.com is a Rocky Mountain News venture where anyone is invited to share stories/photos and opinions, add events, sell something. It is about to launch and is planned for 37 neighborhoods in the Denver area.

Blount County Voice is a community site in Maryville, Tennessee.

These sites and the others like them demonstrate a movement toward the local and acknowledge the place of the reader in creating content. While in its infancy and yet to evolve into what accountants might consider an economically sustainable model, consumer and participant interest suggests that they are heading in the right direction.

Local newspapers face the more immediate risk from the citizen journalism movement. Rich in advertising, these papers are lucky to carry one or two genuinely local stories. Consumers creating content will provide more interesting and more immediate local content and see more local papers thrown in the bin.

With Australia’s 4,600 retail and distribution newsagents reliant on newspaper and magazine sales for more than 50% of customer visits each day, we need to urgently find a way to meaningfully participate in citizen journalism. Publishers embracing the model will do so outside our bricks and mortar channel. Our response has be between us and consumers.

ICANN, the not for profit peak internet management body yesterday at a meeting in California approved the creation of .jobs and .travel sponsored top level domain names as this item reports.

The .jobs decision reduces the supply chain between job advertiser and job seekers. Aggregators such as SEEK now face their own challenges. In recent years it has been SEEK and others challenging newspapers.

This ICANN decision is further proof that the supply chain is shrinking in many sectors and bricks and mortar and older technology aggregators need to adapt to maintain relevance.

It will be interesting to see the impact of this decision on the forthcoming SEEK float.

This article from Wired News announces that several newspapers are about to offer news reading software which will make news from their sites and others more accessible. The same software is also expected to enable consumers to search classified advertisements.

This move further challenges the relevance of traditional channels through which newspapers distribute their products.

The good news is that publishers and software developers are teaming up to deliver timely articles of your choosing to your virtual doorstep — and you don’t even have to tip the delivery boy.

And so opens this article from Wired News posted two days ago.

Newsreaders pull headlines from a variety of bloggers and news sources and allow consumers to create their own ‘paper’. Newsreaders are available without cost and they access websites such as BBC, CNN, News Limited and ESPN which provide content without cost. Once you select an article of interest you are taken to the site for the story.

Newsreader software is available for hand held devices making up to date news accessible on the road.

The road between story conception and the consumer is changing.

We have seen the changes in news and information distribution for some time and set in place a plan a year ago to grow the business and brand. Our goal has been double digit growth in the magazine and newspaper categories and to leverage that traffic into other areas as we expand our range.

The strategy is working. Magazine sales are up year on year by 30% and newspaper sales are up 12%. In the Women’s Weeklies segment of magazines our sales are up 50% year on year. We’re seeing positive impact elsewhere in the business.

While not addressing the longer term issues, our strategies are building consumer loyalty. Holding their hand we’ll lead them through our evolution.

Australian newsagencies are bricks and mortar aggregators. Consumers visiting a newsagency have access to between 1,500 and 2,000 magazine titles and between 20 and 50 newspapers in English and an array of foreign languages.

Historically we have been a one stop shop for news and information. The perfect model for the day – a model which has resulted in significantly better than average per capita consumption of news and information product. The model was created by the publishers and until 1999 protected by government.

The model in its present form is out of date.

Now that we have been cut loose we’re facing tougher competition. Those who created and fostered the development of the newsagent channel are busy placing their product in other channels where they feel consumers are more likel to make an impulse purchase. This is happening at the same time as new online models are emerging to challenge print.

Newsagencies are typical middle-men in the supply chain and are the most at risk of not adapting to change. Many are too busy in their businesses to consider the strategic issues.

Given the involvement of the Australian Government in, first protecting the newsagent channel decades ago and, now, cutting them loose, it would be appropriate for them to provide assistance so that the 50,000+ employees in newsagencies and the mum and dad investors who own the businesses have a future.