A blog on issues affecting Australia's newsagents, media and small business generally. More ...

Author: Mark Fletcher

Worst newsagency supplier of 2018: Gordon and Gotch

I nominate magazine distributor Gordon and Gotch as the worst newsagent supplier of 2018. I do this on the basis of:

  1. A broken magazine supply model that results in failure every month with between 30% and 50% of what is sent as not selling. This wastes newsagent capital, time and space. Gotch people will say this is the fault of the publishers who control print runs. I don’t care. Gotch is the supplier to newsagents.
  2. Poor communication.
  3. Poor customer service. Often non existent. Newsagents have to spend too much time using inefficient systems at Gotch – phone and email – to get simple queries answered.
  4. Poor tech infrastructure that makes it hard for newsagents to proactively trade on new titles. I am tired of excuses by Gotch representatives on this.
  5. Disinterest. The impression newsagents tell me have is that when it comes to Gotch, newsagents feel they don’t care.
  6. Poor commercial value to a newsagency business. The poor margin, couples with a broken supply model and a high labour cost for newsagents on dealing with queries drives this poor value.

Feel free to nominate any other company or agree or disagree with my post.

FOOTNOTE: A Jan 1, 2019 reflection: Why am I so hard on Gotch? Because they have had decades to get this right. They are a cornerstone supplier in a cornerstone category. Newsagents used to be their exclusive customers for print media products. Now, ur channel is one of several. While we have more competition, Gotch has less, and we are the worst off for it.

The position of Gotch in the channel, their size, their market dominance mean we ought expect more from them. In 2018, we got less. This is leading newsagents to exit magazines.

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magazine distribution

Terrific Boxing Day Sale result

Looking at the post-Christmas sales, I’m very happy with the results. Close to double-digit growth in good margin categories. Every sale is an opportunity we leverage for return business by using the discount voucher program with a date-based offer to bring those sale shoppers back in a reasonable period.

In retail here in Australia or anywhere in the world for that matter year on year growth has to be appreciated.

We drove this latest sale with a strong offer right out the gate from December 26, with plenty of product purchased for the purpose. The sale success gets us closer to the key shop floor reset we have planned for a few weeks, as we further transition the business into new areas.

I appreciate Boxing Bay / post-Christmas sales are not for everyone. In a major shopping centre in suburban Melbourne, they are an essential event on the retail calendar.

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Newsagency management

Dealing with product returns

Christmas is over and now retailers have the returns / refunds challenge as people deal with either gifts they do not like or want or return gifts that are broken.

I have found it useful to remind team members of the policy of the business at this time, and to ensure that  everyone agrees to follow the policy.

Once purchase from us has been verified either by receipt or proof through a time of day match in our POS software data approach is as per the ACCC guidelines.

If the item is faulty and not repairable by us, we replace. If we don’t have an acceptable replacement, we refund value of purchase. Depending on the item, we might bio back to the supplier.

If the item is damaged and it has been out of the store for more than a week, we may offer an amount  but not full value. This all depends on the shopper and how they are.

It the item is expensive and repairable, we will take it and approach the supplier to resolve, keeping the customer in the loops all the way through.

If the item is not damaged or faulty we will not accept it for return. A change of mind or an I don’t like the gift is not our problem.

The challenge is the extraordinary power shoppers hover today with social media. There are many stories in retail and in our channel of shoppers unreasonably using social media to make false and distorted claims in order to ‘blackmail; a retailer into giving a refund or some other benefit.

This is where we as retailers have to weigh top the risk.

It takes no time for someone to bag your business out on social media, with potential ramifications being financially serious and emotionally distressing.

One way to avoid this is to document everything, have an escalation process and to communicate clearly and often with the aggrieved shopper. However, there are some who will never one satisfied. With those and if their request is unreasonable I take the risk. In my experience they damage themselves more than the business in the long run.

I have seen this behaviour from newsagents too, making claims about a supplier in order to get a supplier too provide them something to which they are not entitled. It’s human behaviour, unfortunately.

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Management tip

Adelaide oval, cashless

Further to my posts about cashless retail, I found our recently that Adelaide oval is cashless.. This, from their website:

All credit and debit cards will be accepted and will be exempt of any surcharges imposed by the venue. This change has been implemented to deliver faster service for patrons (less fumbling for change) and is more convenient for patrons who don’t, or don’t want to, carry cash.

Various locations around the stadium are clearly signed as card only outlets. Near these card only locations are outlets that will accept both cash and card payments. Also available are booths where patrons can exchange cash for a food & beverage cash card should they wish.

Adelaide Oval event day staff are familiar with the locations of all card only and cash/card outlets and will be available to direct patrons as required.

More and more locations are making this move. The ATO recently made a statement about its preference for cashless retail. I think going cashless something more retailers in our channel and similar will be dong in 2019 and beyond.

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Newsagency management

Ready for Boxing Day

We are all set for a massive Boxing day event starting today and running for the next two weeks. Being in a large shopping centre, it is essential we participate in this. It brings in plenty of first time and rare shoppers so squatting product will not adversely affect sales to regulars though the year, many of whom will stay away for the next few days.

We have bought in for this, as we do every year, to maintain terrific margin %.

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Newsagency management

Christmas Eve craziness

Today is unique for retailers, as Christmas Eve always is. There will be places that are quiet and empty and others that are crazy busy. My own experience is more crazy and busy thanks to being in a shopping mall and located near food.

The most fascinating shoppers are those who have left everything to the last minute. They can be a lot of fun. they can also be stressful in that they expect you to have a full range of options available.

Our core shop floor focus is shopper traffic flow and stress. We want the shopper experience to be the best possible. In between this we will start to be ready for the Boxing Day sale.

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Newsagency management

Husband Christmas card campaign works

Over the last month, for newsXpress members, I have been engaged in a Christmas card marketing campaign targeting husbands. I’ve been pitching this across a bunch of Facebook and Twitter accounts as well as some Instagram. It has worked a treat.

Here is one post from last week.

While I have pitched to wives as well, the husband pitch is the one that has attracted in-store comment.

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marketing

Designs and location key to driving bag sales in the newsagency

We refreshed the location of bags at the same time we enhanced the range in the shop. The refresh delivered a sales boost. Placing them such that more shoppers walk through the alley of bags is a key factor here as is the regular moving of bags between rows and hooks, so the range looks different to regular shoppers. This photo is part of the range.

I think we should be selling more gift bags in newsagencies. Data I saw a while back indicated the channel underperforms in this category compared to other greeting retailers. We can do better with placement, range refresh and through owning the category. One way to look at it is unit sales yer on year. Growth has to be the target.

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Newsagency management

Newspaper publishers fail to leverage the interest in stories with their paywall strategy

I get that publishers need to monetise content to pay for more content. I am happy to pay. If I like a song, I buy it. If I want to see an episode of a TV show, I buy it. However, I can’t buy a news story.

The paywall approach by news publishers is out of date. It was created for a time long gone. Today, stories matter far more than a masthead package.

Take this Herald Sun exclusive story from today. They want me to sign up to a subscription. The cost outweighs the benefit I see in accessing the story. So, I will wait to find out more about the story.

If, on the other hand, I could buy this story for a micro payment, they’d get me and, for sure, I’d probably join a micro payments service where I could nominate the types of stories I like and agree on rules for being served these single stories.

The price for a story could depend on the story itself, in a way similar to how some entertainment content is priced online.

Their demand that I sign up for an old-school subscription is so yesterday. It’s what they did when news on paper delivered to your door was a booming business. It is out of touch with today.

How, when, where and what we consume through subscription has changed. News publishers need to change to reflect this.

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Media disruption

Everyone on the shop floor for the next three days

The next three days are critical for Christmas retail sales. It’s for this reason that everyone in the business should be on the shop floor.

You can’t sell from the back office.

So, all staff including business owners, should be on the shoot floor either helping customers or keeping products tidy or doing other work that makes them interruptible by customers with questions.

This may seem like obvious advice. That’s good if it is for you. There will be some, however, will see this as new advice and others who will ignore it. That’s okay. However, it works, especially over the next three days.

Here are starter suggestions of things you could do on the shop floor over these three busy days:

  1. Offer a cool glass of water.
  2. Offer a slice of homemade fruit cake (with a layer of marzipan and white icing).
  3. Give our Shopping baskets.
  4. Have a selection of cards to add to the purchase, and Christmas bags.
  5. Manage a discount area where you place items you want gone from the shop.
  6. Maintain a small, easy to access, card writing station.
  7. Put out as part of Christmas something you have stored away and not one the shops floor, something you could not sell previously.

While Christmas sales have already been terrific, the next there days should be even better as you will have the last minute shoppers for whom price is less likely to be an issue as well as the savvy shoppers looking for a deal this close to Christmas Day.

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Newsagency management

Change your gift voucher settings now and be a good citizen

With changes coming to ensure that gift cards / gift vouchers have a three year expiry, smart retailers have made the switch, playing ahead of the wave of change, demonstrating that shoppers come first.

I am talking here about the cards /. vouchers over which retailers have 100% control, those for their specific business.

While Blackhawk and Touch are responsible for the other store vouchers newsagents sell, your own v vouchers / cards are your responsibility.

I say make the move now and promote the fact. Customers will appreciate it. It is a small business opportunity.

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Newsagency management

Crabtree & Evelyn retreat from Australia

Crabtree & Evelyn wrote to retailers a few days ago announcing the imminent closure of their Australian wholesale business. It came as a surprise to plenty of customers, including newsagents, gift shops and independent pharmacies. Crabtree & Evelyn is a solid brand, well recognised and appealing to a valuable demographic.

This move is one of many recently by suppliers, retreating or trimming operations in light of challenges in retail and allied areas.

I think 2019 will see more suppliers dealing from a head office, with less investment in field representation – especially in dealing with small business accounts.

As I noted here a few months ago, representation is expensive, especially compared to being able to deal with a national account that covers hundreds of locations. Here is what I wrote about the cost of reps min the road.

A rep on the road has a cost to the business of around $100,000 made up of salary, maintained vehicle, on-costs such as work cover, insurance and related as well as any incentive for performance.

A rep is on the road, on average, forty weeks of the year allowing for annual leave, other leave, training, meetings and times when retailers don’t want to see any reps. While the 40 is a generous number, let’s go with it.

Forty weeks is 200 working days, or 1,400 working hours after allowing for breaks.

A rep needs to earn at least $71.42 in gross profit per work hour to cover their costs to the business let alone other business costs.

However, reps and suppliers tell me that rep travel time accounts for around 30% of work hours. This takes the work hours in a year to 980. At 980 work hours a year, a rep needs to earn $102.05 in GP to cover just their cost to the business.

The reality is, given business overheads, the cost of a warehouse, marketing and other costs, a rep would need to earn between three and five times this in GP to cover the business costs.

While not ubiquitous in the newsagency channel, the Crabtree & Evelyn is well represented.

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Newsagency management

Scam alert: gift cards including iTunes cards

Apple the ACCC and the ATO are seeking to alert retailers and shoppers about a scam involving gift cards and iTunes cards. This, from the Apple statement:

A string of scams are taking place asking people to make payments over the phone for things such as taxes, hospital bills, bail money, debt collection, and utility bills. The scams are committed using many methods, including gift cards. As the fraudsters are sometimes requesting codes from App Store & iTunes Gift Cards or Apple Store Gift Cards, we want to make sure our customers are aware of these scams.

Regardless of the reason for payment, the scam follows a certain formula: The victim receives a call instilling panic and urgency to make a payment by purchasing App Store & iTunes Gift Cards or Apple Store Gift Cards from the nearest retailer (convenience store, electronics retailer, etc.). After the cards have been purchased, the victim is asked to pay by sharing the code(s) on the back of the card with the caller over the phone.

This from the ACCC website:

The ACCC is warning people to be on the lookout for scammers who are trying to con their victims into paying for scams with Apple iTunes gift cards.

During 2017 to date, reports to the ACCC’s Scamwatch show 1236 people lost nearly $540,000 to scammers using gift cards as payments.

This is a growing trend: in the 2015-16 financial year losses were about $480,000.

“Scammers are increasingly getting their victims to pay with iTunes gift cards as they can quickly on-sell them and pocket the money,” ACCC Deputy Chair Delia Rickard said.

This from the ATO website:

The Australian Taxation Office (ATO) is reminding Australians to stop and think before giving their personal details or hard-earned money to scammers this tax time.

Assistant Commissioner Kath Anderson said 48,084 scams were reported to the ATO between July and October last year.

“We have already seen a five-fold increase in scams from January to May this year and typically expect further increases during the tax time period,” Ms Anderson said.

As retailers, our roles are to ensure we are aware and to use our shopper communication platforms tom amplify warnings about scams, especially when they could connect with what we sell, such as gift cards.

Posting about this on your business Facebook page could be appreciated this time of the year.

12 likes
Ethics

What’s in a name, PMP (Gotch) to become Ovato

Gordon and Gotch announced to newsagents Friday that they plan to change their name to Ovato. While the announcement seems innocuous enough, the final statement in the letter has caused several retailers to express concerns.

During 2019 the Gordon and Gotch name will be transitioned to a division name of Ovato and we will be sending out further communication in due course as well as any resulting changes to our trading relationship.

My take is that PMP plans further, and most likely considerable, evolution of their business and that the name change is a public facing representation of that change.

The company’s share price, sitting at less than half it was a year ago, is the driver for change, as you would expect. This level of drop in market value is serious for investors and serious for the board that sets the direction of the business.

Check out this graph of the PMP share price from the ASX website:

Do I think what we know as the Gotch business is set for change? Yes, I think it is set for change. It’s margins are low and it is dealing in a product category that remains stuck in deep decline. Change is necessary and by change, I am talking about 90 or 180 degrees. Like the change we need too drive in our businesses.

At Australian Printer, there is a useful report on the name change:

PMP will soon be rebranded as Ovato, as part of a shake up that will see it also install an 80pp manroland Lithoman press in the new year.

The company had taken heavy hits to its share price when its expected EBITDA was revised twice throughout the financial year, coinciding with the early exit of long-time CEO Peter George.

During the company’s AGM, its chairman pointed to the three-month delayed ACCC approval leading to a shorter time-frame to integrate with IPMG, meaning planned efficiencies were not achieved.

Kevin Slaven, CEO, PMP, says, “As a business we have drawn a line in the sand.

“Our rebranding [to Ovato] is not a simple change of name for the sake of changing a name. It is based on the rationale that the value of bringing our businesses together is significant, that we need to signal a significant evolution of the business, and to better present the impact we already have, and are building, in data and technology.

“We have had some significant customer wins during the year and the renewal of many existing major customer contracts. We have won or re-signed some large customers with a bundled offering of print and distribution. We have a unique selling proposition as the only company in Australia and New Zealand with a national footprint providing co-located print and distribution delivering freight efficiencies, and speed to market for customers.”

Significant evolution. Gotch has changed since taking over the Network Services distribution business. However, I suspect the financial benefits have not hit what the board expected. If I am right. what we know at the Gotch business will need further change.

The assessments they will be doing, on the numbers, are what we should be doing. Products we sell have to pay their way. This is why I say to every magazine publisher with whom I speak, the 25% gross profit on magazines is unacceptable. maintain this and you will see fewer newsagents stocking magazines. We are no longer agents.

FYI here is the full Gotch announcement:

Dear Newsagent,

As you know Gordon and Gotch is a subsidiary company of PMP Limited. At the recent AGM it was voted positively by shareholders that PMP and all of its subsidiary companies would be rebranding as Ovato from February 7th 2019.

In terms of the work we already do for you, very little will be different from February. There will be a new brand name and logo on your invoices and our communications, access to websites will not change.

The company name, business number (ABN/ACN) and bank accounts will also remain the same as current.

During 2019 the Gordon and Gotch name will be transitioned to a division name of Ovato and we will be sending out further communication in due course as well as any resulting changes to our trading relationship.

Many thanks

17 likes
magazine distribution

Updated checklist to consider when buying a newsagency

A common question I am asked privately from people who find me through this blog is what should I ask for when looking at buying a newsagency?

The question itself, when asked, indicates how green a prospective purchaser is when it comes to purchasing a business.

Here is an updated list of data I suggest newsagency business purchasers access from the vendor or their representative. I first published this two years ago. I’ve just updated it:

  1. P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
  2. Tax returns for the same two years. While note always appropriate given business structures, they can provide a cross check with the accountant P&L.
  3. A good explanation of any add-backs reflected in the P&L.
  4. Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
  5. Sales data reports from the lottery terminal to verify the income claim.
  6. BAS forms to confirm data in the P&L.
  7. A list of all inventory to include purchase price and date last sold for each item.
  8. Copies of invoices from which you can randomly select to verify the above point.
  9. A copy of the shop lease.
  10. A copy of any leases the vendor expects you to take on board.
  11. A detailed list of all forward orders placed on behalf of the business.
  12. A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.
  13. A testament from the vendor as to the claimed accuracy of sales data.

This is good basic information that will enable any purchaser to undertake reasonable assessment of a business.

A good business will shine through the numbers just as a business with upside achievable by new owners will shine through.

My advice to newsagents looking to sell who are concerned about this list is: think about it now and focus on your business so the data I have listed looks good.

Every day you make decisions in your business that impact many of the data points listed.

This is why I say every day is your pay day. Run a smart, lean and profit focused business and you will have a good pay day today and a good one when you come to sell.

The most appealing businesses are those that are easier to run and are making money.

The time to focus on that is now.

Sure a purchaser can turn a business around. They should get the rewards if they are expected to do that for your business.

The price you can sell your business for will be based on what it is making now.

Getting the data ready for the sale of the business could, of itself, help you improve how you run your business.

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buying a newsagency

Advice on security cameras for newsagents

I heard of a newsagent being ripped off recently, paying more than $12,000 for a mediocre security system for their business that is not ideal for the business.

Here is my advice on buying security cameras:

Much has changed in security camera technology over recent years. Whereas in the past best-practice advice was to install a retail specific security system connected to your POS software, that is no longer recommended.

Many domestic camera solutions are better and more cost effective for small business retailers than those pitched specifically at retail businesses.

DVR (the device that records the video) technology is changing rapidly, making it challenging for integrated systems to keep up.

The connection to your POS software is not important, especially when you consider the cost of systems that offer such a connection.

Myadvice is that you start by considering what you want. Usually, the most important need is a record of what went on in-store – so you can see who did what and when and from anywhere including outside the business.

While security will be a key need, cameras will also enable you to track shopper traffic and this this you can make product placement decisions that drive better business outcomes.

Here is what I suggest you cover with cameras:

  1. Shop entrance. See the faces of those entering.
  2. Shop exit. See the faces of those leaving.
  3. The counter. See who presents at the counter and what the purchase. Plus see staff behaviour at the counter.
  4. Shop floor. Do not go overboard. Better quality cameras will cover more areas and allow zooming.
  5. Rear entrance, if you have one.
  6. Back room, if you have one.

As for cameras, don’t go cheap. Resolution o is key. Buy units that you can control remotely. Wireless is best – if you have good stable in-store Wi-Fi. Wi-Fi means you can save on wiring and easily move the cameras as the needs of the business change – but you still need power. Consider how you want night video to be handled.

When it comes to the DVR, it may be more cost effective to get two. It all depends on the prices available at the time. Two smaller units for 6 to 8 cameras may be cheaper than a bigger unit serving 8 cameras.

Install a monitor in-store to show you are recording.

If you are not sure what you want to do, start with two to four cameras in prime locations. This could cost under $1,000.

10 likes
Newsagency management

Supermarket free magazines can hurt magazine sales

Checking out the latest free magazines from the major supermarkets and it is no wonder some food titles are finding it tough.

The free titles of years ago in supermarkets are nothing compared to the terrific content and production quality we are seeing today.

These free magazines in the major supermarkets today are tough competitors.

0 likes
magazines
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