I am frustrated with the world is ending type reporting relating to the arrival in Australia of Amazon. Most stories are not reporting. Rather, they are ignorant speculation, fear-mongering. I even wonder if they reflect a wish. Unfortunately, the wrong people are quoted, like the ever-shrill Gerry Harvey.
I hopped into the studio last week and shot this video to provide some perspective on the arrival of Amazon and to share some thoughts. While I shot this video for use through my POS software company, I think it may be of interest to some here:
Like any good competitor, Amazon challenges us to improve our own businesses. What makes them different to other competitors is their back-end efficiency. This is where we are challenged, where must focus the most on what we do and how we do it.
Amazon will set a benchmark in terms of fulfilment from how items are packaged to speed of delivery. Their investment in Australia will include encouragement for more Australians to shop online. This is an opportunity for us.
I hope the video offers useful thoughts rather than the sky is falling stuff we have been served by local news outlets.
When I see a company handing out a big cheque I think wanker, but that’s just me. Community group recipients usually deserve the donation, but too often they are a pawn in a commercial game.
At a recent function, I was sitting next to the new CEO of Lotterywest, talking about Lottoland and the announcement at the function by the Premier, Mark McGowan, to act on Lottoland in WA.
I mentioned that Tatts is also a competitor in WA, allowing online purchases via their website and their app. The Lotterywest CEO was surprised.
I grabbed by phone and in a matter of seconds completed a purchase for that night. She was shocked and commented that Tatts is another competitor Lotterywest must face.
The competition from Tatts felt by Lotterywest is the same competition every retailer must feel. Online must be the main game in town for Tatts. They have no option but to drive online purchases. They are more efficient and more profitable.
It is easier to win a new customer through online.
It is easier to get an online purchase converted to a perpetual subscription.
Online also provides Tatts with a direct to consider relationship. As any manufacturer selling online direct to consumers know, this is the most valuable of relationships.
Driving online is smart business for Tatts and Tatts shareholders.
While newsagents can lobby for Tatts to give them a share in online, I don’t see any way that can happen unless you can get Tatts to agree for you to be able to vend tickets online. Not now. The time for that argument was ten or fifteen years ago.
This is one reason I say there is no upside in lotteries for retailers. Unless you can access online sales yourselves, over the counter will continue to decline for most retailers.
In case you have not seen how easy it is to purchase using the Tatts App, check out this video I made a couple of months ago:
While I am no lawyer, I do wonder if this ad from Lottoland that appeared on Facebook last week is false or misleading.
A lottery jackpot is a win based on the accumulation of first division prizes that have not been won from what I understand. Is this $100M that? I don’t think so, unless I am missing something.
In the ad text they say Bet on OzLotto Online. My understanding of Lottoland is that you are n to betting on OzLotto. rather, you are betting on the numbers that are drawn for OzLotto.
While there is, finally, some action calling out Lottoland, there are newsagents who are not aware of other competitors, some of whom operate in the same way as Lottoland. Take a look at these competitors.
William Hill is like Lottoland.
News is yet to launch but is already getting plenty of attention in gaming circles.
Crownlotto, the name says it all.
Magpie Millions pitches as a community service, but it is a numbers based lottery. It operates under licence from the NT government.
And as a reminder, here is Lottoland:
What are you doing about this? All these lottery / betting products are chasing the customers on which retail, over the counter, lottery businesses rely.
While there has been some focus on Lottoland, their community contribution, the taxes paid and more, the challenge to newsagents and other lottery retailers is bigger than just Lottoland.
I have been aware of this suite of competitors for some time and have discussed them within my own circles when contemplating competitive strategy.
Okay so the folks at Tatts have woken from a year of slumber about Lottoland. On top of their TVC, which I wrote about a couple of days ago, they have emailed their retailers today with this:
This is not the whole email. It contains call to action instructions and links to resources.
They should know that black text on a red background is hard for many people to read, especially some people who are colour blind as they see it as black on black.
Here is a copy of in-store collateral they are making available for use:
Tatts should have responded many months ago. Now, they have engaged in what some newsagents have said to me in an over the top campaign. With all the brightness of tatts collateral in-store and the requirement to not place non product material in the tatts space, Tatts is asking retailers to put up more distracting material that I suspect will get lost.
I think Tatts could have approached this in a smarter way. Not for a week or two weeks but with a long game in mind.
What they ask retailers to do in-store should reflect their TVC.
They have had a year to get this right. The email to Tatts retailers feels rushed and like it misses the mark. The messaging feels rushed, scared and inappropriate to the needs of local small businesses and their communities.
Thinking about this further, this in-store campaign feels like tatts is doing lip-service to its retailers rather than actually trying to address the issues. Our the TVC is excellent, but this campaign is not.
On the Sunrise breakfast TV program yesterday the hosts crossed to the CEO of Lottoland, Luke Brill, who was standing outside a newsagency, for a story (an advertisement really) about the US Powerball jackpot Lottoland was promoting.
Shame on everyone involved in the Seven West Media Sunrise program for this segment, especially the decision to have the Lottoland CEO outside a newsagency. What were they thinking?
Surely, someone in the production team on Sunrise would have thought hang on, we are part of Seven West Media, we produce shows that are featured in magazines that we rely on newsagents to promote and sell … oh and worse still through our Pacific Magazine subsidiary we publish New Idea, Better Homes and Gardens and other top selling magazines that we rely on newsagents to promote. Why are we joining in attacking and mocking them with this Lottoland segment?
If someone did think that and did comment on it, they were not listened to. Instead, what went to air was a continuation of the attack on our local family owned tax paying small businesses. Shame on everyone involved at Sunrise.
In case you missed it, here is the story that aired:
This story is an attack on small business as well as an attack on Australian taxpayers. It comes on the back of a relentless TV ad campaign by Lottoland that mocks small business newsagents.
Lottoland is a company registered in Gibraltar, where they pay no income tax on money earned from overseas.
Lottoland pays no local taxes like Tatts pays. $1 spent on Lottoland does not deliver the same benefit for the local economy that $1 spent with Tatts delivers. Reports indicate in Victoria alone the cost is at least $90M over three years.
It has its gaming licenced through the government of the Northern Territory.
Lottoland purchases have been banned in South Australia.
New WA Premier Mark McGowan has said publicly he favours the SA model.
I am shocked someone in the production side of the Sunrise show did not question the story, especially the placement outside a newsagency. I am equally shocked the hosts did not bring more balance to their story.
The folks at Sunrise were happy to talk up the US$800M+ prize value and while they did explain a Lottoland ticket is a bet on the numbers drawn, there was no clarity around what a winner would actually receive. My reading of the 14,483 words under the terms section on the Lottoland website indicate that the US$800M+ would never be paid in full as they would apply the US model. In the US the IRS takes a percentage for tax. However, Lottoland pays no tax so I am not sure of the basis on which Lottoland would claw this amount from the win.
I think there are ethical and social responsibility questions for politicians to answer about Lottoland. This company is ripping millions of dollars out of Australian wallets for which there is little or no community contribution. They are doing it at a cost to local family run newsagencies – that employ locally, pay Australian taxes and support the local community.
Politicians who care about the local community and about small business should want to stop this bleed.
Lottoland think they can win the community engagement challenge with a million dollar deal to name a sports stadium. We are stupid if we let their spend at Manly pay off.
Oh, and all through this, the genius folks at Tatts have remained silent. They have allowed the Lottoland attack on small business newsagents continue. Indeed, some Tatts in-store collateral appears to have been inspired by the Lottoland ads. Totally ignorant or dumb or both. It’s Tatts, who knows?
I don’t have lotteries in my businesses so none of this affects me at the register. However, I have business relationships and friendships with newsagents who are affected, every day. That a TV show that positions itself as a show for Aussies has participated in this is gutting for them.
What should Sunrise do? They should be clear about what Lottoland is. they should trace $100 spent on lotteries at a local newsagency and compare that to the same spend on Lottoland. They should talk about the role local newsagents play. They should engage in robust and transparent debate about Lottoland versus local lottery products. The should ask politicians why they are not acting. They should look at their processes to work how how this screw up occurred. they should apologise to small business newsagents and all who work in them. They should ask Tatts why the have been silent through all this.
What should newsagent do? Write your local politician along these lines: My family runs a small newsagency business serving our community. We employ locals. We pay taxes. What do you intend to do about the Gibraltar based online gambling business Lottoland that is attacking us, taking revenue from us and not contributing to the local economy like we do?
Consider a Facebook post:The Sunrise TV show this week ran a story about Lottoland and their $800M+ jackpot. They filmed this outside a family run newsagency. Lottoland competes with newsagents. We pay Australian taxes. They don’t. One you win first division with us, you get the total prize. With Lottoland you don’t When we sell you a lottery ticket it is a ticket in a lottery. Lottoland sells you a bet, not a ticket. If you want to support your local economy, local jobs, better roads and better schools, support local newsagent lottery outlets and not Lottoland. Oh, and tell Sunrise to stop promoting Lottoland.
Check out this latest email from Lottoland. The headline is the $644 million jackpot. That is what they use to get your attention.
The thing is, $644 million is not even close to what you are paid if your bet wins.
You have to follow the * to get closer to understanding what the ‘win’ is. Even the detail is not readily available.
*Main jackpots for bets on the US Powerball and US MegaMillions are paid out as 30 year annuity or discounted lump sum at Lottoland’s election, and also subject to 35% reduction as per T&C’s. US Powerball is not connected to the Australian Powerball. Bet on Australian & International Lotteries Online.
The marketing email does not directly link to the terms and conditions. If you go to their website you can find them there. They are long and detailed. After reading a while you can see that a win of $644 million is not paid as that, there are hoops to go through, rules that can dilute the amount.
Reading all this at their website leaves one wondering if there is enough there to challenge their marketing approach through Australian ad standards approaches. I know there have been some challenges. More may be helpful.
An account manager from GNS contacted the senior manager of my retail stores asking what gifts we stock that GNS could consider offering.
The account manager advised that they asked us because their boss asked them to.
My initial reaction was that this is a joke. I could see no logical reason for GNS seeking this information from my stores.
It is not a joke. It happened. The request for help from us by the GNS account manager was real, it was genuine. They wanted to know what was working to determine if they could offer these gift lines.
The more I thought about their request for information the more frustrated I became at their request.
GNS has no role to play in the gift space in my opinion. They would add a layer of cost, making gifts more expensive for newsagents. They would also bring to the category poor ranging and other challenges of their old-school approach to wholesaling.
I don’t think GNS handles stationery all that well. They should get this right before expanding their focus in the gift space.
I can understand why GNS would be looking at further expansion into gifts given the state of stationery sales in the newsagency channel. However, GNS leadership would get a better return by investing in strategies for driving stationery traffic for newsagencies, ensuring they have the right stock at the right time and driving efficiency in their operation.
Based on what I hear from other newsagents there is frustration among newsagents at GNS leadership on their lack of leadership on a range of fronts.
But back to the question put to the senior manager of my retail stores. I am shocked they did not think through their question. Seriously.
As I understand it, GNS is the majority shareholder of Newspower. Surely Newspower could help in this area. Why, then, go to the senior manager of newsXpress corporate stores and ask for help on what gifts GNS should stock? It does not make sense. It is like Newspower asking newsXpress for help – but probably without the knowledge of the folks at Newspower.
Either someone has not through this through or the GNS situation is parlous or Newspower has nothing to offer. I don’t know! I have no inside knowledge. All I do have is the evidence of the request for help and the advice from the GNS account manager that the help was sought because of a request from their boss.
newsXpress has a carefully selected range of preferred suppliers, many of whom will not supply newsagents direct. The supplier mix is an asset of the business, it is unique. Through its ownership of Newspower GNS is a competitor of newsXpress. Again, the request for help does not make sense.
I would be interested to know if others have been approached by their GNS account manager seeking advice as to what gifts are successful to determine what GNS could stock.
Gift, toy, plush and collectibles revenue is up year on year on a same store basis in more stores. This is driving overall GP %. There is plenty of good news out there, plenty of optimism. This is thanks in part to a broad range of niche wholesalers. It has little to with the big warehouse style wholesalers. Those types of businesses are challenged in my view.
I have not gone to GNS management about what happened as I saw no point. There would be an explanation, which I may or may not have believed. It would not alter what they have done.
Here is an ad that came up in my Facebook feed because some friends, newsagents, like the Facebook page for TheLott.
Here is where I landed once I clicked Open Link.
Here is the subscription option offered after numbers were selected and prior to checkout:
Tatts promised newsagents it would stop this, yet here it is, again, promoting online, leveraging the hard work you do in your shop to promote the brand.
There is no upside in over the counter lottery sales in my opinion. Tatts is chasing customers where they are, they are making buying lottery tickets easier.
A complication has been another offer for the business.
Any deal that further concentrates the ownership of B2B stationery sales in Australia is problematic for a newsagency channel that already has challenges with stationery. Indeed I think the prospective merger of the Staples and OfficeMax businesses is something that should have prompted a submission from GNS or even newsagents with big stationery business.
The activity is a reinforcement of how much stationery is in play in Australia. This indicates more disruption ahead for this product category. Disruption can be good if you leverage it to your commercial advantage.
The disruption in this category is not confined to our shores with major activity in the US
Stationery News has more perspective on the Australian moves:
Recent media reports quote “industry sources” who estimate the merger of Staples and OfficeMax would give the group “90 per cent of the B2B market in Australia and New Zealand – 10 times more than nearest rivals COS and Lyreco.”
As Stationery News has stated before, the figure is off-target – a combined Staples/OfficeMax business would have estimated revenues of between $1 billion and $1.2 billion. This compares with an estimated figure of $2 billion for Officeworks (consumer and SME sales) and a combined figure of $500 million plus for dealer groups Office Brands, Office Choice and ASA Australia.
William Hill has launched Planet Lottery in Australia, with Lottoland. Gambling Insider has the story:
William Hill Australia have today announced the launch of a new integrated lottery platform, which will allow its Australian customers to bet on some of the world’s biggest lottery contests.
The ‘William Hill Planet Lottery’ has been developed by William Hill in conjunction with Lottoland, following the agreement of a partnership deal between the two last month. Players will be able to bet on the results of lottery draws via their mobile or tablet, with all bets being guaranteed by Lottoland.
In a statement marking the launch, Oliver Scott, Head of Corporate Development at William Hill said: “William Hill is a leader in Australian betting, and we are thrilled to make this innovative and exciting new offering available to our punters, to bet low stakes for the chance to win goliath jackpots.”
This launch marks the first time that an Australian sportsbook operator has entered the lottery betting market. Lottoland has come under fire in the UK over recent months amidst concerns about whether operators should be allowed to take bets on the outcome of lottery draws.
In March 2017, the UK Department for Digital, Culture, Media & Sport launched an industry-wide consultation into whether such betting contravenes section 95 of the UK Gambling Act (2005). The consultation period for this closed in May with results due to be published later this year.
I expect this will intensify the competition for newsagent lottery outlets. Tatts cannot get this pass without response, as it has done with Lottoland since its launch.
Last week in Chicago I got to look at a range of online fulfilment solutions. The most interesting were the fully automated facilities aimed at small operations.
Whereas in the past it cost hundreds of thousands of dollars to establish an automated warehouse for even 500 items, today that can be done for under ten thousand dollars.
The photo shows a small part of one such facility I saw up and running. It picks goods, feeds them to a packing line where they are packed, sealed and labelled ready for collection. Hands free.
These facilities run with a considerably lower labour cost that our small businesses that fulfil for online sales. It is a way tech engaged online competitors are able to sell at lower costs, they have lower overheads.
While there is plenty of discussion abut websites we can see, there is little written about the back end, the fulfilment side of things, where tremendous advances have been made in delivering access to solutions with considerably lower cost that has been the case.
I spent two and a half days diving deep into this side of online retail, looking at many different fulfilment options from the tech-centric to low-tech and highly personal. It was fascinating and illuminating given the moves Amazon is just months away from making in Australia.
The start-up costs for a pure online retail play have never been lower. This low barrier to entry and the flexibility of a start-up compared to a legacy business like then traditional newsagency presents challenges we need to confront. That starts with awareness. hence this post.
2017 is not even half over yet and it has already delivered more innovation around online and fulfilment than the last two or three years combined, innovation that is cost effective for small businesses and start-up businesses.
Now, if you think this is not relevant to you, I say it is as even today there are online businesses taking revenue from you, delivering to people who are local to you.
I have evidence of businesses, for example, in Western Australia, taking revenue from local high street businesses in suburban Sydney. People purchasing online worry less about local and more about the brands they purchase.
Here are recent tweets from Tatts via their TheLott Twitter handle, promoting online purchases. No mention of retail. Your branding commitment adds value to their online marketing, for online purchases. This is your competition:
Oh, and here is one that popped up in the Twitter feed on my phone this morning:
The Use App button is what they want you to press, that is their call to action.
Spirit & Destiny is a new magazine. I checked it out on the weekend and was surprised at the ad on the back page – promoting $1 an issue subscriptions to Woman’s Day, 77% off the cover price.
Newsagents, the most important channel for Bauer Media, are paid 25% of cover price for each issue we sell.
The company will say that subscriptions don’t account for the majority of sales, that we should not concern ourselves with the 77% discount they offer for subscribers for the first 12 weeks of the 32% discount thereafter.
I don’t think that’s how newsagents will see it.
I do understand the role subscriptions play in the mix. I struggle, however, to find a reason for a 77% discount. Maybe the folks at Bauer have research indicating that this level of discount is necessary to sell the number of subscriptions they need. Maybe this is about a bump for circulation audit reasons. Maybe they have research indicting that the subscribers they will attract and not current newsagent shoppers for Woman’s Day.
Since we are paid a paltry margin that is declining in real margin dollar terms, for all magazines and not just Bauer titles, we are owed an explanation as to how this generous subscription model fits with our 25% and why our own shelves are being used to encourage shoppers to have Woman’s Day home delivered when on the shelf near Spirit & Destiny we have Woman’s Day at the price set by Bauer.
My initial reaction seeing the ad was that I should take Spirit & Destiny off the shelf. However, I did not do that. I might yet … I wanted to think it through for a few days. Like many issues I have confronted over the years, thinking it through involves writing about it here and seeing what others think.
Next time the folks at Fairfax demand you putt out newspaper posters to promote their news papers show them this photo from Monday at a Coles supermarket for it shows how much Fairfax finks news sells The Age in Melbourne.
Oh, and remind them Coles supermarkets are not required to display newspaper posters.
The Reject Shop’s share price has continued to plunge, as market analysts suggest the discount retailer needs to start closing stores and question whether it can compete with supermarkets and department stores on everyday household items.
Coles superb markets are quitting unsold mini cookbooks from their Summer promotion. 50 cents each is cheap, until you see the quality of this product. Newsagents with mini cookbooks could find sales soft through this promotion.
