Lottoland looks set to disrupt lottery operations in Ireland and Germany. Click here for one of the many reports online. This organisation is getting bigger and bigger. Newsagents need to factor their growth and commitment into business plans.
The original Lottoland from months ago has been shown again this week with an update on prize money. This is the first ad, when they clearly depict and newsagency business and make fun of the newsagent.
In my opinion this is a disgusting attack on small business newsagents by Lottoland. I think it is unethical and demonstrates a lack of social responsibility.
Shame on them and shame on Tatts for doing nothing to counter the attack on their retail network.
Here is the ad from months ago that is the basis for the current airing. The lotto land YouTube version has been taken down – I guess because they don’t want people like me to draw attention ion to it in a negative light.
Like I said, shame on Lottoland for what they are doing here and shame on Tatts for not supporting its retail channel.
Everyone logging into their Tatts (The Lott) app or website is pitched their new subscription service through a series of screens.
Subscriptions makes it easy or a regular shopper to always have tickets in the games they want.
Think of your regulars, who always purchase a the same ticket in one or more games. Once they try this why would they come to your shop?
Now, think about the capital expenditure Tatts wants you to spend on their corporate fit out promoting their brand. I am shocked newsagents are not challenging this.
Check out the Tatts subscription pitch:
Newsagents need to factor into their business plan what their business could look like without Tatts traffic and revenue.
Lottoland is a pure online and app play. Tatts (The Lott) has a strong online and app play. OzLotteries has a a strong online and app play. In the US there is online as well as self-serve machines like this one that does not age check and does not give change. These are all factors to consider when costing the capital expenditure demanded by Tatts.
Check out the vending machine I saw yesterday at the offices of New York Lottery and Gaming Commission:
I am shocked that the Manly Sea eagles appear close to 
selling naming rights to Lottoland. Lottoland is an online business that seeks to take revenue from small family businesses in Australia. Look at their ads, that is who they target.
Shame on the Manly Sea Eagles, and Northern Beaches Council, for putting money ahead of local Aussie family businesses.
Neil Bare, the CFO of the Manly Sea Eagles is quoted in The Daily Telegraph article:
“We are a family-run company and it was important to the Penn family to have like-values and like-goals,” he said. And despite the name change, Mr Bare said it would still be known as the Sea Eagles’ Fortress.
This is nonsense in my opinion. He has clearly not seen the Lottoland ads attaching small family businesses. If these are the values of the Manly Sea Eagles shame on them because Lottoland cares less about Aussie small family businesses, meaning the Manly Sea Eagles care less about Aussie small family businesses.
Sure, Tatts is a target of Lottoland. But it is the mocking small business newsagent ads that the Sea Eagles will support if this deal goes ahead.
More broadly, that Lottoland would commit seven figures to naming rights demonstrates their commitment to Australia. My question for newsagents with lotteries is: what are you going to do about this? From where I stand it looks like newsagents are letting it happen
Ancol, a Co-Operative and owned wholly by South Australian Newsagents, runs Newspower in South Australia, owns KW Wholesale, which supplies stationery direct to schools, and Lighthouse Books & Office Supplies, another business that supplies consumers. Ancol acquired Lighthouse in recent years – it was not a core business for most of Ancol’s history.
What Ancol appears to have become via Lighthouse is a retailer of stationery, competing with the businesses of its shareholders. The Lighthouse website shows some the the schools with which Lighthouse partners:
From what it appears, Lighthouse wins the schools tender to supply stationery to students, then the school directs the parents to go online and purchase through Lighthouse .
Here are some examples of pricing :
I am curious about what South Australian newsagents think about Ancol directly competing them through Lighthouse?
While it could be argued that success for Lighthouse strengthens Ancol and this benefits newsagents. Maybe so. But what about newsagents competing for Back to School How would a newsagent feel losing a school parent stationery sale to Lighthouse?
I know from discussions with newsagents across multiple states that Ancol prices to newsagents are considerably higher than elsewhere. Newsagents pay a premium if they buy from Ancol that must flow to retail prices, making those newsagents less competitive.
How would newsagents in the rest of Australia feel in GNS purchased a business like Lighthouse and through it chased school parent booklist purchases?
To see the retail of booklist business pursued by Lighthouse, take a look at part of a booklist for one school.
Newsagents will have to make up their own minds on this. My opinion is that Ancol should have been more transparent about its plans and given newsagents the opportunity to say it should not purchase a business that competes with them.
Lottoland sent an email yesterday celebrating their first birthday in Australia. The only indication of numbers is:
You and hundreds of thousands of other Aussies registered for their chance at the record-breaking $2.1 billion dollar US Power jackpot.
Registering is free so the stat is no real insight into their success. That said, I suspect their ad campaign attacking newsagents is hurting our channel, as appears to be their intent.
I got out of doing back to school around ten years ago, because there was no evidence of it being profitable for my suburban Melbourne newsagency.
Sure, revenue was good. Margin was trimmed to the bone. People bought on price. They were not loyal through the year. So I got out of it.
I talked to people at GNS at the time and disagreed with them on the value of the season, that the traffic generated returns through the year. It’s like the theory of trickle down economics – nice to hear but not reflective of what really happens.
The current Officeworks catalogue is reminder of the challenge of back to school in the open buy space – where you chase business from walk-in shoppers without a specific school endorsement. The page 1 hero product is the 48 page exercise book, priced at 5 cents. This is the cheapest price I can find by far for this. Further in the catalogue are more compelling deals newsagents in this space will be frustrated with.
I can understand parents being price conscious, especially when a comparable product from a local small business retailer is as much as five or ten times the price. The Officeworks advertising on price pays off especially at this time of the year.
But back to school is not lost for the newsagency channel.
I know of many newsagents who do well from back to school. They either have strong local school support, contracts with local schools based on booklists or are located in regional situations.
In capital city suburban situations, newsagents doing well from walk-in (as opposed to the more structured booklist) back to school business is rarer today than a few years ago – thanks to the loss leader pricing of Officeworks and the tremendous competition from K-Mart and similar.
In my own shopping centre based businesses this time of the year while we have stationery, we prefer to focus on other seasonal opportunities. Calendars remain strong as are diaries. Plus, we have another non-traditional season built around full margin product that works a treat in January.
GP is the key for me. We must maintain above a percentage goal for the numbers of the business to work. Gone are the days of years ago of thinking that selling cheap today will drive loyalty and pay for the discount with revenue volume over time.
I am not happy that Coles supermarkets continue to pitch that Inside Out magazine from News Corp Australia was $8.20 and now is $6.00. Beyond making other retailers look expensive for this magazine compared to Coles, there are other issues here that concern me, issues that I think the authorities like the ACCC need to consider.
At $6.00, Inside Out is sold at Coles supermarkets at below the established cost price for the magazine title.
The ACCC website has something to say about selling items at below cost including this:
While selling goods at a below-cost price is usually okay, it may be illegal if it is done for the purpose of eliminating or substantially damaging a competitor. This is known as predatory pricing.
Coles has been offering Inside Out magazine at $6.00, discounted from $8.20, at least since June 2014 when I first wrote about it on this blog.
The ACCC has something to say about two-price comparison advertising including this:
Statements such as ‘Was $150/Now $100’ or ‘$150 Now $100’ are likely to be misleading if products have not been sold at the specified ‘before’ or ‘strike through’ prices in a reasonable period immediately before the sale commences.
Such statements are also likely to be misleading if only a limited proportion of a product’s sales were at the higher price in the period immediately before the sale commences. The volume or proportion of sales that may result in such statements being misleading will depend on the circumstances of each case.
The length of the period will depend on factors such as:
- the type of product or market involved
- the usual frequency of price changes.
If a business has a policy or practice of discounting goods when not on sale and uses two-price advertising in relation to sale periods, there is a significant risk that the use of two-price advertising will involve conduct that is misleading. The business would be representing to consumers that they will make a particular saving if they purchase the item during the sale period, when this is not necessarily the case.
While I am no lawyer, I think it is possible that the Coles Inside Out magazine pitch is what the ACCC would consider to be misleading conduct based on its position on two-price advertising.
I have written to the ACCC this week seeking their consideration of evidence Coles has been running this campaign for two an half years.
The Coles pitch does make other retailers of the title, including newsagents, appear more expensive. I suspect this is what Coles wants.
While newsagents and other high street lottery retailers have the $55 million Powerball jackpot posters out and those with the screens have digital posters showing, it is on phone and online where purchases are being snared, in seconds.
We know from countless studies every year how much online advertising is growing as is online purchases. Such studies often offer comfort to high street retailers saying online searches play a role in in-store purchases. Not so with lottery purchases.
It is so easy. You can have the ticket purchased seconds after seeing the ad.
This is where Tatts and others are winning online sales – as I would hope from them if I was a shareholder.
Two years ago here I said online was the biggest threat confronting newsagents. I think this week we can see how that is playing out.
Yesterday, while reading Huffington Post on my phone, this ad came up:
I clicked on the ad and it took me here:
And here is a post that came up in my Facebook feed last night, a sponsored ad from Tatts:
And here is the OZLotteries online pitch from Facebook:
A couple of seconds later with a few clicks from the ads I could have had a ticket in the $55 million Powerball jackpot on my phone.
In my opinion, online is the biggest threat to in-store purchases as from a consumer perspective it is easy, easy to purchase, faster to purchase, more easily managed than paper tickets and more relevantly engaging with the lottery ticket customer.
Newsagents can’t stop the growth of online purchases.
It is not just Tatts in play online, there is OzLotteries, a Tatts agent, Lottoland and other betting products including lottery products.
And when I talk about online I am really talking about mobile given that some research from Australia last year indicated that more than half of online purchases were made from mobile devices.
If a lottery purchase is an impulse purchase then online wins that game for the reasons outlined above.
I think there are two lines of action newsagents could / should consider:
Being able to sell online will most likely not happen for contractual, management and other reasons so the focus of newsagents and those who represent them should be on the in-store corporate image cost.
Tatts should be reasonable about location in-store, space allocation, the actual fit required and the fees for the digital platform. The cost should drop 50% or more and the digital feed should be free. It should also be more flexible as to what newsagents can pitch with lottery products as that will make being in lotteries more sustainable for small business retailers.
Tatts can’t have it both ways. It can’t be a competitor that blocks other competitors online while forcing the physical store competitor to have a cost base that is not relevant to the changing circumstances of 2017. Online will be a beneficiary of the branding investment by newsagents. Time will tell the extent of the benefit.
Newsagents yet to invest in the new fit need to understand the cost to their business. They should determine how long it will take to earn the cost back. They need to be aware of the challenges of promoting a brand that is clearly migrating to an online model. These are things to contemplate before you spend a cent.
Check out the Lottoland TVC that has been airing this month:
OzLotteries has been busy this week promoting the $35M Powerball jackpot. This was on twitter yesterday:
Online is where it is at with lotteries in Australia. This is why I have said for ages now that supermarkets getting lotteries is not the biggest threat to newsagencies. Online is the threat.
It is vital you run your business to be less reliant on lottery commission than ever. While this may feel like an impossible task, it is possible. The sooner you start seriously pursuing this the better.
News Corp has announced that Woolworths, like Coles, will no longer be required to process the returns of newspapers.
If News Corp. was genuinely supporting of small businesses it would implement this change for all retail outlets that comply with scanned based trading requirements and not just its big mates / advertisers.
The less friction for retailers in handling newspapers the longer they are likely to support the sale of newspapers.
Scanned based trading is key to this implementation. This is something smart newsagents have been able to offer News Corp for years.
Here is what News Corp. has announced:
Changes to the Supply of Newspapers in Woolworths Stores.
What is happening?
The physical returns of newspapers is being removed from Woolworth’s stores. Agents/distributors will no longer be required to collect and process returns for any Woolworths SupermarketsThis includes not processing the figures into iServices.
This process will be similar to Coles – whereby no returns are collected or processed by agents.
When is this happening?
This change is effective from Monday , 16th January 2017.The week ending January 15th, 2017 will be the last week agents/distributors will be required to process returns on behalf of Woolworths Supermarkets.
Why is the change being put in place?
The returns process adds complexity and cost in a low cost retail environment. It adds cost to both Woolworths and delivering agents and distributors.This step in the process is being removed to reduce that cost and complexity for both Woolworths and you.
Will the distributing agent’s commission change?
The commission rate for distributing agents will remain unchanged.What happens to unsold papers?
All unsold papers should be placed in Woolworths recycling (paper and cardboard).How will returns be calculated?
Woolworths are providing News Corp scan sales by store, by day and by title. This scan data will be used to derive a return figure – or”un solds” – by deducting the actual scan from the allocated amount. This data will be used to calculate agents/distributors commissions.Is scan sales now accepted by audit
AMAA will accept scan sales as audit compliant.
News Corp. in its papers calls out what it considers to be the unfair practices of politicians and businesses. But they will not publish about this unfairness. This move is another reason for retail newsagents to get out of newspapers. Maybe that is what News Corp. wants.
I noticed the calendar pitching a Sanity store in Emerald in Queensland – two calendars for $20.00, a 20% discount off the suggested retail price. While the multi-buy offer is compelling, that it was placed in the back corner of the shop without any supporting collateral left it to be an offer for those who shop the shop rather than driving traffic from front of store placement.
Officeworks is making their usual big noise about back to school for the 2017 year. Their centrepiece claim is the price match offer – to beat the price on a booklist by 20%.
Many schools enter into booklist fulfilment arrangements as a means of raising funds for the school. Parents buying outside the preferred arrangement can reduce funds available to the school, meaning they may end up paying the gap through other fees.
This is why I see the Officeworks 20% discount offer as being false economy. It all depends on the school funding arrangement in place with the booklist partner, which is often a local family run newsagency business that invests back in the school and the community.
Newsagents doing booklist fulfilment work need to more actively talk about their financial support for the school and the community – to counter the Officeworks 20% saving claim.
Discounts by big businesses come at a cost somewhere but I suspect usually not at a cost to the big business. We hear about the pressure supermarkets place on farmers and other suppliers – they fund the supermarket discounts that the supermarkets claim to give to consumers.
This 20% discount offer by Officeworks on school booklist items feels like that – a discount that is not real as someone somewhere ends up paying for it. It could be the parents who actually pay over the course of the year.
My advice to newsagents doing booklists and who offer a rebate or other benefit to the school – be open about this, let parents know the good being done by supporting your business.
I took a close look at the BUY ONE GET ONE HALF PRICE offer for Bauer Media titles in Woolworths yesterday, if the Park Street Sydney store.
You only have to look at the in-store promotion to understand the damage this Woolworths exclusive promotion could do to the sale of Bauer titles in newsagencies.
Why Bauer would fund this promotion for Woolworths is beyond me. Well, I guess not actually since they were probably put under pressure by Woolworths.
Here is a photo of the magazine department. Your eyes are drawn to the orange collateral for the offer as you approach the display.
Now take a closer look. here is how The Australian Women’s Weekly is being promoted.
The message is clear side on and front on. Now look at Woman’s Day:
Again, a clear message, which I get since the goal of the promotion is to drive incremental purchases of Bauer titles. The question is whether Bauer wins at the cost of other publishers. Bauer would win from this but maybe not the retailer.
Off location is this floor unit:
This promotion will run a total of three months. That is three month of preferential pricing for Bauer titles in Woolworths. I suspect newsagency businesses located near Woolworths will suffer from this. If my business was affected I;d be unhappy with Bauer and taking the matter up with the company.
This promotion looks like Bauer wants to migrate shoppers from other channels to Woolworths. While I expect the folks at Bauer would disagree, the facts speak for themselves – a compelling offer, exclusive to Woolworths.
It surprises me why any supplier supports a retailer like Woolworths when they don’t engage with the category like you see in most newsagencies. I guess only big businesses understand big businesses. Time till tell how that pans out for them.
Magazines are important to our channel. Indeed, they are more important to us than they are to Woolworths. Yet Woolworths gets the deals. They are able to say magazines are cheaper there than in newsagencies – why should shoppers shop with us when we are more expensive? For discretionary purchases price does matter.
The Media column in The Australian yesterday reported a shake-up in the way Coles handles magazine sales data and payment. The Australian claims Coles will move to a scanned sales model with Woolworths soon to follow. I thought Woolworths had scanned sales in place already – they certainly provide overnight sales data from what I understand.
Regardless, the story is interesting for a few reasons:
This brief diary piece should interest newsagents as it goes to matters at the heart of our competitiveness in the magazine space. The item puts publishers on notice not only from supermarkets but from other retailers including newsagents.
I was surprised to see Darrell Lea liquorice at Officeworks in Pitt Street Sydney yesterday. The Officeworks price is $1.00 per pack higher than I can easily find it elsewhere. So much of the Officeworks low prices claim in their expensive ad campaigns.
The other surprise was the placement of the product in a dump bin, next to what look like cheap products. This is not the type of representation I expect to see for a quality brand.
Dump bins in Australian retail typically suggest a deal. This is not a deal.
If you sell Darrell Lea and have an Officeworks nearby, be aware.
If you ever needed evidence that Lottoland is targeting newsagents more so than Tatts, check out their latest TV commercial that has just started airing:
My question for newsagents with lotteries is: what are you doing about this?
Lottoland is attacking the small business newsagency channel as they see it as the weakest link in them gaining a stronger foothold in Australia. I hope you can see that – that they are targeting you ahead of the products you sell. And … Tatts does not appear to be in your corner.
As a newsXpress Director I can advise I have written to authorities about the misrepresentation of newsagents in the Lottoland TVCs, engaged with TV Standards, approached Lottoland Australia and approached Lottoland Europe. I have also written to the Chief Minister of the Northern territory where Lottoland has its licence. while I have little to show for the effort, the effort itself is important.
Also, in this place, representing all newsagents, I have written about Lottoland with some of those posts being picked up by news outlets.
I could be wrong but I suspect my effort is the only effort on behalf of newsagents on this. If others have engaged, please share what you have done.
This is not something to grumble about. No, it is something on which to act.
If you are in a marketing group, ask what they have done. If you are paying money to the ANF (ALNA), ask what they have done on your behalf.
The Lottoland Australian website claims four million players. That number is extraordinary. It is audited by KPMG so I trust it.
What we don’t know is how many of the four million are regular players. That percentage would be interesting to know. Regardless, having 4 million players at any time over the course of their first year her is extraordinary.
As I have noted here previously when writing about Lottoland, they market well. here is part of an email I received from them yesterday – I am a registered customer having tested their product a while back.
This is a compelling offer compared to how Tatts promotes products products. Look at it. Buy six games and they give you another three free.
Because it’s all done online, they can push the offer out quickly, gauge engagement quickly and get people playing again who may have taken a break. Their whole approach is different as there is no store and I think that is what newsagents don;t get about this challenger, there is no store.
This is why the Lottoland TVCs target newsagents, because this is where they are weak. To play lottery games in a newsagency you have to go to the newsagency you have to be in the store with the parking lines, credit card fees and more points of friction. To play Lottoland you don’t have these points of friction.
It is a very different game, promoted in a different way.
The TVC is about attracting new shoppers while the email marketing is about driving engagement among their database of customers, four million customers.
Marketers say emails get a minimum response rate of 2%. That is 80,000. Imagine if 80,000 played the six Powerball games. The revenue soon adds up.
Now think about what it would take for the newsagent lottery outlet network to sell the 80,000 tickets. 80,000 transactions at around 30 seconds each plus stating in line and parking and more, the time cost of the purchase would be in the order of four thousand person hours – allowing three minutes per transaction walking and / or parking time plus shopping time. Compare that to something like 400 person hours for the seconds it would take each of the 80,000 to make the purchase online.
My point here is Lottoland is an extraordinary game changer. I don;t want it to be because I want newsagents to flourish. However, it is what it is, a game changer in my view.
Be informed. Play it, let your business planning be informed by that experience.
The calendar category has been challenging for years thanks to Calendar Club and their heavy discounts early. Their approach to discounting has taught shoppers to not pay full price f0r calendars. I have seen them pitching 2017 calendars at 25% off already.
While there are newsagents who do sell calendars at full price successfully, this can come with friction that can turn people off the business … without the business knowing it.
Pet Stock is strong in the calendar space, offering a large range of calendars pet lovers are sure to like. The brand they sell is Magnet and Steel. In the hand, to me, they don;t feel as good a quality as the Borwntrout range but I suspect that does not matter.
Pet Stock has 2017 calendars prices at buy 1 get 1 half price across their network of stores. While I was aware pet shops had calendars, I was surprised at the range I saw on the weekend.
More harden centres and homewares shops have calendars too – pushing this category into more retail outlets. This makes sense given the special interest nature of calendar titles.
The challenges are two fold – more outlets and discounting by major competitors.
With discounting so early in a season by national retailers, I wonder if the message to shoppers is: we have overpriced our products so we can make this discount pitch to you. That is what I would think if I was the shopper.
With only a limited range of calendar publishers at the premium end of the category price comparison is easy. This is why newsagents in this space need to look carefully at what others are doing.
I know of newsagency businesses where calendar sales are worth $15,000 a year. It is in these businesses where there needs to be a differentiating and commercial response to Calendar Club, Pet Stock and others. The best response is to switch focus and change the conversation. However, this is not easy.
If calendars are important to you, be informed about competitors and engaged with a differentiating offer. Make sure your investment is not harmed by the actions of big business competitors.
One comeback Tatts retailers can have against Lottoland is that they don;t sell lottery tickets. One way Lottoland combats this is with stories about winners, like this online story from a few days ago:
The advice I published here two weeks ago on how to combat Lottoland remains the most comprehensive advice provided to Tatts outlets thus far.
Smiggle stores have a terrific Advent calendar and there are two key points to make about this:
1 – wow! Brilliant idea and execution by Smiggle including the Golden Ticket promotion. The calendar is excellent value at $45 – I have seen all the products included. Parents will love that it is not chocolate.
2. Get Advent calendars out now. Majors have them out already.
Here is a look at the products in the Smiggle Advent calendar. They have one at the counter for people to see and they happily hold it for you to take a photo. Nice.
Officeworks outlets across Australia have boxed Christmas cards, Christmas gift bags, gift tags and more out on display in-store with this ready-to-display unit. The unit is delivered to them loaded with stock, retail ready.
On the unit there are two major colour themes. Here is the second:
The products have a low cost feel yet the prices are not all that low. To me, this is typical Officeworks – source from China and price with a generous margin yet still pitch to connect with their we’ll never be beaten on price pitch.
I think Newsagents need to respond to what Officeworks is doing. We need to not cede ground to them. we do this by being engaged, now. Even if you don’t have an Officeworks located nearby you should be engaged. Here is the advice I provided newsXpress members when I first saw the Officeworks boxed Christmas card pitch:
The best way to respond to what Officeworks is doing is to engage with boxed cards as if you are serious about them.
