At the GNS Market Fairs in Melbourne and Sydney last weekend and this it was terrific to catch up with some smaller magazine publishers. We have an opportunity to work directly with smaller proactive publishers. That they are making the time to get to know the channel better by visiting our trade shows is encouraging.
All of the effort by around 2,000 newsagents and newsagent software companies counts for nought when a magazine distributor ignores the sales data and ships stock without justification. Gordon & Gotch yesterday sent us more stock of Food & Exercise Diary and Calorie FAT & Carbohydrate Counter. We still had stock from the initial allocation by Gotch. The sales data they have in their computer system for our store would tell them this yet they sent us more stock and billed us.
I bet I am not along in receiving more stock of these two titles yesterday without justification. It would be good to know how much newsagent cash was sucked out of our businesses by this decision to send us stock without taking into account sales data.
Magazine distributors need to understand that they have an obligation to supply on a fair basis. Supplying when the sales data shows supply is not necessary is a blatant cash grab. Either that or the sales data we are sending is an absolute waste of time.
Yep, it’s been a frustrating week on the magazine distribution front.
We received a truckload of Complete Wedding Melbourne from Network Services and published by Universal Magazines yesterday. We had no spare space in our wedding section so we decided to take Melbourne Bride off the shelf and early return this. I chose this title because we had sold one copy in six weeks and because it was distributed by Network Services – the same distributor wanting more space in this section.
On Melbourne Bride, I need to sell a copy a week to cover my costs. As it is it will cost me close to $10 to return the unsold stock.
No wonder some in magazine publishing and distribution circles say we have the best magazine distribution system in the world. That’s because newsagents are the bank and we fund half the freight.
A few issues back Network Services increased our supply of Puzzler Collection by around 50% without justification in our sales data. Since the increase we have continued to sell around the same volume. We have supported the title with co-location – crosswords and in with our women’s weeklies titles. Network’s response will be that we can early return and use Netonline to adjust supply. That would be a lame and ignorant answer. A fair and efficient magazine distribution system would not have created the problem in the first place. The extra copies sent have sucked just that little bit of extra cash from us and how many other newsagency businesses?
Wither magazines? is an excellent blog post by the respected Jeff Jarvis writing at his BuzzMachine blog. Publishers, newsagents and distributors ought to read his its points of advice for magazine publishers.
While it may be seen as stupid to link to a post which contemplates life after print, it is vitally important that we understand trends and opportunities overseas so that we can better plan for our businesses here.
There is an extraordinary difference between magazine publishing, distribution and retail in the US compared to Australia. But that difference plays out only in terms of a time line. As I commented at Jeff’s blog:
As a specialist retailer of magazines in Australia I, sadly, agree with your points. Publishers ought to engage on these for their future.
In Australia, we have 4,000 newsagents, specialist retailers of magazines. Each selling between 1,000 and 2,000 different magazine titles. Our channel was created by publishers in the 1880s and today they continue to exert considerable control.
While the publishers pursue (at varying degrees of speed) their future, newsagents are somewhat contractually stuck in a model which binds them to a print model.
Our asset is our community connection. Our Achilles heel is that we have 4,000 CEOs who cannot agree on working together to find our future in a world where print fades as a delivery mechanism for news and information.
A terrific opportunity for newsagents today is with publishers who engage directly with us and who publish content which is relevant to our communities: geographically local communities, special subject interest communities and economically and socially connected communities.
Newsagents can play a role here. Look at the tremendous success of SA Life, Tasmanian Life and similar local publications. At the high volume end as well as at the low volume end, we can work with proactive publishers for mutual success.
Further to my blog post yesterday about supermarkets getting access to Cosmopolitan Health and other magazines on better trading terms than newsagents, this is an issue industry associations could consider engaging in – using collective bargaining rights.
Equally, now that we have proof of it happening, we could try and bargain for ourselves although I don’t hold out much hope.
I plan to put the question to several publishers. I am keen to hear their response.
I am looking to add to the pool of newsagents I am working with on researching the cash flow implications of the magazine supply model. While I have good data from my benchmark participants, I want to extend the reach to ensure the best possible representation. This next round of magazine performance data will be the most comprehensive ever gathered for newsagencies. I plan to make good use of it on behalf of newsagents.
If you would like to participate, please email me privately at mark@towersystems…
At one of my newsagencies yesterday morning I counted thirteen different sudoku titles. Thirteen! Obviously, the magazine distributors think that is not too many. If I complained, I am sure they would claim to have sales data showing that this level of supply is justified. In my view, this level of range of sudoku titles it is not justified in my newsagency. If I carried half the range I bet my total sudoku title sales would not change.
Distributors say we can early return product. Sure we can, but we pay the freight. They say that we can control supply through their website and other processes. Nonsense.
Australian magazine publishers often complain that newsagents don’t engage with their titles and miss opportunities to grow their businesses. That is because we are drowning in junk, like some of the sudoku titles in this photo. We need these Australian publishers to help us to get distributors from abusing newsagents. If they can help reduce the overseas junk for a start we will have a publishing and retail businesses.
We also need to take firm action ourselves to exert more control over our assets. We pay the rent and wages bills after all. I hold no hope at all that newsagents will do this though.
Sure we complain. But we don’t organise ourselves. Too many industry leaders are seduced by a nice lunch, sponsorship for an event, a trip or some simple ego stroking to deliver the strong leadership newsagents need on this issue and to push back against this appalling behaviour.
In today’s marketplace, with magazine sales falling, newsagents must act on inefficient supply. Too many newsagents are losing too much money for the current situation to continue.
We compete with supermarkets, convenience stores, petrol outlets and others for magazine sales and while the newsagency channel accounts for 50% of all magazines sold in Australia, I suspect we have the least control over supply. That is how it feels at least.
We received the Beckett 2010 World Cup Guide in store on Friday, long after the last goal of the 2010 World Cup had been kicked. Gotch should never have sent out this title. Sure there will be some die-hard fans who will want it as a souvenir but I doubt sales will be enough to justify the cash-flow cost to newsagents. I would have given the title a go had I received it two months ago. We received three copies at $21.95 each. I broke with my own rule and early returned them all. I am not prepared to have $60 worth of out of date stock sitting on my shelf when I have more current and fairly priced stock available. And while on the price, this magazine sells for $9.99 in the US. How do we get to $21.95 here given the current exchange rate. Surely freight cannot be that much.
We returned all stock of Gameinformer magazine earlier this week after keeping it on the shelf for the full on-sale period. As I mentioned in my blog post last month, this title is not working well for us yet Network Services increased our supply. There was no justification in our sales numbers yet they decided to spend our money. And magazine distributors wonder why newsagents get angry and why paying the bill on time is such a challenge.
What I want is a magazine distribution model where I can choose the titles I want and the quantity I want to receive. I suspect that if I had this, my magazine sales would grow – I’d carry a wider range of titles and more stock of titles which work for me.
Instead we have a magazine distribution model which is not based on sales – despite what some on the disribution side say.
Smart publishers would try and tap into the growing pool of newsagents who want more control over magazine supply so that they can grow magazine sales. We are out there people – come and find us because we can help you grow your business too.
We received Monarch magazine at our Forest Hill store this week for the first time. I was surprised since this is a magazine which according to the publishers: commemorates the lifestyle of affluent African American Professionals. I have owned Forest Hill for fourteen years and cannot recall seeing that many African American customers shopping with us. What would possess Gordon and Gotch to send us three copies? Certainly nothing in our sales data for other titles. Supply to us was plain dumb! It wasted my time and money.
Publishers with more relevant stock vying for time and attention in Australian newsagencies ought to be as frustrated as me by this story.
As a rule, I do not early return stock the day it arrives but I did with Monarch magazine.
I was fortunate to meet with Adam Gray, General Manager of Fairfax Media Publication Solutions and Damien Wouda, National Account Manager of FMPS, today to discuss the transition from NDD to Fairfax. I did this as owner of Tower Systems, a Director of newsXpress and as a newsagent. They are meeting many people in the newsagency channel to canvass the best approach to further establishing their magazine distribution business.
I appreciated and enjoyed the questions they asked and the openness of the discussion.
Today’s meeting was not about conclusions. I am not about to publish here the details of the discussions since it is the decisions they ultimately make which will matter.
I cannot recall a magazine distributor demonstrating the level of genuine interest in options that I experienced today.
It is terrific to see that the folks at Fairfax Media Publication Solutions are consulting widely on how to handle their growing magazine portfolio with the takeover of some titles from NDD. They are asking good questions and listening to the responses.
While commission will floow the existing Fairfax Media agreements, they are researching the implications of this for the long term.
We receive 10 copies of each issue of Australian Model Engineering and 5 are putaway orders. That is, we have standing orders from customers for them. Special labels are printed with customer names and these copies are filed alphabetically behind the counter. When customers collect then, we scan the customer specific barcode and record that they have collected their copy of the magazine. We let customers know when each issue comes in by sending them a text message – our computer system does this automatically for us. Plenty of other newsagents offer this premium putaway service.
I mention it today because more publishers are visiting this place and I suspect that they did not know about the premium putaway service newsagents offer.
I am using Australian Model Engineering magazine as my example because I love this magazine. Not so much the subject matter, it is above my knowledge and patience, but its sales efficiency. 50% sell through from putaways and usually another 30% to 50% from over the counter sales. If only every magazine could perform this well. It pays for its space, more so than some titles inside the top 200 in terms of sales volume.
I hear of newsagents cutting magazine space and this worries me because titles like Australian Model Engineering will be cut. As magazine specialists we need to carry this title and many like it. Otherwise, we become glorified convenience stores when it comes to magazines.
The Australian this morning has an update on the NDD situation – reporting that Network Services will be taking around 80% of the NDD business. They are also taking on 15 of the NDD staff.
Sally Jackson’s article also reports that Fairfax Media Publication Solutions is picking up between 40 and 80 magazines from NDD. Fairfax will need to review their distribution as retail only outlets like mine are likely to not want these titles unless at least 25% margin can be achieved for the retailer.
Plenty of newsagents I have spoken with are aggressively early-returning NDD product out of fear of not getting credits. This is unnecessary. NDD is going through a structured winding down of its business. I am confident that it has the capacity to process and pay for all returns sent according to the timing of the distribution of titles.
I see no reason to early-return out of fear for the cash at risk. Why cut yourself out of a sale just because of fear?
Magazine distributor Network Services operates as victim, prosecutor, judge and jury in the handling of disputes arising from magazine returns. While they will say that statement is unfair, it is how it is. It is how newsagents who have experienced a dispute often feel.
While I have seen Network act fairly in some situations, I have also seen them act unfairly in others. The frustration felt toward their handling of disputes is magnified since they relate to products over which newsagents have very little control thanks to the push model of magazine distribution in Australia.
Here are my suggestions for newsagents to be better able to deal with a magazine returns credit dispute:
The better you are able to prove what you did and when in the event of a dispute the faster the dispute will be resolved.
The process outlined above will also show some newsagents mistakes which led to credits being denied.
Sometime between Wednesday morning and Friday morning last week, a visual merchandiser entered my newsXpress Forest Hill store and created a half waterfall display for Mindfood magazine above our weeklies. This is despite our placement of a half waterfall display in the usual location for Mindfood – which they left in place.
To create this display they took down the titles I had personally and tactically placed in this premium location. They did this without seeking permission and without offering compensation for the use of the space.
Mindfood is loss making for us. Network Services does not supply based on sales data. If they did, we would have received far less than what was sent for the latest issue.
I can hear a possible explanation – that we were supplied extra stock because the Mindfood publisher was spending money on in-store promotion. If this is true and if the extra promotion was a co-location strategy along the lines of what they did in my store then they should have negotiated a fee with me to access the premium space.
I took the display down Friday morning. I am returning half the Mindfood stock on Monday – we still won’t sell out.
Am I angry? Yes! This action violates my business. I am sick of it. I am sick of magazine distributors pushing product without offering fair and reasonable control and then demanding that I carry the financial risk of their supply decision.
Which other retailer would let a supplier come in and take control of their business in this way for a product for which you make only 25% margin?
I intend to use Mindfood as one of the examples in a complaint to the ACCC on the magazine supply model.
Magazine distributors control what newsagents are supplied, the terms under which the titles are supplied and often control when we are able to return the product. Their absolute control over the magazine supply model comes with an obligation to treat us fairly and in a way which enables us to make a living from what they supply.
Fewer newsagent make a living out of magazines than ever before.
When I took off 4 copies the old issue of Golf Magazine and replaced it with 8 copies of the new issue I wondered why Gotch increased us from 5 copies to the 8. There is no reason in our sales data. Sure I could call but I should not have to. The answer should be obvious since they have decided to risk more of my money on this extra stock – and on the last day of the month.
As I have blogged before, even one extra copy of a title which is not justified in the sales data is one copy too much- especially when you project the impact of this behaviour across the channel as a whole.
Newsagents need to match up their sales by distributor against the payments they make to each distributor over the last year and see in glorious colour the impact on cash flow of the magazine supply model. I will write more about this soon.
With more newsagents now trading as retail only newsagents and receiving newspapers as sub agents, there will be a great reluctance for newspaper publishers to take on more magazine distribution work.
With magazines at 25% margin struggling to pay their way I can see no upside in taking on magazines with a margin of 12.5%. With shopping centre rent priced more than $1,000 per square metre, every magazine pocket has to justify itself. At 12.5% this can’t happen.
This will be an issue if newspaper publishers take on the distribution of more magazines.
Mediaweek this morning reported that Network Services is moving to support Australian publishers who have been using NDD for magazine distribution.
No mention of the international titles in the Mediaweek report. Maybe these will end up at Gotch – this would be a natural fit.
Newsagents will be watching Network and Gotch to see that the changes result in a more efficient assortment of titles. One excuse put by distributors to newsagents in the past was that they did not know what newsagents were getting from the other two. Now, there is one less to be concerned about.
The announcement yesterday that NDD is to close will see two main magazine distributors. While there are other players, it would take extraordinary expansion for them to compete with Gordon and Gotch and Network Services.
The magazine distribution model newsagents currently have often fails us. We are supplied at a level which makes the magazine department loss making or break even for more newsagents than those who make a profit. This is not healthy for us for publishers.
Despite what magazine distributors say, newsagents do not have fair control over the stock they receive. They are denied the opportunity of making business decisions on what titles they carry and the volume of each they receive. Yet we are held accountable for paying magazine supplier bills on time. This is grossly unfair since we are not given control over magazine cash flow.
In the next week or so I will publish a post here on magazine cash flow in newsagencies, based on fresh evidence. In one store, supply from Gotch and Network has been cash flow positive only three months out of the last twelve. Yet this newsagency has had to find the cash to pay the magazine bills or not receive stock.
Gotch and Network are doing what they need to do to serve their respective business models. Just as IPMG has made a decision about NDD which serves its business model.
It is a pity that newsagents have so little control over this vitally important part of their business.
The closure of NDD reduces choice and has the potential to see newsagents face tougher magazine supply terms.
I will NDD’s innovation, they we always at the forefront of range analysis and, in recent years, more flexibility for newsagents in controlling supply.
NDD has announced today the winding down of its business:
As a consequence of a recent significant reduction of distribution volumes, IPMG (NDD’s parent company and shareholder) has reluctantly taken the decision to wind down the NDD business.
It is NDD’s intention to manage the process in an orderly fashion as magazine product in the system works its way through the retail channel. newsagents and supermarkets have been advised of the decision today.
We would like to assure you that NDD and its parent company IPMG, will continue to collectretail sales proceeds on your behalf and will guarantee any publisher payment liabilities in accordance with contracted terms.
We make the commitment that all NDD distributed magazines will be delivered in accordance with on sale schedules until a completion date is determined and notified. This will ensure the timely reconciliation and finalisation of your trading account with NDD.
Newsagents should check their supply of gameinformer magazine. Yesterday, we received 10 copies. The last issue we received 4 and returned 4. The issue before that we received 8 and returned 5 and the one before that we received 8 and returned 6. I can see no justification in our sales numbers for Network services to increase our supply by 100%, I doubt that even an amazing promotion would lift our sales by 100%.
Publishers reading this blog need to understand that every additional copy sent to newsagents which does not sell has a cash flow cost to our business. Retail real estate and labour account for between 21% and 24% of revenue in shopping centre newsagencies.
Come the 20th of the month Network will be chasing payment yet when if we try and use the regular processes they have established for newsagent communication they will not be as attentive.
With magazine sales down significantly on last year and 2009 down even more on 2008, magazine distributors and magazine publishers have an obligation to stop sucking cash out of our businesses with poor supply decisions.
Sit in the office of the accounts office of any magazine distributor in the last week of any month and you will soon realise how serious cash flow relating to magazines has become for newsagents. They don’t care, all they want is their cash. They accept no responsibility for creating the cash flow problem.
I has data from several newsagents for April showing that they paid some distributors more than the money they took through the register for their titles. This happens because of a failing supply model. Yet the accounts people do not get it, yes, all they want is their cash.
This is a crisis no one seems prepared to address.
I was surprised to see Daily Express World Cup 2010 arrive with the magazines this morning. With the first games already over, it is late. It will be interesting to see if it sells. I’d much prefer to have had this title on the shelves a month ago, before sales of World Cup titles peaked. We will give the title a go by placing it in our World Cup display out the front of the newsagency.