supplier arogance

Here is the letter I sent yesterday to the ACCC detailing my unconscionable conduct complaint against NDD. I have documented what I consider to be irrefutable evidence of supply and return data for Bargain Shopper magazine from the last fourteen months, data which has been ignored by NDD in the making of their latest scale out decisions for this title:

On December 21, 2005, NDD supplied my business with 64 copies of the 2006 edition of Bargain Shopper. We returned 34 copies: 28 copies on January 12, 2006 and 6 copies on June 7, 2006. On February 8, 2006, NDD supplied us with 40 copies of the same 2006 edition we had earlier returned. We subsequently returned 30 of these: 14 copies on April 12, 2006 and 13 copies on June 7, 2006. On August 25, 2006, NDD supplied a further 29 copies and we subsequently returned 18. In broad terms this represents a sell-through (success) rate of 38% for 2006. Once we allow for theft, the success rate falls to close to 34%.

On January 10, 2007, NDD supplied my newsagency with 75 copies of the 2007 edition of Bargain Shopper. Given the access it has to sales data, NDD would know that it would be unlikely that we sell any more than 30 copies of the title through the entire forecast on-sale period, even allowing for some growth.

The supply of 75 copies on Bargain Shopper accompanied by a requirement that they are held for eight months is, in my view, unconscionable conduct under section 51AC of the Trade Practices Act 1974. I say this because NDD consistently oversupplied long shelf titles like Bargain Shopper with the full knowledge that my business will sell less than half of what they supply.

Section 51AC of the Trade Practices Act 1974 sets out several factors a court can consider in deciding whether conduct was unconscionable. The ACCC website advises:

Being taken advantage of in a transaction in a way that offends the conscience is known as unconscionable conduct.

Does it offend the conscience that NDD supplied me with such quantity of Bargain Shopper that I will lose money? Yes! Does NDD do this for other titles? Yes! Will NDD offer to fix this? Yes! Some time after fixing this will NDD revert to their old practices and oversupply? Yes!

I could have supported my complaint against NDD with evidence relating to many more titles. I felt it appropriate to start with one. Depending on the response from the ACCC, I may add more titles.

It would be easy to turn a blind eye to the oversupply by NDD as many newsagents do. Sometimes it is too stressful thinking about the tens of thousands of dollars in magazine stock sitting on the shelves waiting to be returned some time in the future. My view is that unless newsagents take a strong stand we will continue to be treated as we are. We ought to be proud of our businesses and the benefits they provide publishers and magazine distributors and we ought to price ourselves accordingly.

Last year NDD sent us 64 copies of bargain shopper. We returned 34. Some weeks later they sent us another 40 of the same issue and we returned 30. Some weeks later they sent us 29 and we returned 18. In all, 133 supplied and 82 returned – a 38.3% sell through rate. Fast forward to this week, NDD, a company claiming to be magazine distribution experts, sent us 75 copies of the 2007 edition of Bargain Shopper.

This is unconscionable conduct by NDD. There is no support in our sales data, data they also have, to support such a scale out. In my store alone this title is costing me $559.68. Based on my sales history I can expect to return more than 60% of stock supplied. This means I will have $447.75 of my cash being held by NDD purely for their benefit. The cost of this cash, the real-estate taken and the cost of labour wipes out any profit from the title.

It is appalling that my newsagency and thousands of other newsagencies are being abused by NDD in this way. It is this behaviour which is killing our channel. I will lodge a complaint with the ACCC about this conduct. Hopefully other newsagents will as well.

While I will also early return the half of what I have been supplied and make a case to NOT pay for this excess stock, it is appalling that my time is wasted with this activity.

Here’s another title which should be killed. Sales are none or one for each issue of Business & Investment Lifestyle Sales in my shop. It’s not paying its way and is wasting time and real-estate.

I’m boring you with my almost daily blogging about crap magazine titles but someone sometime will take notice. NEWSAGENTS ARE BEING ABUSED with titles like this. Newsagent competitors are not burdened with such performing titles. Yeah, Business & Investment Lifestyle Sales is passed its use by date. The internet owns this space now.

Australian Business and Money Making Opportunities magazine is not making money for me. It never sells and is rarely stolen. The publisher website is called profitcentre. This title is NO PROFIT CENTRE for me.

Newsagents write to the distributor cutting titles like this and nothing happens. We need the ability to kill the title permanently. Magazine distributors would hate it all newsagents had access to such control.

By continuing to blog about such titles I am hoping to shame the publishers, in this instance AAA Media Network, into respecting newsagents and paying for our labour and real-estate.

NDD sent through more long shelf life magazine junk today. We received 5 copies of Free Games 4, another title from IDG Communications Australia. Free Games 4 joins Build Your Own Games, Ultimate PSP Buyers Guide, World of Warcraft and Grand Theft Auto. Each has a shelf life of between four and six months, each is cash-flow negative and each makes a loss for my business. Being small in size, these titles are more prone to theft – newsagents carry the cost of that as well.

IDG and NDD are abusing newsagents by supplying these titles without compensation for the extra long shelf life. They suck cash out of our businesses and this impacts in other categories. They would not do this to any outlet competing with newsagents.

Not only are we out of pocket in funding the stock while it’s in our shops, we also have to pay freight for product returned. I can’t imagine Coles or Woolworths putting up with this.

This is a scam. Newsagents pay for the titles a month after they arrive and are not repaid for returned stock for a month after they are returned. In the case of these IDG titles, hundreds of thousands of dollars is sloshing between NDD and IDG – cash funded by newsagents. We are their bankers.

These IDG titles would be a good starting point for newsagents to take collective boycott action. The current supply model is uneconomic. In fact, it is unconscionable based on the data I have seen from many newsagencies. There is no justification for the quantity supplied or the long shelf life. While the Trade Practices Act denies us the opportunity, today, to take collective action, morally we would be right to do so.

I am offended that IDG is promoting direct sale of the titles from its website. They ought to point people interested to newsagents – there are 4,600 of us – one near you. That they do promote purchase direct from IDG like this disrespects us. Here they are supplying titles we have to fund and carry for up to six months and they say thanks by competing with us.

The sooner newsagents are firm and business like in controlling the real-estate and labour assets of their business the sooner we will make more money for ourselves and the suppliers who respect us.

Thanks to Vaughan Lawrence of Beechworth Newsagency for tipping me off about Free Games 4 today.

Here is proof of how newsagents are disadvantaged by the broken magazine distribution system.

On October 11, 2006 we received 16 copies of PC World’s Small Business Technology magazine at my newsagency. Up to yesterday we sold two copies. If we do what NDD, the distributor, wants, we’ll hold the title for another month. The credit for returned copies will not reach us until a month after that, leaving us more than $100 out of pocket for several months. On top of this cash-flow ‘loss’ I’d add that the title, over its shelf life, will have cost us $14.00 in real estate and labour providing a trading loss to us, on the basis of two copies sold, $9.00.

I didn’t order this title and it’s cost me $9.00. How nuts is a magazine distribution system which can cause a loss for me and not offer me any control over the loss?

How unfair is a magazine distribution system which does not value, at all, my real estate and my labour?

Every day in newsagencies across Australia we’re seeing unconscionable conduct such as with Small Business Technology magazine by magazine publishers and distributors.

I did not order this magazine. I had no input into the quantity supplied. Sales data at NDD would suggest that a scale out of no more than six copies for my store would be appropriate. However, since NDD has a contract with the publisher which, I suspect, requires scale out of all copies supplied by the publisher, they shift their obligation to newsagents like me. This makes us the banker for several months. NDD uses our cash to fund a broken magazine distribution system. The publisher gets paid, NDD is financially protected and newsagents carry the risk.

This magazine should never have been published. The information is out of date. It’s mainly advertising designed for browsing and newsagents provide this service.

I doubt that newsagent competitors in the magazine category – supermarkets, petrol outlets, convenience stores – have this title. They control what they receive. Newsagents do not.

Titles like this and scale our decisions such as that made by NDD for this title are killing newsagencies. This is one outcome of the Government driven deregulation of our channel – that we have been left with a magazine distribution model which makes us financially uncompetitive.

The only action I can take is to return the title early but that’s time consuming of itself and often leads to arguments with the distributor.

The magazine supply problem will get worse for newsagents in 2007 as the gulf between the successful titles (around 250) and the unsuccessful titles (about 2,000) widens. Newsagents must organise and take collective action, they must boycott under performing titles. They must refuse to pay for under performing stock and force their suppliers to fix the problem.

“The beauty of the Australian magazine market has always been that entry to it was reasonably uninhibited.” Publishers Australia executive director Chris Tchakalian

He was quoted by Sally Jackson in The Australian yesterday. By “uninhibited” he means that newsagents wore the costs. We take new titles, pay who all the stock we are sent, put them o the shelves, return what we don’t sell and wait a month or two for a credit for the returns to come back to us. New titles are often cash-flow negative for a year, sometimes more. Tchakalian goes on…

“You can have the best magazine going but the public will never see it,” he said.

“What you will see is a crippling of the opportunities to launch new titles by the medium to small publisher …

The best way for niche publishers to get their product in front of consumers is to respect newsagents and deal with them on commercial terms. The current magazine model does not respect newsagents for these niche titles. These publishers want us to consider them as charity cases. No. Thanks to decades of this charity work newsagents need some charity of their own. Niche publishers need to either run by business principles or close down. The current situation cannot continue.

I wish Sally Jackson had spoken to newsagents about this problem with niche titles. I’d like her to read my magazine cash-flow report and see the evidence of the cost of these titles of small businesses which can ill-afford such an impost.