I have been working with a newsagent on challenges in their business and thought this summary email may be useful to other newsagents, especially those with traditional businesses: magazines / papers / lotteries / tobacco / cards / stationery – and little in the way of gift and good margin traffic generating products.

So, here is my email. I have washed it of any identifiable information out of respect for their privacy. The business is in a small centre, in a competitive situation. New owners have been in for six months. he old owners had been in the business for many years.

Note: I am direct in the correspondence as I have found this to work best. There is no point in sugar-coating anything if affecting change is the goal. Here is the email:

It was terrific to meet a couple of weeks ago.

I have now gone through the performance reports for you business an offer these comments for your consideration:

1. You are not using the software properly. By this I mean, you are not tracking stock on hand for items you sell. This makes it easy to steal from the business and difficult to provide management advice to the business. For example, in 2015, $25,397 worth of stationery was sold without scanning it. This has denied you the opportunity of understanding what has been sold specifically. To address this: receive all inventory in through your software, scan all sales and scan all returns.
2. Cards. 30% of card sales cannot be adequately assessed as they are not being tracked by category. This is because of the data issues noted above. No, in terms of card performance, you are trending down 11% year on year. This suggests the card department needs a considerable overhaul. If I look more deeply at Everyday Counter Cards, I can see sales are down 5% year on year – this is below the trend reporting growth in other stores.
3. CIGARETTES. Sales are tracking at $746.00 a week, down 24% from a year earlier. You have to consider the cost of the space. If you ripped out the units and put in shelving to promote higher margin and unique product could you achieve a better return on the space and the inventory investment.
4. Magazines. Sales are down 16%, more than in an average newsagency, close to double the decline in fact. I think you need to relay the magazines and refresh the offer urgently to arrest your decline. At the same time, you need to improve space efficiency, cut your space allocation by 25% without cutting range and thereby reducing the operating cost of the category without impacting sales.
5. Newspapers. Sales are down 4%. This is good compared to the industry trend. That said, I think you could lose your old-school paper stand and place papers in a less expensive location, freeing the current space for more effective use in the business.
6. Stationery. Down 35%. This is a disaster. Your stationery needs work to get back to where it was. I suspect this is due to poor management of the category. When I looked at the range in store I was left thinking – what do you stand for. Y0u had a bit of everything but without being strong in several key everyday areas.
7. Gifts. The 212% growth is good. Based on your card sales and considering newsagency channel benchmarks, you could reasonably grow gift sales y another 300% from where you sit today. Considering the store layout, I think you cold do this without capital investment on fixtures.

Right now, your focus has to be on getting your data right for without more accurate segment level data you cannot reasonably measure the performance of the business. So, this would be my immediate focus: get the data right. At the same time I would relay magazines, move papers, bring in more gifts and remove tobacco replacing that space with male-oriented collectible and or gift lines.

I think most of the changes could be done with little or no capital investment in fixtures and no more than $5,000 investment in new supplier lines.

I would be happy yo help you source appropriate product lines. That advice would come from card and other sales data – hence the importance of getting your data up to speed first.

The business overall still feels like a traditional newsagency. That requires urgent change if you are to be competitive with the businesses nearby that are competing with you. The changes you have made this year step you toward the right direction. More needs to be done, and quickly in my view.

Thanks for the opportunity to look at your data and visit your business. I am confident you can be tracking good growth soon and for little cost.

I have attached the reports relied upon for this analysis for your information. Note, I have concentrated on the reports comparing the first three months of this year with the same period from last year.

A Toyworld has opened near the newsagency, three shops away, and has started discounting lines we stock. One major licence range is being discounted 28.5% off suggested retail. Theses a range that easily sells at suggested retail. We never have to discount. Nor to the three other retailers with the same products in the shopping centre.

I am not matching the discount being offered by Toyworld as I know it is a mug’s game. Any customer they will win because of the discount will not stick with them, unless they continue to discount, which they cannot do as they are in a major shopping centre with shopping centre rents.

We will beat Toyworld by having a better range, displayed more appealingly, backed by a loved loyalty offer and supported with excellent shop floor customer service. The whole experience will be different.

Comparing the two shops as dispassionately as I could on Sunday, our offer is visually more appealing from outside the shop. We have the same products promoted with context that will appeal to the target shopper. At Toyworld, price comes first and a long distance, in terms of visual focus, than the product itself.

It is a tough call to not match the Toyworld discount as matching them or beating them is the easy move to make. However, as I say, it would be a mug’s move that does not serve the long term plans and needs of the business.

We have invested considerably in providing a premium retail experience and this commitment is paying off. Reacting to an ignorant small business competitor who thinks price is a good strategy is not for us. We confronted a similar situation with a discount ink outlet that opened three metres from our front door. We saw them off.

Specialty retail is a long game. Discounting is not a long game. We need to create stores that are interesting, entertaining and remembered for more than price. We want customers happy when they think about us and our stores.

Shoppers who remember a shop sole because of price are not shoppers delivering the level of margin dollars one needs in an expensive shopping centre situation in my view.