A blog on issues affecting Australia's newsagents, media and small business generally. More ...

COVID-19 is driving down retail sales for many small business retailers

Talking to retailers from several different channels, there is no doubt that COVID-19 is impacting retail shopper traffic and revenue. Traffic is down. Revenue is down.

None of the retailers I have spoken with are from channels with sought after food and household goods lines. They are all from businesses serving discretionary needs.

I think the significant decline in retail traffic and revenue is due to two main causes: anxiety in the community about future income and spending of available funds stocking up on essentials.

Looking at the forecast trajectory of COVID-19 and regardless of what governments decide about retail being open, this is the new normal for the next six months at least.

Several newsagents I spoke with said revenue was down 30% Thursday – Saturday last week compared to what is usual for this time of the year. Retailers outside our channel share similar numbers. Yes, 30%. Plot that out in your cashflow projection for six months.

While the possibility for forced closure is most likely in the near future, there is a more present challenge today, the challenge of sales revenue taking a serious and sustained dive.

The sales decline is so great that the affected businesses have to respond, unless they have spare capital to fund being open usual hours with usual overheads.

Walmart in the US overnight announced a significant scale back to their hours. plenty 24 hour stores will close overnight. They say to re-stock. I this it is to also contain costs.

If your revenue has significantly dropped in recent days and if you don’t have a deep well of capital from which to draw to tide you through, consider:

  1. Reducing opening hours and / or cutting labour cost (rostered hours).
  2. Reviewing all inventory forward orders.
  3. Being transparent with local shoppers about the challenge.
  4. Pitching bringing forward purchases for Easter and Mother’s Day.
  5. Encouraging forward purchases of birthday cards and gifts.
  6. Stocking up on crossword titles.

There is no shame in the sales decline.

In my own case, we will decide today our own next steps. The first move is likely to be a reduction in hours. Nothing major, but a move nevertheless. Our forward orders are prudent. And, we have been actively promoting bringing forward purchases for several weeks.

We have sought information from Westfield on their plan but have heard nothing.

What is impacting the whole community and retail is unprecedented. No one knows for sure what retailers should do. However, we do know that doing something is critical.

UPDATE: 1pm four newsagents have contacted me reporting between 30% and 40% reduction in revenue for the week to Sunday March 15, 2020 compared to the same week a year earlier.

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Newsagency challenges

Australian Geographic magazine for the counter

This issue of Australian Geographic magazine is perfect for pitching at the counter. Shoppers will buy it for themselves and as a perfect gift for someone overseas. The koala is adorable, the image timely.

That’s my recommendation – place this issue of Australian Geographic at the counter, and see it sell.

Other retailers won’t take this initiative.

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magazines

If you plan to go cashless because of COVID-19

newsXpress Toorak was on A Current Affair last night because of their decision to go cashless from Monday for health and safety reasons.

If you decide to go cashless in response to COVID-19, I suggest you remove all surcharges and that you fully explain your reasons. Maybe something along the lines of…

We are going cashless for the health and safety of our customers and employees.

We appreciate this may be challenging for some and we apologise for that. We will try and accomodate the needs of those affected.

We are not playing into a conspiracy to remove cash from society. Rather, our health and your health are what matter here.

Be safe everyone and thank you for supporting our local business.

Unfortunately, shrill reporting of the story on social media has lead to some nasty comments being made not only about the business but about newsagencies more broadly.

My advice is to not go completely cashless.Always have a way of serving for cash. But above all, get your messaging right. Shows like ACA are there to encourage and feed trolls.

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Social responsibility

Bright Easter for front of store

We have had our easter pitch up and at front of store for 10 days and it has been working a treat, drawing shoppers to the business from the busy car park to main centre mall thoroughfare in which we are situated.

It’s the plush items that are attracting shoppers. We watch them drawn to the shop, picking up items, and being drawn further inside looking at other items.

The display is a key pathway to purchase:

  1. Notice the display while walking past.
  2. Walking toward the display.
  3. Picking up and item or 2.
  4. Looking beyond the display and into the shop.

We see this pathway work regularly. We actively watch as this engagement is key guidance as to whether a display is working or not.

Easter is a terrific season beyond the significance for those with with Christian beliefs. It is a family tradition season for many and that is where it works well for us.

I didn’t create the display in the photo. I saw it for the first time a week ago when visiting the shop. It is terrific. I am grateful to those who put this together.

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Newsagency opportunities

Professional analysis on the likely impact of COVID-19 in retail businesses

A supplier representative I trust shared with me a comprehensive independent 33-page report from a US research business on the likely impact of COVID-19 yesterday.

The report looks at the likely impact from the perspective of US retailers and their suppliers including manufacturers and the supply chain. It seeks to inform US business leaders so that they may make appropriate plans suitably in advance. There is expectation that much of what the report discusses will apply to Australia.

While I cannot share the full report, here is some key information that I hope is useful. My own comments are in square brackets.

  • Out of stocks are likely across high demand categories. [Australia has been ahead of the curve on this – toilet paper, pasta, cleaning products, rice.]
  • Cocoon-stocking will reflect household makeup, with indulgent items, such as DVDs, confections, salty snacks, alcohol sales increasing; however, holiday shopping may take a hit. [Hence advice weeks ago about promoting games, jigsaws and similar.]
  • Food delivery, Click & Collect, online shopping and home delivery will increase as consumers avoid going to areas where there are large gatherings.
  • In-home entertainment will flourish, and some marketers should re-consider their media spending (e.g., less out of home, fliers, etc.)
  • Out-of-home food consumption is likely to take a big hit as travel comes to halt. More people will be working from home as virus spreads across the U.S. [We see stories daily ion restaurant closures.]
  • In-home food and beverage will increase significantly, resulting in both increased consumption and pantry stocking.
  • Stockable items continue to be popular (besides obvious ones like wipes), e.g., shelf-stable and frozen food items, sports drinks, water, toilet paper, etc.
  • Some manufacturers can potentially spend less in terms of advertising and trade if they have virus tailwinds in their back, opportunistically driving some savings.
  • Preventive healthcare products, such as vitamin C, are trending higher than symptomatic products.

newsXpress has been sharing this information like this and even more detailed on COVID-19 for weeks. It shared it’s first strategic advice in terms of strategic product placement in store and out of store marketing relating to COVID-19 in late January. I mention this as a reminder that proactive marketing groups can play a key role in providing members with a competitive advantage.

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Newsagency management

Not a retail apocalypse: Kikki K has been headed for trouble for years

Back when it launched, Kikki K was innovative. Built on the back of carefully selected products from quality brands, the business was known  for curated stationery related gifts. A year or so later, the brands were replaced with house brand products. A beautifully designed and thoughtfully curated range continued at a premium price but direct sourced by the company.

In the years since, Kikki K has played the same game – beautifully designed and thoughtfully curated products direct sourced to maximise margin.

Once mass retailers entered this space, K Mart and Typo in Australia and similar overseas, Kikki K needed to change, to differentiate from what had become a crowded marketplace with downward pressure on margins.

Kikki K didn’t change direction. On a retail innovation tour 18 months ago some of us were talking about Kikki K and the store we had just seen, commenting that unless the company reinvented itself it would not last. Product designs had a sameness look and feel. The pricing model remained expensive with a value offer for volume. Mass retailers nearby could beat them easily.

The other challenge for Kikki K was it was built on a kind of influencer model in an era that pre dates influencers. The issue with influencers is they have a limited shelf life before another influencer gains attention.

While current retail challenges may have sped up the bringing in of the administrators, it is not the cause. The case rests with those in control of the direction of the business over the last 10 years. They did not innovate, they did not act for the company to offer a unique value proposition. Immediately the Kikki K offer was joined by mass retailers with excellent design departments and better direct sourcing the company needed to move. It did not.

It frustrates me that news outlets will point to the appointment of administrators as another example of their often talked about retail apocalypse. The Kikki K story is not that. If only news outlets would do better research.

If Kikki K stores close there is good opportunity for innovative newsagency businesses nearby. Their closure could be good news for our channel.

My advice to newsagents is to not feed off the retail apocalypse nonsense in plenty of news stories out there.

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Newsagency management

Is your retail business ready for a Coronavirus nearby diagnosis?

Carey Grammar in Melbourne closed yesterday on the news of a teacher being diagnosed with Coronavirus.

A Walmart store in the US remained open after a staff member was diagnosed with Coronavirus.

The Coronavirus situation is fluid and challenging. A check of state, federal and local government websites for what businesses, like retail shops, should do in the event of a diagnosis nearby, of a staff member or a customer does not provide clear advice.

It is important we in business have contingency plans. They are part of any disaster planning. At my retail POS software company, a month ago we worked through how we’d handle the whole business operating from home. It is the type of business where we can do that. retail is different. Retail needs customers.

Retailers with a strong online business are better positioned as there is this on which to fallback to a certain extent.

I think it is important that you have a plan in the event an employee is diagnosed or a regular customer is diagnosed.

I think it is important that you have a plan should your shopping precinct be closed for a time.

I think it is important you have a plan should shopper traffic decline significantly, 25% or more, as a result of the virus.

  1. Can your business cope with closure for a day, week or month?
  2. Do you have an action plan in the event of closure? Supplier notification, employee notification etc.
  3. Do you know what deliveries are planned by day, a month out?
  4. Do you have what you need to be able to work from home?

If you think this reads as unnecessary, think about what has happened in Italy in the last few days. There are plenty of big businesses in Australia this week testing different approaches of working from home, working from another location. It’s prudent business practice to be prepared. That is all I am suggesting here.

For suggestions for shop management, see my post from Jan 29. My suggestions for the shop itself remain – stay positive, offer a clean and upbeat experience, don’t engage in herd mentality retail, don’t try and profit from this.

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Newsagency management

Dog and cat range attracts shoppers to the ‘newsagency’

This small front of store dog and cat range is working a treat at attracting shoppers to the business. It’s an unexpected pitch for the business. The range includes some homewares as well as dog fashion – bandanas.

We were not concerned about product price point when choosing product as we are not of the view that we can only sell low price point gifts.

Every time we play outside what is expected from the business we find new shoppers, which is mission critical in retail today.

The opportunities to play outside what is expected are endless given the broad range of suppliers from which we can draw products.

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Gifts

Creative customers

I love the creativity of the customers in a stationery shop I was in last week. The first photo is the testing sheets they have for pens and the next photos are close-ups of customer creativity.

This interaction and the opportunity for it differentiate the shop.

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Uncategorized

A good time to promote Easter cards

With people spending more time at home rather than socialising, now is a good time to pitch easter cards. History has shown this season to be popular outside the religious significance – as a season for people to reach out to loved-ones to say hey… Here is a new video produced by newsXpress for its members to use on social media.

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Greeting Cards

ALNA representing small business lottery retailers on credit card ban

ALNA is active in making representations to government on the ban on using credit cards for gambling, as reported by Rob Harris in the Nine papers yesterday.

Newsagents have launched a pre-emptive strike on a potential new crackdown on the use of credit cards for gambling which could also ban the purchase of lottery tickets and scratchies on credit.

The Australian Banking Association is considering new recommendations for financial institutions to minimise their role “gambling related harm” which could lead to tough new restrictions on using lines of credit for online gambling.

Despite bans on credit for gambling and cash advances on credit cards in casinos, on racetracks and poker machines, gamblers can still use most credit cards for online gambling, betting apps and purchasing lottery tickets.

The Australian Lottery and Newsagents Association argues any measures should not extend to buying lotto tickets which it says are “extremely low harm” and “very different to other forms of gambling”.

The peak body has become increasingly powerful within the corridors of power, having led a successful campaign against controversial “fake lotto” website Lottoland which led to it being banned from accepting bets on Australian-based lotteries.

Ben Kearney from ALNA has done other interviews on this issue, representing newsagents to the public as well as to government.

Click here to access to ALNA newsflash from yesterday afternoon oon.

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Social responsibility

A practical, small business and local economic stimulus package for suburban and regional Australia

Every election, politicians say that small business is the lifeblood of Australia. Then, after the election, they forget about small business. No wonder trust in politicians by Australian voters is low.

Small businesses are the lifeblood of our economy. Not just retail businesses, but all small businesses. Oh, and by small, we mean locally owned businesses turning over $2M or less that are not part of a larger group.

Small business retailers are nimble and able to lift local economies faster than big businesses and certainly better than online businesses.

Here are six tips for politicians on steps they can take, decisions they can make to help lift retail, especially small business retail, as well as those local businesses with which small business retailers can quickly connect.

  1. Local shops refresh grant. Give every local retail business a grant of at least $25,000 with the stipulation that it is spent locally on capital works for the shop, to improve the shop. It could be for paining, carpentry, electrical, staff training or similar. Proof of local spending is to be in the form of an invoice from a local tradesperson or small business company with and ABN and more than a year of trading as recognised by the ATO – to avoid fraud. Spending could be focussed: painting, electrical, carpentry, flooring, repairs. The management of this should be online with quick approval and payment. Note: the $25,000 is suggested to provide sufficient local economic stimulus.
  2. Local visual merchandising supports. Keeping in-store displays can be a challenge for small business retailers. Fund a network of merchandisers to make a 2 hour call weekly on qualified independent small retail businesses, sub $1M turnover, ABN registered, trading for six months or more. With each visit to be about visual refresh of the shop. Cap the cam pain at three months assess the economic value. Only local merchandisers to be used – i.e. to an overseas agency who hires local contractors.
  3. Direct all politician electorate spending to be with local small businesses. For printing, subscriptions, gifts, parties, cards, everything for a year. Have the results assessed independently. Ensure that spending is fair, too, to benefit a variety of local businesses, and not dolled out as political favours. Shop local, shop small.
  4. Run a national shop small shop local ad campaign. Make it educational, smart, encouraging …, guiding Aussies on the value to them from shopping local, shopping small. Help to understand the true value of shopping local, shopping small compared to the alternatives. The ad campaign should run regionally across multiple media platforms, giving preference to locally owned platforms with a track record for not managing their business to minimise tax.
  5. Local artists grants. Offer cash grants to fund buskers for local high streets, to make shopping locally more entertaining. Make the application easy. Focus on local artists entertaining in their local community. This serves the dual purpose of injecting cash locally as well as fostering the local arts. The application process should be online, approval fast and payment immediate.
  6. Establish local currency systems. These work overseas on regional towns where local currency has more value than the national currency. It supports shopping local through a smart value structure. the government role could be on the tech back end to manage the currency – taking away capital cost from local councils. To find out more ab9out this, read up on the Bristol Pound.

This list could be much longer. It is offered here as a start, to gets people thinking of practical ways to support shopping small, shopping local.

The current disinterest by politicians in practical support for local small businesses has us on a path of business closures. Urgent action is needed to engage locals in supporting local businesses.

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Small Business

How Amazon is redefining everyday stationery purchasing in Australia

We are starting to see Amazon playing in categories that will affect newsagency and similar businesses. As more an more categories fill and the company leverages better pricing deals and connects with online purchase levers, their success is growing and will grow further.

Take this simple pack of 4-colour Bic pens:

Beyond the price, there is the subscription offer, making re-purchase on a timed program easy, convenient. 10% off is compelling. As is free delivery on orders of $39.00 our more. This is an easy threshold to achieve when buying stationery.

The product information online for this item is terrific, making it easy for the online shopper. This is what newsagents are competing with when it comes to online sales of stationery.

In capital city situations it is challenging. Not as much in regional Australia. however, with online, geography is not a challenge in that the free delivery offer is there for all who meet the requirements.

What it is taking a while for Amazon to reach critical mass in Australia, they are having success by getting their online pitch right. This Bic pen offer is, to meta good example of them getting it right, creating compelling price, product information and service experience that will be a good foundation for long term success.

Right now, the Amazon everyday stationery experience is  better than others in this space in Australia. That, of course, can change quickly.

This does not mean you would give up chasing online stationery sales. However, it does mean that in Amazon  you have a formidable competitor.

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Competition

Preferred magazine delivery day survey

In anticipation of significant changes in magazine distribution as Ovato seeks to arrest a collapsed share price, I thought it would be good to ask newsagents about their preferred magazine delivery day:

Create your own user feedback survey

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Newsagency management

Newsagency software is helping newsagents to transform their businesses

Back in the day, newsagency specific requirements such as magazine and newspaper management were hallmarks of channel specific newsagency software. While those needs continue today, good newsagency software is playing a key role in helping newsagents transform their businesses.

While still part of the business, magazine management and newspaper home delivery management are not as commercially valuable and, as you might expect, chasing value is key and this is where evolving newsagency software works a treat.

I’ve seen newsagents evolve into coffee and food, homewares, niche gift, unique in-store services, clothing and, even, classes.  Each of these has unique needs. Plus, I have seen newsagents leverage seamless POS software connected online as well as buy now pay later and other fintech solutions.

My point I that the newsagency software that is working well for newsagents today is that which plays outside the minimal margin history of the channel and helps newsagents, through niche tools made for this purpose. The software is like the skeleton of the business, offering a strong and flexible structure off of which the business can evolve into valuable areas while also handling the old school requirements.

I’m a big fan of leaning into, chasing, change, and this is what my newsagency software company has done, as I have in my own retail newsagency businesses. It’s what I did when I sold off my home delivery run at the top of the market 14 years ago.

Good software will work with you on embracing change.

Now, more than ever, change is critical for newsagents.

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newsagent software

The automated Amazon locker experience

I was with a colleague, Anthony, a couple of nights ago when he collected 2 parcels late at night at an Amazon locker. Here is how it went – I’m sharing this for those considering the Amazon pitch. This self serve locker approach is the company’s standard.

It started with Anthony receiving an email that pickup was available.

We went to the locker, which was located at the rear of a RiteAid drug store in New York. Armed with the email here’s how it went.

What is interesting is that each locker was from a different transaction. Amazon linked them under one barcode and the one locker location, to make the process seamless, easy.

The Amazon parcel locker model is 100% about their service of their customers. While I am sure they like conveniently located locket locations, I doubt they care at all for those businesses.

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Newsagency challenges

Ovato shares down 39.66% yesterday

The share price of magazine distributor Ovato took a significant hit yesterday, falling 39.66% during the trading day.

This was on the back of the company releasing its half year results. In the accompanying investor presentation, the company notes, regarding the latest results, that sales reflect Lower than expected newspaper & magazine volumes. I was shocked reading that. The lower volumes are in line with trend. Who made this projection and on what basis?

Simply Wall Street published some interesting commentary regarding Ovato a few days ago. That commentary includes this:

Ovato is more than a magazine distributor. From where I sit, each division of their business faces significant challenges of disruption and considerable margin pressure.

While I have no crystal ball and seek no ill for the Ovato business and those who work in it, newsagents need to contemplate what their own businesses might look like of Ovato ceased to exist or significantly scaled back its operation.

Yesterday’s share price drop is significant and will play into confidence abut the Ovato business. Urgent and more significant change must be anticipated.

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magazine distribution

Is the VANA formation of a new national ‘association’ a joke?

VANA, the association of some Victorian newsagents has announced a name change and a national focus. They have created National Lottery and Newsagents Association, NLNA. Talk about original. ALNA, the Australian Lottery and Newsagents Association already exists, with an almost identical name, and has a track record of good representation.

This is a stupid move by VANA in my opinion, a move taken to further splinter the already challenged representation of the newsagency channel. A selfish move, maybe ego driven.

The name represents the stupidity. Rather than being creative, they decided to copy. Talk about dumb.

VANA should have folded into ALNA. One national body is enough for the shrinking channel. Now, suppliers are left wondering where to support. My view is that VANA deserves no support. They are not an association. Instead, they are a marketing group trading off the back of a single state association. Good luck to them. However, they need to stop obsessing about agency business to have a future.

VANA parades as an association but I bet they take a percentage from every supplier organisation they support in one way or another. They can do that for sure, but call it what it is – a marketing group.

In my view, associations should be purely that, associations – representing members in collective bargaining and to government on policy matters. That’s not VANA.

I have no arrangement with ALNA whatsoever. I think they are doing a good job. This move by VANA against them is dumb. It splinters and already splintered channel.

Footnote: I am a director of newsXpress, a newsagency marketing group, a competition of VANA in some areas. The difference is that newsXpress is transparent as to what it is.

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Newsagent representation

Interesting stoush in the UK on newspaper margins

WH Smith stopped selling UK newspaper the Daily Telegraph for several days in train station outlets because of a dispute on margin.

WHSmith has banished the Daily Telegraph from its outlets in railway stations, escalating an industry-wide battle over shrinking margins for newspaper retailers.

After ordering managers to move the Telegraph titles to the magazine section on Friday, the UK chain this week refused to stock the daily newspaper in about 120 railway stores.

The dispute arose after the Telegraph raised the cover price of its newspapers by almost a quarter this month — the daily edition to £2.50 and the Sunday Telegraph to £2.80 — but did not increase the amount paid to retailers by the same proportion.

That move, not sharing cover price gain with retailers, is what has been happening in Australia for a while. As the Financial Times story continues…

The disagreement reflects years of frustration among newsagents, whose sales income has fallen along with tumbling circulation of print copies. While Britain’s national papers have steadily raised their cover prices over the past decade, the increases have been offset by cuts to the retailers’ share.

Yes, here too.

A study in 2016 by Deloitte found that the industry, on average, paid 23 per cent of a newspaper’s cover price to retailers and 5 per cent to wholesalers. Today, the national newspaper average for retailers is closer to 22 per cent, according to Financial Times calculations.

Whoa! UK newsagents are better off that us. We are on 12.5% – making newspaper loss making. Plus, newspaper shoppers are not efficient, they rarely purchase anything else.

Like much of the industry, the Telegraph has struggled to cope with plummeting print circulation over the past decade. Since 2017, the Daily Telegraph print circulation has fallen 34 per cent, from 484,000 to 317,000 copies a day, according to data from the Audit Bureau of Circulations.

Boo hoo. The challenges faced by newspaper publishers are not something small business newsagents have to financially support. We have our own challenges that demand our time and capital.

Note, a few days after the newspaper was removed, it was back on sale. No news of the details of any deal being struck.

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Media disruption

An imminent store closure can tell you plenty about what sells

The final days sales leading to the sclosure of a store can tell you plenty about the products you have been offering. I know for personal experience.

Right now, in the US, this is on show at the Papyrus card and gift stores, which will all close on February 26. They have been running a massive sale for more than two weeks. What is left is what has not worked for them. I say this given that everything is discounted by between 50% and 75%.

On the card shelves there are captions that remain quite full. 10 cards for $5.00 is a good price as most of these cards regularly sell at $5.99 or thereabouts.

Still, plenty of greeting cards are unsold with less than 3 days remaining.

What has clearly been a failure at Papyrus is their wooden models. These are small battery operated merry-go-rounds and similar. Several stores I have seen have windows full of this stock. Given that Papyrus has stocked them for several years I am surprised their sales data did not forecast problems with the category.

Retail success comes down to giving customers you can reach what they want and operating with a cost base that permits profitability.

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Gifts

A brilliant local town newspaper story in the New York Times

This local newspaper in the US town of Marfa Texas (pop. circa 2,000) added a cafe/bar to the news room. They then needed to add more journalists. Redefining the newspaper …

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newsagency of the future

Bill Express final dividend

The liquidator of Bill Express Limited has sent out a notice of final dividend. The payout is expected to be 0.021 cents in the dollar.

What an end to a saga that cost newsagents tens of millions of dollars.

What a scam if was.

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Bill Express
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