Interesting feed back at the Australian Car Advice & News Blog on my earlier entry about the fall in car magazine sales. The blog is not your usual journal or diary. This is a well written blog covering news and opinion you’d expect to read in the motoring pages of a newspaper. It illustrates my point that consumers have access to sources online without cost compared to the often out of date car magazine on newsagent shelves.
I’m told that Fairfax representatives at the annual newsagent conference last week made it very clear that they want newsagents to restructure their businesses. Restructuring in this context means newsagents selling their home delivery and distribution businesses to others. The benefits for newspaper publishers are fewer accounts, fewer delivery points and specialised newspaper distribution businesses. In the current situation a newsagency is part retail, part home delivery and part distribution. Some at the conference have told me that Fairfax even said additional commission could be on the table for achieving restructuring.
My understanding is that News Ltd is supportive of such a restructuring but is publicly less demanding on newsagents than Fairfax.
The publishers must be getting frustrated since they have been pursuing restructuring for several years. Newsagents have been slow to get to the table.
I am in favour of restructuring, freeing retail specialists to focus on retail and distribution specialists to focus on distribution. Newsagents need to move on this or risk the publishers taking control.
The challenge with restructuring newsagent businesses is how the exit from one side of the business is managed. Newsagents have, for the most part, paid premium goodwill – anything from 3 to 5 times net earnings where ‘net earnings’ is a figure including net profit plus owner wages and a bunch of ad backs. In some restructuring scenarios I have seen play out recently the seller has no choice but to take a hit on their investment.
The Federal Government, ACCC, newspaper publishers and newsagent associations – all parties to the 1999 deregulation of newspaper distribution – could/should have foreseen the restructuring and resulting financial hit of today. If newsagents were farmers or miners the government would have put a compensation package in place to ease the burden of change. Because newsagents are not farmers or miners their families will take the hit.
It is not too late for the Federal Government or the ACCC to revisit their role in the hardship being felt by small business newsagents today. Nor is it too late for Fairfax or News Ltd to reconsider how they might assist those under pressure to restructure their businesses.
Further analysis of January – May sales data shows a fall of around 10% in sales recorded for motoring magazines. I’d note that for the same period we have seen new titles issued.
With three magazine distributors competing with each other and a model whereby they receive fees for distribution, this will happen while sales slowly decay. If distributors were only paid on the basis of retail sales (as happens with newsagents) we would see far fewer magazines in this country.
There is a case for the magazine distributors to collude with newsagents to control the number of new titles published and or imported. Newsagents are the losers from the current situation because they get no say in the titles they are sent and it’s their cash at risk every day.
The 10% fall in motoring for the small group of newsagencies I sampled suggests to me that this once powerhouse category is in long term decline. It makes sense when you consider the quality and timeliness of specialist websites in the motoring area now.
Newsagencies with a lottery agency will do stellar business today thanks to the $27 million superdraw. The smart operators leverage the 50% – 200% traffic boost into good sales of magazines, newspapers and greeting cards. We need better co-ordination between newsagents and their non-lottery suppliers to make better use of the superdraw opportunities. A special newspaper or magazine deal built around the super draw could have delivered a perfect win win. In my shop we hired a spruiker for four hours, created some specials of our own and were run off our feet.
A good example of a deal would have been an offer today for WHO. The new issue was out yesterday so it’s fresh on the shelves. Buy a ticket of a certain value and get WHO for, say, half off. Reintroduce people to the title on the back of super draw traffic. The same would work for newspapers.
The opportunities for leveraging this traffic are endless. The next opportunity is Tuesday next week. OzLotto is $10 million and that means Tuesday traffic will be up 25% in many stores.
It’s surprising the number of parents trekking to newsagencies and other outlets to recharge their kids phones. One lady quipped to me today “at least this way I know where the pocket money is being spent”. We chatted about how the phone companies are making a killing from the text phenomenon when ‘back in our day’ people would wait until they were face to face to talk with each other. This recharge business did not exist ten years ago and now it’s sucking hundreds of millions from family budgets. On the one hand retailers are told to be responsible in promoting gambling to consumers yet there are no guidelines on our pushing of recharge on consumers. The two are similar in my view.
I’ve been talking with Gary Larsen of Larsen’s News and Bookshop in Innisfail, far north Queensland. Innisfail was devastated by Cyclone Larry. Gary uses my newsagency point of sale software. Comparing May 2006 with May 2005 one can see the impact of Cyclone Larry on this small business. On the surface you see amazing sales growth. 25% up overall. Magazines up 31%; stationery 13%; school text books 94%; drinks 41%. Categories which are down include cigarettes -7%; gifts -45%; cards -16%; newspapers – 4%. Gary and his family are long term Innisfail people. They have not price gouged as a result of Larry even though their operational costs and business challenges are up as a result. Just getting a stationery shipment in has been a significant challenge. The service they have been providing in Innisfail in the wake of Larry has been invaluable and more power to them for achieving growth in such challenging circumstances.
They get my vote for Newsagent of the Year.
Newsagents in NSW are putting up a fight to stop clubs from being allowed to sell lottery products. My understanding is that the NSW newsagents association (NANA) has made robust representations to the NSW Minister for Small Business, David Campbell, and that he gave the delegation a fair hearing.
Newsagents rely on lottery traffic to support the sale of other products such as newspapers, magazines and greeting cards. Ten years and more ago lotteries played a lesser role since newspapers and magazines were sold in fewer outlets. Now, with deregulation, newsagents in NSW need the lotteries point of difference to maintain a point of difference.
This is a big issue for newsagents as losing anything more than 10% of lottery traffic would challenge the viability of some businesses.
One could argue that change is inevitable and if a move to clubs better serves consumers so be it. On the other hand, newsagents sell many items for low margin on the basis of the range. To lose such a key item as lotteries would affect the rest of the items they carry and publishers and consumers rely on newsagents offering low cost distribution services.
Further to my earlier post today on magazine sales in May, sales in the computer category are down between 8% and 17% for the stores I have looked at. Newsagents carry too many titles in this shrinking category.
May sales data is full of red ink for buying and selling titles. Trading Post, Trade-A-Boat, Parts Peddler, and Businesses For Sale are some of the titles in this category. Looking at same store data I have seen unit sales for the category fall between 15% and 33% comparing May 2006 to May 2005.
The respected Pew Internet & American Life Project has issued a new report into broadband penetration in the US. Key findings:
– As of March 2006, 42% of all American adults had a high-speed internet connection at home.
– This growth in broadband adoption has been fueled in part by an increase in internet penetration in the past year, from 66% to 73%. Nearly half of these new internet users subscribe to high-speed services at home.
– The 40% increase in home broadband adoption from March 2005 to March 2006 is double the 20% rate of increase that occurred from March 2004 to March 2005.
– 35% of all internet users have posted content to the internet.
– A “broadband elite” of early adopters that had been the biggest creator of user content has been overtaken by the mainstream.
– User-generated content is driven by young home high-speed users – 51% of “under 30†home broadband users have posted content to the internet compared with36% of home high-speed users older than 30.
Hence the Kim Beasley call for a national Broadband strategy for Australia, the continued significant investment mainstream media companies in online businesses and the challenges for print media.
We need Pew type independent research here to understand the shift which is occurring.
Some great magazine subscription discounts here for students. Great discounts on a considerable range of magazines. Take WHO, for example. Students get it for 40% off cover price plus free home delivery by Australia Post. Newsagents get 25% off the cover price.
The UK Office of Fair Trading has announced the release of a new draft proposal for newspaper and magazine distribution arrangements in the UK. The draft opinion indicates that the OFT is not prepared to back down on plans to change newspaper and magazine distribution – this after indicating earlier this year that they would re-think their earlier announcement to shake-up arrangements.
MediaWeek demonstrates lazy reporting in its page two story this week about the Australian Newsagents Federation. What should be a story about newsagents is a story promoting ANF CEO (and former publisher executive) Rayma Creswell.
MediaWeek says Rayma took over the ANF several years ago. Rayma was employed fifteen months ago.
MediaWeek says Rayma “has just been on a national road show visiting members in all major population centres”. This is not true. Rayma has done a tour of NSW/ACT city and regional centres. These meetings were used by Rayma (rightly) to promote the ANF cause and (unfortunately) attack the state newsagent association (NANA) and any newsagent who dared ask her a difficult question.
MediaWeek says that “the challenges to retailers (newsagents) continues to be the growth of supermarkets…” While one could have this perspective, I suggest it is not shared by newsagents. The biggest challenge newsagents face is the supply of magazines outside the top 200 titles on terms which are not equitable. Newsagent sales of top selling titles are growing. Supermarkets have had these titles for years so why Rayma or the ANF would have concerns now is odd. It is with titles outside the top 200 that newsagents have higher real-estate and labour costs. These titles have a sell through rate of 50% or less in many cases. Call any newsagent in the country and I am sure that they will say the magazine supply model is the biggest challenge.
MediaWeek also says that newsagents have long complained about publishers selling subscriptions in their magazines. Rayma was (last I checked) a Director of Luna media, the publisher of Cosmos. Every ANF press release ought to declare this interest. Cosmos engages in this subscription strategy. It is among the worst performing titles in newsagencies by the cash-flow contribution measure.
It seems to me that MediaWeek has been fed a Rayma press release and run with it as a new item. The item does newsagents a disservice.
Many newsagents are complaining today about hefty invoices from Gordon and Gotch for magazines. It’s the 30th and What Gotch has supplied today makes it on to the May statement. Newsagents have not ordered this product – it has been scaled out by Gotch. Most of the titles delivered today will have sell through rates of between 35% and 50%. That is, more than half the stock supplied today will be returned by newsagents in a month or two at their cost. Newsagents will get the credit for returned stock a month later.
So, today’s oversupply only serves to suck cash out from newsagent accounts for use by Gotch for a few months.
Not one newsagent competitor (Coles, Woolworths, 7-Eleven, BP, Shell, Mobil) has to put up with this.
The magazine supply model for these titles hurts small business newsagents and those employed by them.
Overheard two customers talking in my shop today when considering a New Idea purchase (Bec Hewitt is on the cover). One said to the other, don’t buy it this week with her on the cover. She makes a fortune selling her stupid stories. The other lady quickly dropped the magazine and left. Based on the sales data I have seen from yesterday in a few newsagencies, the Bec factor is not as strong this week as on other weeks.
Just a quick reminder that this week’s Division 1 prize pools total more than $35 million! The week kicks off on Tuesday May 30 (draw 641) with an $8 million Super7’s Ozlotto jackpot. On Thursday, Powerball Division 1 prize pool is $3 Million (Thursday June 1, draw 524) and Saturday night’s Tattslotto Superdraw (Sat June 3, draw 2595) is offering a $27 million Division One prize pool !
Don’t miss out! Drop in to your local Tattersall’s Outlet, or purchase your Super 7’s, Powerball and Tattslotto entries online.
Good luck for the draw!
So opens the email from Tattersalls. The purchase online message is bold in the email and a link to their website. In Queensland, newsagents receive trail commission for a short time from online business. Elsewhere they receive nothing. So, while we continue to provide brand building effort we receive no compensation for helping the push to online lottery purchases.
Visit any newsagency today and you realise the importance of lottery business. Tonight’s OzLotto has jackpotted to 8 million. If other newsagencies are like mine they will experience a 33% sales jump not only in lottery sales but other categories of the business.
We put Australian Women’s Weekly front and centre of our shop last Wednesday for five days. We achieved a welcome sales kick compared to the same first five on sale days for the previous four issues. We broke the rules, ditched the glossy brochures, took the magazine out of its usual place and created our own basic display. The result is a 45% increase compared to the previous best first five days. This demonstrates the value of a non-corporate local newsagent approach to pursuing sales growth and that impulse sales can be achieved for a title like Australian Women’s Weekly.
While the publisher prefers and rewards kick arse retail displays, it’s more basic activity like what we did last week which is more valuable to them. Newsagents are rewarded weekly for feature magazines displays. Our display would not receive any awards. However, the sales kick we achieved is greater than what you would get from any pretty display.
Respected Merrill Lynch analyst Lauren Rich Fine has written a report titled “DEEP Depressing Dive”. It’s an outlook on the newspaper industry in the US. While I’ve not seen the report there are sobering quotes in stories at MediaPost and Editor & Publisher. We’re at least a couple of years behind the US here in Australia. This is in part due to a strong distribution network (newsagents) and more entrenched consumer habit which harks back to the newsagent network.
Publishers are chasing sales outside the newsagent channel and while I understand that, they stand to gain more by supporting the newsagent channel and therefore reinforcing the newsagent visit as pat of daily life. My contention is that greater focus by publishers on newsagents would achieve more (a sales kick or less of a fall) than chasing petrol outlets and coffee shops where the publisher has less influence over the representation of their brand.
Since Burke’s Backyard was taken off TV, sales of the magazine of the same name have been falling in the newsagencies I see data from. What was once a strong title is fading fast. This is disappointing because the product is good – but not sufficiently top of mind to be self supporting. The category is strong – Better Homes and Gardens sales are as strong as ever. My feeling is that the fall off for Burkes Backyard is greater than we saw for Money when that TV show was taken off the air.
Even at a few weeks away magazine and newspaper sales are such that the World Cup lead up has been more economically valuable to my business that the entire Commonwealth Games.
After man-years of effort, we felt ready yesterday to send this fax to newsagents announcing Find It, a place for people to buy, swap, sell and find. I mention it here to declare my commercial interest in the classified advertising space. Find It is two months away from beta release. The challenges for a start-up in the online classifieds space are not lost on us.
The Herald Sun World Cup medallions are proving popular with customers. In fact, all things World Cup are selling well.
I’ll let you decide. Read what ‘gingerkitty’ wrote in her entry My phone conversation with the asian newsagency owner on February 23 this year.
Age customers were annoyed yesterday by the post-it ad on the front page. Many pulled the ad off and left it at the counter. Several had questions about the subscription offer (which we could not answer). I’m not that thrilled by a campaign which stands to cut my retail sales and profitability of the title. A better return could be achieved with a loyalty offering for regular retail customers.
Further to my post a couple of days ago about the San Jose Mercury publishing print ads online, I am reminded that the Melbourne Observer publishes the whole newspaper online as a PDF file. They have been doing this since September 2002. They tell me: “anecdotal evidence suggests that many Melbourne people who are introduced to the paper via the Internet, convert to becoming newsagency customers to buy the Melbourne Observer ‘hard copy’ each week”. The Observer is a popular title especially among the demographic frequenting my newsagency. What I appreciate is their support in the pages on the newspaper. This builds loyalty from retailers and consumers. Another Observer feature gaining more attention is their free classifieds. With the demise of Trade and Exchange I’d expect this to grow in popularity.