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

Why some bank manager’s don’t understand the value of a newsagency business

The views of bank managers are given too much attention in my view. However, sadly, they are the gatekeepers to business funding. So, they are listened too.

A bank manager recently said to someone why would you buy a newsagency, they are going nowhere. It was a generalisation, not based on any business financials, not considering the transition already achieved in a business. It was ignorant and unhelpful.

Why would you ever listen to a bank manager. They are idiots. Yes, another generalisation, which is equally unhelpful.

The challenge for our channel is that banks have models that are out of date, models based on an assumption that all newsagency businesses are the same – when they are not.

The value of a business flows from its P&L, the business plan and the track record of those seeking the loan. The historic performance of the channel is not relevant today. 

I know of newsagents achieving excellent growth. Most would not identify as newsagents but they have enough elements of a newsagency for them to fall under that retail channel category. While the growth is coming from non traditional categories, it is sustaining legacy aspects of the business, keeping services and products represented in regional and rural locations.

This is why the out of date modelling by the banks as represented by their managers is unhelpful for the transformation many of us in our channel are passing through.

Bankers should understand this as they are transforming their model too. That is why the quote at the start of this post is frustrating. It is ignorant and harmful to all in our channel.

If a bank manager says there is no future in a newsagency consider saying: I agree, there is no future in the traditional newsagency you might be thinking of. But, hey, that type of business has not been our model for years. Yeah, we left it behind and embraced something with new categories, new traffic drivers, better margins and lower operating costs. That’s why your banker model of a newsagency does not apply to our business.

Newsagents who are looking to sell their business should lean into this line of thinking. They should be on the front foot, addressing this issue before it is brought to them.

Bankers are frustrating. I remember a time when their opinions were based on what they saw and who they met outside their office. Today, their opinions are fed from out of date business modelling that is certainly not relevant to what may newsagencies are.

Footnote: in the headline I say some because there are some bank managers who think for themselves. They are a rare breed that we should cherish should we be lucky to find them.

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buying a newsagency

Why a newsagency can be a good business to buy

I am often asked if a newsagency is a good type of business to buy.

Any newsagency is a good business to buy to the right purchaser, the person most suited for that business.

The answer really does come back to the purchaser because they may have skills ideal for a specific business. Equally, they may lack skills essential to a particular business – making them not the right purchaser.

Its also depends on the specific situation of the businesses and the opportunities for it.

The question demands a thoughtful answer and the answer will depend on who is asking, their skills, their resources, their experience, their fitness, their desire and their hopes and plans for the future.

While the business they are asking about is important, I see the answer as relying more on the person themselves. This is why I say any newsagency can be a good business to buy and often is.

I have a lot of confidence in the channel even though what the channel stood for in the past is changing rapidly, faster than ever before, to the extent that the channel is not the channel. But all of that is good in my view for I love change and the opportunities in change.

So what if we are not called newsagents. Our roots are our roots. What we are called tomorrow is of little matter.

There are plenty of good newsagency businesses for sale today with good financials and good upside prospects.

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Newsagency challenges

Tough trading results for Reject Shop

The Reject Shop has had a tough year. Their annual results indicate a sales decline of .8% and a decline in profit from $16M last year to -$16.9M this year. While some of the loss is due to write downs, trading appears to be challenging for the group.

I think any business that pitches low prices on known brands as the key reason to shop with them will always be vulnerable to attack from others playing the same game.

Genuine differentiation is key in retail. The best differentiation is one where you have control, where it is your asset and therefore is not easily copied.

The Reject Shop plays in a range of categories important to newsagents. It is worth taking the time to read their annual report and to look carefully at their businesses. It includes this from the Acting CEO:

The sales decline was compounded by a reduction in our gross margin which reduced through the second half. The reduction in margin was the result of the following factors:

  • ƒ  a response to competitive price pressures which resulted in price roll backs;
  • ƒ  increased markdowns to clear product in support of simplifying the shopping experience; and
  • ƒ  as a result of responding to the shift in elements of the merchandise strategy which resulted in clearance activity.

Additionally, we experienced a significant increase in our shrink results on the prior year. We are progressing through a plan to reduce the impact of shrink.

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Competition

Promoting a raunch title available in some UK newsagents

I noticed this tweet today promoting an R rated title that is available in the UK. Most Australian newsagents I know got out of adult titles years ago.

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magazines

Check that you are backing up your data

Another newsagent this week has to rebuild their business data from scratch because they did not have a back-up and their old computer died. They didn’t have a backup because they couldn’t bothered doing it every day.

Now, their hope of selling the business is at risk because they cannot prove their sales claims.

Not backing up every day is stupid. The cost of cover from this could be thousands in terms of IT expert fees or even more if you are looking to sell your business in the next year and do not have current business performance data on which to set a price.

Oh, and if you are backing up every day, have it checked to make sure you are actually backing up.

By backup I mean taking a copy of data on a USB stick or some other device for safe keeping or, better still, a cloud backup facility whereby a perpetual offsite backup us undertaken.

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Management tip

Afterpay Touch has let newsagents down

The customer service from the team at Afterpay Touch over the last week has been dreadful. While they fell victim to problems caused by updates to windows by Microsoft, the communication from Touch has been slow coming and inadequate in content. This has pushed newsagents to others for help that should have come from the company itself.

Like so many big suppliers to our channel, Afterpay Touch has not provided care small business retailers as it should.

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Customer Service

Father’s Day front of store

We have been rotating product categories through with our Father’s Day card pitch. Our most recent category focus with two of our four bays of Father’s Day cards is jigsaws. What you can see in the photo is on the lease line – with two cards of cards behind.

This particular shop is located in the busiest entrance / exit arm of the shopping centre, making lease line placement critical.

If we don’t see measurable take up in two or three days of a pitch, we replace it.

The jigsaw category is strong net traffic driver for us, hence this placement with Father’s Day cards.

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newsagency marketing

Business guru Mark Bouris: small business retailers will be winners from a retail recession

The opinion piece from Mark Bouris published at news.com.au over the weekend should encourage small business retailers. It is a reminder of what is unique and valuable about small business retailers, local retailers.

Bouris notes the indicators of a coming retail recession and explains why local small businesses should do well from it. He compares the local shopping experience with online:

But contrast that with the last time you popped into your local butcher, for example. The person behind the counter probably knew your name, knew what you wanted, and was in a position to offer you expert advice on what was fresh, what to buy, and how to cook it. That’s the kind of personalised service that goes a long way to convincing a shopper to part with their hard-earned, and it’s the kind of shopping experience that only small retailers can provide.

And it’s not just butchers, of course. I was walking down Glebe Point Rd in Sydney the other day and spotted bookstores, cycle shops, boutiques and antique stores, all staffed by experts in their field, ready and waiting to assist customers in any way they can. And happily, there were plenty of customers, too.

The mistake I most often see small businesses make is trying to compete with the giants of their industry. But it’s actually what sets you apart from the big boys that makes the difference. And that’s more true now than ever.

This goes back to the three questions I asked last week as they relate to differences small businesses can bring and evolve, to differentiate to big businesses as well as online businesses…

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Small Business

Tabcorp reports 39.8% growth in online lottery ticket purchases

The Tabcorp 2018/19 Annual Report will be sobering reading for any lottery retailer for in that year, revenue from online lottery ticket purchases rose 39.8% from the previous year. For reference, online revenue grew 22.6% in the FY17/18 year over the FY16/17 year.

While the company refers to this shift in revenue source as part of its omnichannel, I see it as a migration from in-store purchase to online.

They have sought to support retailers with a modest increase in income, which has complex strings that keep retailers positioned more as servants than partners.

The size of the increase in Tabcorp’s own direct sales does not directly correlate with a decline in sales in-store. However, it is happening from what I can see at some stores. As a lottery customer, the benefits of online and in-app purchases far outweigh the in-store.

For its future, Tabcorp needs to continue to push growth in online purchases as they are, I suspect, more valuable to the company than in-store purchases. With retailers playing such an important part in brand awareness and facilitating access to online, the company needs to keep them in check.

I don’t have lotteries in the newsagency businesses I have today. I did have years ago, but not today.

At some point, decisions will be made by retailers along the lines of decisions some of made many years ago about our home delivery runs. There will be a point when the requirements, price retail space cost and all the hoop jumping is not financially worth it.

What can help retailers today with a decision they may wish to make in the future is success at attracting new shoppers for purposes other than to buy a lottery ticket.

Tabcorp’s latest results are to me a strong call to retailers to relentlessly pursue non lottery new traffic opportunities cities through their businesses. Lottery retailers who do not do this will see their business results perform in line with the results achieved by Tabcorp. If the company continues to successfully grow online purchases and if that is achieved at a cost to in-store purchases then lottery focussed retailers will lose revenue and business value.

To be clear – I am not criticising Tabcorp. If I was a shareholder, which I am not, I would applaud their strategy. My criticism, if there is one, would be at retailers who are not acting already to make their businesses more relevant outside of lotteries. This is mission critical in my view.

Note: the image is from the Tabcorp published investor presentation.

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Lotteries

NT magazine delivery issues

I have heard this morning that magazines are not getting out of the TNT warehouse on Mondays, leaving NT newsagents without key weekly titles. I’ve reported this to Ovato.

UPDATE: 10:15am. There was a unique situation last week that disrupted deliveries. It has been addressed.

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magazines

Leveraging mindfulness in the newsagency

We have given the expanded range of mindfulness magazine titles better positioning and less noise nearby, to make the most of growing interest in this topic.

This move, which we made on the weekend, was a no-brainer given the increase in sales of mindfulness related products. The move also lends itself to social media support, to pitch to folks in the area who may want to check out these titles.

While, for sure, the low margin on magazines is frustrating, a move like this we have done for mindfulness required minimal time and no capital. It’s a small-step reminder that we are relevant magazine specialists, even if our range is less today than a year ago.

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magazines

The power of social media

Social media gives everyone a voice. This is one reason why we retailers need to engage with it, to understand this, to leverage it ourselves and to be aware of hour it is used. Here is one example from the latest Alan Jones scandal. He made an appalling comment about the NZ Prime Minister and some on social media called for people to boycott advertisers on his show. Regardless of where you sit on the issue about which Jones spoke, this tweet is democracy in action.

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Social responsibility

One of the best Father’s Day cards

When you combine dogs and the Star Wars licence franchise you have a winner and that is what we have with this Father’s Day card from Hallmark.

We are featuring it full face for impulse purchase as people need to see the whole card and not just the top 20% as is often the case  with regular card fixturing.

I expect this card to sell out.

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Greeting Cards

The value of pre-orders

We have a pre-order opportunity we are running right now for items that will sell out quite fast. By offering pre-order, we are paid in full weeks before we take delivery and two months before we pay for the goods.

Retail today, in-store and online, is a race to the cash. A well managed pre-order process is key to success with this race.

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Newsagency management

Retail turnaround tips for newsagents experiencing flat sales – small business retail advice

In May 2010, I posted Retail turnaround tips for newsagents experiencing flat sales. This was a post in response to reported flat retail sales.

We are at that place today. retail sales are flat. There is plenty of bad news being reported.

Here is an updated version of that 2010 post…

If your retail sales are flat and you are doing the same things today that you have been doing for the last year it is not good enough.

Business will not come to you. You have to go out and find it – often through a series of small steps as opposed to a big bold move. You have to obsess about presenting a compelling offer to everyone walking through your door.

Price is not a point of difference.  Shoppers expect us to be expensive. That has been shown in plenty of consumer surveys. Railing against this is a challenge. We can do this for some categories and at seasons but not across the board.

Being unique differentiates. The mix requirements of our shingle make that a challenge.

Here are some tips for retailer newsagents on responding to flat sales:

  • Refresh your head. Work out what you want for your business and those who rely on it. Make a plan. Live the plan. Success is in your hands.
  • Lock the office door. Only rarely do you make retail sales from the office. The shop floor is where the action is. Play there.
  • Refresh what you sell.
  • Refresh the counter. Many newsagency counters look the same, boring, what you see in other stores. Create something different and fresh. Take everything off and rebuild the counter with the purpose of selling product on impulse. Make strategic choices. Your counter should NOT look like a newsagency counter.
  • Refresh the window. Tell a story. have fun. Cause people to stop and look.
  • Refresh the shop. Change change and change. Move departments and categories. Make the shop feel fresh to regular customers and to your team. Make strategic choices about what products go where. Use dump bins for specials. Place impulse products next to high traffic products. Once you have undertaken the big moves, create a plan for continual change each week. Change shows that the business is a, living and breathing thing. It can make the shop appealing to new visitors. Newsagents who don’ change their business reinforce that the model is a retail dinosaur.
  • Refresh the team. Let your team know than business is tough. Ask for their ideas. Take some time out of the business to relax over a meal or drink or some other social activity (mini golf, go kart racing, fishing, bushwalking) and share an adventure outside the business. Sometimes getting away like this can get creative juices flowing about changes which can be made back at the business.
  • Ask suppliers for help. If your business is slow it is likely that your suppliers are finding it slow too. Ask them for some good value deals – not the stock they can’t sell but the stock they have plenty of and which sells well.
  • Lure customers back. Look at the top selling items in your businesses. Create a strategy for getting these customers back. Create a small flyer offering a discount on something if they come back in, say, a couple of days. Do this leveraging your top traffic products.
  • Create events. Give people more reasons to visit your shop other than to specifically buy something.
  • Use social media properly. be your platform for marketing.
  • Connect with the community. Go to community clubs and offer a discount to members and a rebate back to the club for business their marketing efforts on your behalf deliver. This is easy to setup and manage. The more people you have in the community saying to their friends that they should shop with you the better.
  • Ode to you. Run a competiton to find the best poem which reflects why your business is important to the local community. Get the finalists in to read them live and get your customers to vote. Maybe the local newspaper will run the winner?
  • Crazy ideas. Think outside the norm. Nude day has been done so has the underpants idea where customers get a discount for shopping only wearing underwear.

Stop talking about it. Yes, retail is tough. Talking about will not improve your situation. Doing something is better than talk.

Change is oxygen to any retail business regardless of its current sales health. Doing nothing in tough times will make the tough times tougher for you.

Personally, I am optimistic about the future for newsagents … that is from 2010. It is true today.

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Newsagency management

Urgent Touch Networks Support Bulletin

There is a problem affecting all AfterpayTouch customers, regardless of what POS system they use. It is apparently an issue between Visual Basic and Windows. The Touch software is written in Visual Basic.

Touch is un-commissioned when attempting to sell vouchers. It seems to have occurred after the latest round of Windows updates.

The Tower help desk has received more than 30 calls so far. We have been in contact with Touch and are awaiting an update from them.

For Tower Systems customers please keep an eye on our private Facebook group and your email for an update once we have heard from Touch. We anticipate they will release an update to address the issue.

If you run any other software written in Visual Basic this may be affected. Note: the Tower newsagency software is not written in Visual Basic.

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Newsagency management

Crikey: Could a boycott of News Corp work?

A report from Chris Woods at Crikey Tuesday about whether a boycott of News Corp. titles could work is interesting reading, especially for newsagents and other retailers of newspapers. Click here to access the report. Here are the opening pars of the article…

Over the weekend, two major things happened in the News Corp universe.

First, The Australian launched a new page technically titled “gender issues” that, coincidentally, is 99% directed at trans people. Of those, the majority either focus on the Prime Minister’s squeamishness about trans people playing cricket, fear-mongering over Victoria’s new birth certificate laws, or flat-out lies about people “castrating children”. The folks at Junkee go into this further, but the short story is that no, neither early childhood support or latter-stage puberty blockers are anywhere near the same thing as castration.

Secondly, journalist Rick Morton published his first major story since leaving The Australian, which, not for nothing, covers a world-first study examining how News Corp papers embolden far-right groups that use stories around safe schools and immigration as recruitment tools. Morton joins a growing stable of journalists and editors who have left the media giant.

Both these events didn’t come from nowhere — and they have both helped spur existing campaigns against News Corp, each targeting different facets of the organisation. But can they work? Crikey looks into the realities of such a disparate push.

What interests me is that social media has evolved into an easy to access protect platform through which people can organise. This is a risk for News Corp and its use of its newspapers and other media outlets to yell at people. push agendas and tell people how to vote.

Regulars here will know I have been interested in the newsagent boycott of The Sun in the UK. I wonder if that could happen here now that there are more respected former News journalists outside of News Corp.

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Ethics

Learning from Coles on pitching Father’s Day cards

Coles supermarkets have a consistent front of store Father’s Day card pitch this week.

The location is strategic, something newsagents should consider if they =are not pitching Father’s Day cards similarly already.

The other smart move is a stand of birthday cards next to Father’s Day cards.

It pains me that Coles is doing cards so well across their fleet of stores.  I’d prefer newsagents were as consistent nationally in this commercially vital category.

I encourage newsagents to take a moment to ensure Father’s Day cards are being pitched front of store and that a birthday or other mix is pitched next to them. It is vital that every shopper entering and exiting the business sees the range as Father’s Day card purchases are more likely to be on impulse.

We have had the season up for a week and a half at the entrance and it is working well.

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Greeting Cards

Bank closures making cash less appealing to regional and rural retailers

More regional and small business retailers are being challenged with banking cash as banks retreat from branch and even deposit ATM service in more locations.

Talking to a newsagent yesterday, they mentioned that for them now banking cash involved and two hour round trip with no other bank or ATM nearby to manage cash deposits.

With lottery revenue being swept twice a week and other demands on cash, they are currently making four trips to the bank each week with the hope of cutting this back to three a week. They are actively considering going cashless as a result because of  the six hour saving and the release of additional cash they are holding to cover when they cannot get to the bank.

If you cost up the six hours of travel time, other banking time costs of around two hours a week and fuel, you can reach between $250 and $300 a week. That is at least $500 to $600 in revenue cost.

If I was affected by this I’d be writing to my local federal and state politicians, the banking industry ombudsman, the small business commissioner as well as media outlets.

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Social responsibility

The revised gift to card revenue ratio for indie retail newsagents

There was a time when newsagents would aim for a dollar in gift revenue for every dollar in card revenue. Back then, cards pulled shoppers and gifts were the add on.

Today, there are engaged newsagents who achieve a gift to card revenue ration of 2:1 and 3:1. That is, they are easily achieving $2 in gift revenue for every $1 in card revenue. I think this is the starting point benchmark for gift to card revenue. Anything above that is bonus.

I have seen data this week from several different newsagency businesses, city and country, achieving gift revenue of more than $175,000 a year with card revenue sitting at $80,000 and with both growing.

Growth is the other piece of this. Growing gift sales sets you up for terrific growth in card sales. North in both good margin categories can provide a GP$ base that helps the business deal with rising lease and  labour costs.

We make our own success.

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Newsagency management
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