Threat to magazine sales

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Distribution newsagents in South Australia are questioning whether it is worth distributing magazines at all as the returns for their efforts fall below 4 per cent.

Long-time distribution specialist, John Fitzpatrick from Portside Newsagency, says out of and annual $263,000 payment for magazines to distributors the bottom line is just $9,570 or 3.75%. He and other agents say the margins are just too tight to be sustainable.

“We only have to lose one subagent to direct supply and we start losing money and will cease delivering all magazines across our territory

“I believe in magazines, but losing money or just breaking even, means in the medium term we will probably close our accounts and that’s really sad for the end reader and a sad end for all those editors who work so hard to publish their titles.

ANF state manager Colin Shipton says that more top selling titles need to be provided and newsagents trusted to know the numbers required.

“This is a frustration of many newsagents where the top titles are undersupplied and slow moving titles oversupplied.

“If distributors offered consignment stock (sell now pay next month once returns are sent back) to every newsagent or delayed billing (which most newsagents love)- many, many more magazines would be sold each and every week as the newsagent would have an incentive to not early return as much stock. More magazines would definitely sell because of the cash flow ease and there would only be a one month settling in period of the way monies/ accounts are currently paid by distributors and publishers.”

This problem will increase as retail and delivery functions separate across all states and newsagents discover that 12.5 per cent is not enough compensation for the work involved. With magazines sales falling and early returns growing new arrangements need to be made to prevent a catastrophic drop in magazine sales.

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10 thoughts on “Threat to magazine sales

  1. It is going to be important that both Distributors and Publishers read this article and act on suggestions or find solutions to prove that the newsagency channel is still important and the best way to sell, display and promote the largest selection of magazines-not just the top 40 that some retailers offer.

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  2. i have stopped delivering magazines to my 15 territories that i service due to the reasons outlined above. I have not missed them for one minute.

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  3. Why is it that we humans continue to do things that we know don’t work. If you always do what you have always done, you’re always going to get what you have always got. To expect anything else is insane.

    Every year some $ 215 million dollars are expended by parents to equip their children for the start of the new school year. Why is it that so few Newsagencies take advantage of this lucrative sales season by failing to provide a school booklists service for their local schools? Newsagents occupy the best retail real estate in the country, often walking distance from schools, often in traffic areas where parents shop every day, they stock or can source items typically on a booklist. Their prices are often lower than supermarkets and the list goes on and on.

    The evidence of the success of businesses who are doing booklists for their local schools is compelling. They’re making money every year and increasing their market share of schools and better than that – they are in complete control of their lives. No publishers telling them what they can or can’t sell or dictating what profits are going to be.

    If more newsagents considered creating a relationship with a few local schools they would quickly go from picking up the scraps left over from the chain stores and turn themselves into the “go to place” in their area.

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  4. The ADA Group, Australia’s largest Newspaper Distribution business walked away from magazine distribution from the two current magazine distributors when they:
    1. Couldn’t supply the product as ordered every time our business grew by merging territories.
    2. Added administrative work to our Early Morning Supervisors when they arrived for their early morning tasks and found that the printed run sheets were no longer relevant to the 400 sub agents we were to supply.
    3. No matter how hard we tried to implement a system to advise our customers that although they ordered 10, that we dossed it out and marked 4 it still created tens of dozens of calls incoming to register the sub agent short supply.
    3. Created additional administration work to credit and/ or re invoice all of the subagents… a task we had prepared the day prior.
    4. Like a bad contractor who misses delivering the daily newspaper to a customer over and over that creates a negative view on the operating business– the magazine distributors no matter how hard we tried made us look incompetent.

    I remember the day we sat around the table trying to convince ourselves that Newspapers and Magazines went together and what a brave move it would be to call an end to that scenario.

    Like the US President contemplating the “lets go to war” decree, we went through all the reasons why we couldn’t, we then made the decision that we would….made the call to both Magazine Distributors and it hasn’t made one iota of a difference to our bottom line.

    We want to distribute magazines, its in our DNA and makes sense however the model for the future is about ordering stock direct from the Publishers in bulk cutting out the distributor and lowering the cost of the magazine. We’ll split the stock and send the goods to our sub agents, we’ll make sure our sub agents are compliant with scanned data where we will do cycle counting of returns. Our customers will pay us on scanned data and throw the magazines in the recycle bin where they eventually end up after the current fiasco returns process.
    The sub agent and Newsagent will receive an increased margin for magazines on his/ her shelf because we’ve driven out the archaic costs to get the goods into the shelf… now as a seller of magazines I’m excited again by the magazine business….the current system is not sustainable and will die…it takes guts, determination and a bit of stupidity to make a call like we did…a decision we reflect on as one of our finest.
    Again I say, we want to distribute and sell magazines— will the Publishers have the guts to make an equal call and find a solution before they find themselves selling the best 20 titles in most stores?
    http://www.adagents.com.au

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  5. Magazines are increasingly becoming a burden on our business. The reason for this is two fold, diminishing sales and increasing administrative/distribution costs. Magazines will always be around and we want to be part of the Magazine distribution process. However, to expect us to continue will require the Distributors (Gordon & Gotch, Network, IPS) to take a long hard look at the current system.

    There are at least 6 steps to getting a magazine onto a retail shelf and another 4 to process the return back to the supplier. This includes electronic downloading, physical handling, labelling, despatching, collection etc., and each step of the way is a huge cost in time and effort to the Newsagent. If a magazine is not sold, then we make nothing on it, in fact we have spent hard earned money and time for no return and this makes a mockery of the “Sale or Return” system, which Magazine companies constantly remind us is a system we can’t lose on!

    As well we are repeatedly having more and more titles dumped on us. Cut out a title and up pops another 2 in its place, overseas niche titles just seem to keep on flooding the market and granted they may sell in some Newsagencies, but unlikely to sell in the absolute majority. It is very concerning when one looks at their magazine sales and observes that 95% of sales are done from less than 10% of magazines titles! The niche titles that we continually receive and which “cost” us the most to get to the marketplace (especially barcode labelling overseas titles), are the ones that we constantly receive back unsold from our Subagents. And for what? So as to fill a void on the shelf in the hope of getting a sale?

    We can’t live on hope and chance that an item may sell. Granted that is how retail works, but at least other retailers get to choose what they sell and their expertise lessens the chances of not being able to sell a product.

    The Newsagent is struggling. Diversification is all the rage and rightly so. Magazines are experiencing declining sales, compounding year on year and we’re unable to halt the decline. The Distributors are still getting their “cut” of the pie as they are paid by publishers to distribute their product and not paid on a per sale basis as we are. All their costs are factored into the charge they levy the publisher. As distributors ourselves (and in total DelX distributes to over 450 Subagents) shouldn’t we be able to be compensated in the same way?

    I admire Ken Wilson and Titan for taking a stance and choosing to cease magazine distribution, perhaps more Newsagents should look at doing the same and send a message to the distributors.

    Or we can sit down with them and take a long hard look at Magazine Distribution.

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    • Chris and Ken have outlined the issues very clearly and now it is over to distributors to work with the agents to ensure this is a win win for all. It would be a shame if newsagents refused to take niche titles. A shame for our cultural well-being and for newsagents whose offer would be much the same as supermarkets and convenience stores. The need to resolve this matter is now urgent!

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  6. A few years ago one of the major Distributors came to South Australia and asked Distribution Newsagents to “put in some skin” to a large Retail Corporation running 24 hour convenience outlets so that the Retailer could enjoy greater margins. Given the figures John has supplied, any reader would understand why the group of SA Distribution Newsagents were not in the slightest bit interested in reducing the 12.5% margin – to put it politely.

    We were then informed that a new model would be developed….no details provided….not even a broad scope was hinted at. A few years later nothing has changed. No new model, nothing changed in any meaningful way….still.

    The only reasons I continue with the magazine side of the business is because I don’t have a wages bill associated with magazines and so expenses are vastly reduced. The other reason is because I am not yet fed up enough with the amount of time that needs to be allocated to magazines for the lowish income. So, from a financial aspect, Newspapers are the big winners and from a time aspect it only takes one of us to do the Administration whereas the magazines take 2 of us because of the convoluted processes involved.

    I think for Ken Wilson, it was a good decision and if I had a wages aspect, it would also be my decision to close the Network & Gotch accounts because 12.5% is not sustainable in those circumstances. Doing a whole lot of work for next to nothing makes no business sense at all. Major Distributors say there is no more beyond the 12.5%. If that is their only answer, then magazine distribution as we know it will be finished faster as more Newsagents amalgamate and wages remove the viability.

    I think Ken Wilson is correct in that Publishers need to go direct to Newsagents. This will only work if Distribution Newsagents amalgamate the magazine aspect of their businesses to supply at least 200 Subagents.

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  7. Some great comments here and lets hope that Distributors and Publishers are reading this portal.

    I have recently met with one of the new Network Management team in Adelaide. We discussed many items but I explained that newsagents love ‘delayed billing’ because it gives incentives to promote an item.

    Notwithstanding. for over 4 years I have been stating to anyone who will listen a couple of options:
    Firstly, that magazine sales will increase if distributors only charged newsagents for their average sale of each magazine. Then only the magazines that are supplied over the average sale are paid for – if sold, and in arrears. This would mean that newsagents know they are only paying for what they normally sell, which helps cash flow, the agents enthusiasm, and agents all have an opportunity to sell more niche titles or even magazines that they may normally early return- which may sometimes be a waste of an opportunity of additional sales.

    Secondly, Publishers need to realise that they need distributors to change their thinking right now to help everyone make more money. Many newsagents I talk too state they need more of the top selling magazines. Returns don’t show the realistic sell out figures at all of the sub agents they supply so I am certain publishers would love to know they could sell more of their top selling titles at many sites.

    Do Publisher’s and Distributors want to sell more magazines from day one?
    Lastly, to me personally the obvious solution to increase sales would be CONSIGNMENT of ALL magazines. Newsagents pay the following month for what they have sold.This would mean only a delay of one month in the money cycle to the Distributor in most instances and you can be certain that the Publishers would see increased sales. Newsagents have already paid bonds to Distributors so I cannot see why consignment is not already in place and returns should never be paid for by the newsagent as it is the Distributor who must be accountable for this if they require the unsold and sometimes overstocked magazines back.

    Its now back to the Publisher to pressure the Distributors for this game changer and surely a win for al or more newsagents will want to speak directly to Publisher’s or simply step away from the high labour cost-low margin of magazines.

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