The new & magazine sector has not had an easy ride of late, but retailers who are going the extra mile are still delivering healthy profits. Robin Mannering reports
News and magazines isn’t a category retailers are rushing to exploit. It remains an embattled sector, fending off the combined threat of the internet and recession, and chained to a monopolistic supply chain. So why is it retailers are clocking up healthy profits from it, and even seeing its value grow?
For one, in the right circumstances and with the necessary level of commitment, home news delivery (HND) is still a service in demand. Award-winning news trader Jon Ellis, of Town Common News in Christchurch, Dorset, recently doubled his HND service after a competitor shut up shop. “We bought his HND list of 200 customers and haven’t lost one customer since,” he says. “HND was doing fine anyway - we win about the same amount as we lose - so this was an added bonus.” Jon, who was named News Trader of the Year at the Convenience Retail Awards 2011, insists that HND remains a reliable business for those considering entering the market. “It is not dependent on the weather, or other factors,” he says. “It’s also worth getting into because no one else seems to want to offer it.”
HND also provides a reliable income for Ramesh Shingadia, of Londis Southwater, West Sussex, accounting for about 40% of his overall news and magazine sales. “A lot of retailers shy away from HND, but it significantly boosts our bottom line,” he says. “It can be a bit of a challenge, especially with getting enough youngsters to do the rounds, but luckily we have the highest proportion of young people in Sussex here in Southwater.”
Ramesh employs 10 newspaper boys and girls, and has a waiting list of young people itching to supplement their pocket money. But although delivery charges cover the cost of employing the newspaper boys and girls, HND requires time-consuming paperwork. “There’s a certain amount of due diligence that you have to manage: insurance making sure they’ve got lights on their bikes and helmets and making sure their bikes are in good shape. We also have to get parents to sign for responsibility. It can be a bit laborious,” he adds. “Every month we’ll also do a big audit on their bikes, unannounced - if they don’t have everything in order we’ll highlight it to them.”
But the box-ticking is worthwhile, and employing newspaper boys and girls can also prove to be a useful recruitment process. Says Ramesh: “Some of them end up working in the shop, so it’s a good way of finding reliable shop staff.”
Malcolm Crump, of Spar Compton, near Wolverhampton, says about half of his 32 news delivery team are adults, possibly due to high unemployment in the area. He has a massive 800 HND customers, down from a high of 1,000, but with the help of marketing he is still picking up new business. “We advertise HND at the front of the store and we deliver flyers to people’s houses when they move to the area,” Malcolm says.
Aside from HND, Ramesh admits that the category has seen better days, but he has successfully taken steps to stem the decline by streamlining and remerchandising the news stand. “We were overstocked on magazines so we did an exercise with Londis whereby they removed a number of under-selling magazines, and we started to give full face to all other magazines,” he says. “We also reduced the size of the news stand from nine metres to seven metres, and moved it to the back of the shop.” The exercise resulted in a 10% increase in sales.
Stocking the right magazines is paramount, and one way to generate demand for a title is to respond to major events. Last year, Jon took advantage of the Olympics to promote relevant specialist sports magazines. “During the Olympics we put up window displays of magazines about taekwondo, swimming, cycling, you name it. People didn’t know such titles existed, but they started buying them after they started watching the sports on TV. We got six orders out of that,” he says.
“The trick is to seize the moment at the time and just after the event, as it will be forgotten after that.”
Malcolm has also noticed a slight increase in sales of cycling magazines as a result of the Tour de France and the Olympics, while Ramesh says special interest magazines such as equestrian titles are doing well. Otherwise, the recession and competition from the internet is taking its toll on magazine sales. “People are moving away from monthlies to weeklies as they don’t want to spend £5. Otherwise, it’s all about the usual TV and women’s magazines,” Jon reports.
Controlling the supply of magazine titles remains a major issue for many retailers. “Independents argue that wholesalers don’t give them enough attention, but the wholesalers argue that they’re not getting the compliance from those retailers,” says Ramesh. “Londis is moving key stores towards compliance, and if more stores move that way they’ll get the supplies they want.”
The issue was central to the National Federation of Retail Newsagents’ (NFRN) and Association of Convenience Store’s argument for the OFT to review the industry. Now their appeal has been rejected, the NFRN has decided on its next move. It wants an amendment to the Competition Act 1998 to enable independent retailers to have more control over the supply chain.
As the legislation currently stands, if any two or more independent retailers were to get together and delist a title in protest, the relevant wholesalers and publishers could sue them for collective action under the Act. The NFRN wants it amended so small businesses are allowed a limited ability to act collectively in markets characterised by “tolerated operational monopolies”.
In the meantime, retailers such as Jon, Ramesh and Gordon are proving that there is life in the old industry yet.•