Glittering prizes

I have been asked to write about a few issues which, in my personal opinion, will be important in the future. (I opted for this rather than try to forecast sales in the next ten years!) However, at the time of writing it is difficult to know just what the future of the newstrade might be. We are currently in the middle of the thirty day period which was granted to the industry by the DTI, the purpose of which was to see if the industry could arrive at a collective agreement on the way forward. All this being prompted by the government’s plans for competition "modernisation" and its intention to repeal the vertical agreements exclusion (VAE). Newspaper publishers, in particular, are concerned that this could lead to the eventual loss of exclusive territory distribution arrangements. If this happened the outcome could well be as predicted by Professor Paul Dobson in his report on the threat of National Distribution which was commissioned by the NPA and published in August 2000. This forecast the closure of thousands of small retailers and the loss of millions of copies of newspapers and magazines.

However, I am an optimist and for the purposes of this article I am going to assume that the industry structure stays together. So what are some of the things I would like to see happen?

New outlets

Since 1993, when the MMC report was published, the number of outlets selling newspapers has increased to about 54,000 and now appears to be stable. At this level you would think that this should be more than enough outlets. But, particularly, in major urban areas peoples’ shopping and life style habits are changing and consequently these outlets are not in all the places where people now assemble to work or play. In order to maintain the sale of our newspapers I think we need to be in more outlets, but probably not in the type of retailers or locations that we would normally arrange. What about staff restaurants, coffee shops, bars and sport / leisure centres? All these outlets have high foot fall and, potentially, could sell newspapers. However, because of the nature of these outlets it is unlikely that they would be able to operate in the same way as a newsagent. To make it worth their while we would probably have to offer a package consisting of net margin, ie. no carriage charge and a reduced profit margin, supply racking and merchandising, ie. we put the newspapers on the rack, take away the unsold copies and provide a central accounting facility, if it is part of a chain. It is unlikely that these outlets will be terribly profitable, but when you think how much publishers spend on promoting incremental sale I would suggest they are worthy of serious consideration. Of course, in some situations there could be an alternative method and that would be to make these outlets sub retailers. Perhaps food for thought for the NFRN?

Tackling unsolds

If you want to wind up a publisher one of the most emotive phrases you can say is "pay on scan". There are various definitions as to exactly what it means, but basically retailers would only pay for those copies which they have sold or scanned. Naturally, publishers see this as retailers abdicating their responsibility with all the "shrink" in the system being passed from the retailer to publishers and wholesalers. Retailers do not see why they should pay for the inefficiencies of the newstrade as they see it.

At their most basic level both views may be true, but let us examine the issue from another direction. About 14% of all newspapers are returned as unsold copies and the level is over 30% of magazines. In some respects wholesalers have more sophisticated methods for dealing with unsolds than they do for despatching copies in the first place. Just imagine how much the whole industry could save if we didn’t have to deal with unsolds? I realise it is not straightforward and I know we would have to deal with all the issues of shrink, security and the risk of unsolds coming back through a different route. This is not easy and it is unlikely that we will be able to quickly remove unsolds across the entire industry. But isn’t the prize worth it? It has been suggested that, if we could remove unsolds, the industry could save up to 25% of wholesale costs. For an initiative like this to get off the ground it is going to need co-operation and trust amongst all parties and is going to involve working with those retailers that have good scanning and reporting systems. Are we brave enough to recognise the opportunity rather than continue to focus on the problem?

Home delivery

My final point for the future is not new and has been a major feature of the industry for decades. Home news delivery. Everybody knows that it is in decline for a variety of reasons, some of which are blamed on different parts of the industry and some of which are the consequence of social trends. Retailers say that publishers should do "something about it" and point out the advantages of firm sale and the committed copy. However, one fact which people often lose sight of is that home news delivery was invented by newsagents and is owned and operated by newsagents. Newsagents rightly see this as a valuable asset and publishers have tended to let retailers "get on with it".

In my view there is still a demand for home delivery, but the system needs substantial investment. Retailers might argue that this should be given in the form of increased profit margins from publishers, but this is not going to happen. Publishers recognise the importance of retailers in the provision of home delivery service, but in the future it will be publishers that will market the service and transact with the readers. I believe that in return for specific services (to an agreed industry standard) many publishers would be prepared to make a significant investment in home delivery, but they will not just throw more money at the existing infra structure.

One way of envisaging where we could be is to imagine a TV commercial with an extra ten seconds at the end saying that if you would like the Daily X to be delivered, ring this number now. The consumer would be able to arrange and pay for home delivery through a central order number. The system would then place the order with the newsagent who is designated to that area or postcode. The publisher, having taken the money from the consumer, (ideally via direct debit or something similar), ensures that the retailer is paid for the service probably via the wholesaler. For such a system to operate the retailers would have to be on line and to be registered with the call centre, together with the area they cover and their charges for the service. This would not stop retailers developing and operating a local service, but the main drive would come from the central marketing done by the publisher. "Inter home delivery" here we come!

I wouldn’t be surprised if I have now succeeded in upsetting many publishers, wholesalers and retailers. Also, I cannot pretend that what I have proposed is easy to achieve or that the process might not be painful. But sometimes we seem to focus on the difficulties rather than the opportunity. At the very least, I would hope that I have provoked some discussion as a result of this article.