“If you are a small newsagent, paying Carriage Charges within the minimum and maximum bands determined by your wholesaler, beware of stealth cuts to your income.
What is happening is that an increasing number of regional publishers are giving up direct delivery to retailers and handing over delivery and unsolds collection to your wholesaler. Recent correspondence with Smiths News confirms that the value of these supplies will be added to news sheet values (when their periodic review of Delivery Service Charge (DSC) next takes place) and retailers will start paying carriage charges on the value of the regional title(s) delivered by the wholesaler, effectively cutting the retail margin on these titles.
The only way that individual retailers can effectively combat this is by taking control of the selling price themselves. However, this is difficult to do if it has the effect of making the retailer less competitive to the point of losing sales.
What truly stinks about this process is that this stealth cut only affects small independent retailers. Larger retailers, and (one suspects) all multiples, will be completely unaffected. This is because of the relatively low maximum cap on carriage charges which means that the multiples are already receiving free delivery on every £1s worth of supplies they receive over the maximum cap, unlike small retailers who pay carriage charges on everything they receive. Looking at this in percentage terms, it means that multiples may well be paying less than 1% of their weekly news sheet value in carriage charges (possibly equating to 0% when display allowances and other overriders are taken into account), whereas typical independent newsagents may be losing 5 to 10% of their meagre margin due to carriage charges.
Is this fair? No, of course it isn’t. It also raises some serious question marks also as to whether this is legal. The Competition Act 1998 prohibits agreements that discriminate, e.g. between customers (retailers are an interim customer) for example by charging different prices or imposing different terms where there is no difference to the service that is being supplied.
So are independent retailers being discriminated against versus the multiples? We believe the answer is a definite “Yes”. Whilst there will always be a case for volume discounts (overriders) there is no justification for enhanced terms, through the ruse of “display allowances” or contra deals on advertising, and certainly nothing that justifies independent retailers having to pay carriage charges for all the supplies they receive, whilst multiple retailers only pay a fraction by comparison.
Is there any wonder that independent newsagents continue to lobby for the abolition of carriage charges? It is an archaic system for paying distribution costs that only exists in the first place because publishers and wholesalers are allowed by the Competition Authorities to employ their monopoly power to impose it. Is it an abuse of market power? You would need to have rose-tinted glasses to believe that publishers don’t take carriage charges into account when awarding margins for wholesaler contracts, and expect wholesalers to fund these uneconomic contracts through carriage charges…effectively meaning that retailers are subsidising the route to market. And are they anti-competitive? Well you know this is true when you see how wholesaler templates are skewed to ensure that the bulk of carriage charges are collected from independents, whilst comparatively, multiples are lightly treated.
This stealthy move by regional publishers to transfer distribution costs to retailers, thereby reducing the terms of small independents as a result of higher carriage charges, is one more example where independent newsagents are inexorably being strangled to death.
Will no one in the industry put a stop to this? If not, then isn’t it time the Competition Authorities stepped in?”
