ARTICLE TEXT:
IS
THIS THE PENDING DEMISE
FOR
NEWSAGENCIES ?
Why don't
some people listen and learn?
The
lessons of life and business can be hard. Consequences can
be brutal, swift and widespread.
Sadly,
too often because of a lack of foresight, sensitivity or
an unwillingness to take into consideration forecasts and
projections by external sources about evolving circumstances
lessons can be challenging, if not dire.
Take
for instance retail newsagencies. For a long time these
individual and collective businesses have been exposed and
vulnerable to the vagaries of fast evolving sector structural
changes.
CRITICAL
ANALYSIS
Critical
reviews would have (and indeed did) readily identified,
isolated and enabled analysis of certain business fundamentals
which needed to be addressed and redressed. Among the more
obvious aspects were:
BRAND
NAMES
There
has been a noticeable lack of broad spread consumer recognised
brand names in the sector. Some industry insiders will dispute
the proposition. However, repeated research has established
consumers possess little recall of newsagency trading names,
have isolated or marginal loyalty and are most influenced
in newsagency selection by the convenience/location of “their”
local newsagency.
Thus,
value propositions, with a few exceptions, are rare.
TOO
MUCH CONCENTRATION
No
business should be overly reliant on one or a few suppliers
or customers. As a rule of thumb, a 20% share is deemed
to be a maximum tolerable ceiling.
Sadly,
for many newsagencies revenue from Lotto, Lotteries and
like gambling activities constitute between 50% and 70%
of gross receipts. The margins are typically single numeral.
Hence, percentage rental payments can be and are burdensome,
taxing and profit squeezing.
A
looming reality is the evolution of on-line consumer purchasing
of lotto, lotteries and “Super Ball”. Physical distribution
and availability for a significant percentage of patrons
will become redundant and obsolete.
Compounding
that scenario is the increasing availability of newspapers
and magazines in supermarkets, service stations and convenience
stores. The recent world-wide release of the Apple I Pad
and competitive branded products have muddied the water.
Today,
regardless of the business, its size, nature or sector,
management and owners need to recognise their primary activity
is supply chain management.
Lack
of control of the supply chain or profound leakages in and
from it, exacerbates the exposure and vulnerability of individual
businesses, newsagencies in particular.
IT'S
ABOUT STRUCTURE
Many
people have chosen to ignore or dismiss our statements about
the fact that current economic circumstances are not part
of seasonal or cyclical trends, but rather are part of a
significant structural change.
During
the past decade and a half the attrition of newsagencies
have seen their national Australian numbers fall from around
7500 to some 4500.
It
is conceivable that within a three year period that number
will reduce further and with it will be the emergence of
smaller lottery kiosks which retail a limited number of
high volume selling newspapers and magazines, complemented
by a relatively broad range of cigarettes, cigars and related
products.
Sin,
it seems, still sells (in the forms of gambling and cigarettes).
WINNERS
AND LOSERS
Fortunately,
in a period of consolidation, rationalisation, mergers and
acquisitions there are inevitably winners and losers.
Newsagencies
per se will not disappear from the business landscape. A
few recognisable brands will evolve, shop sizes will change,
so too will product mixes. The introduction of services
will be the fore for those committed to developing their
business, increasing their relevance to consumers and seeking
to enhance the newsagency's value.
As
the level of professionalism is upgraded, so too will the
barriers of entry, which up to this time have been consistently
low.
BUT
WAIT, THERE'S MORE
The
scenario confronting existing newsagents is not isolated.
Changes
to legislation and regulations will have immense impact
on the viability and operations of a number of smaller accountancy
practices. Raising the minimum taxable income levels to
$25,000 per annum and simplifying tax return requisites
will remove many local suburban accountancy practices from
consideration by Pay As You Go income earners.
Financial
planners and mortgage brokers will not be immune to the
gathering forces of change. The omnipotent presence of the
four major Australian banks throughout Australasia will
become increasingly evident.
Retail
pharmacists will need to undertake some serious strategic
analysis, forecasting and planning.
The
protection accorded individual retail pharmacies and the
sector at large by the agreement with the Federal Government
expires in the near future.
A
casual perusal of this sub-grouping highlights a profile
similar to that of newsagencies.
Little
brand recognition, a strong influence of locality and convenience,
and decreasing client loyalty. An industry-wide bias to
revenue generated within the dispensary (averaging close
to 60% of total retail pharmacy receipts) is a cause for
concern.
The
Federal Government is cutting back on health payments and
is encouraging greater use of generic medications. The latter
instance will reduce prices, margins and overall profits.
Pursuit
and promotion of complementary health products, weight reduction
counselling and beauty products are both timely and appropriate.
Terry White Chemists are strikingly successful.
Given
the education standards and entrepreneurial nature of many
retail pharmacists, many will address and redress these
challenges, some of which are forces from within the profession.
The
chemist warehouse concept is asserting it's presence and
importance. This genre had genesis in South Africa, and
with international migration to Australia the trend is growing
locally.
Submissions
to Federal Government for protection from the ubiquitous
major national supermarket chains are being undermined by
the practices of pharmacy professionals within the industry.
Chemist warehouses are, in essence, pharmacy supermarkets.
Upon
reflection, these trends and innovations are part of significant
and sustainable change and the restructure of industries,
professions and sectors.
