In an average month Australian newsagents lose $3 million from magazine operations.

Considering a full year of data from six representative case study newsagencies I have been researching, on average, 31% of all titles supplied over the year analysed were found to be cash-flow positive, 1% are cash-flow neutral and 68% are cash-flow negative.*

An immediate question is why would newsagents tolerate such a situation? The data suggests that concentrating only on the top performing titles would be the most logical course of action. Of course, this is common practice in supermarkets, petrol outlets, convenience stores and other retail outlets selling newspapers. They do not take anything more than 10% of the range of magazines in a newsagency and focus only on the cash-flow positive titles.

Newsagencies do not have this option – they are often forced into stocking the lesser titles for the opportunity to stock the bestsellers. So non-newsagency magazine outlets usurp profits from top performing titles without sharing the burden of the bottom performing titles, thereby reducing a newsagent’s ability to offset the cost of loss-making titles. This leaves successful departments of newsagencies to cover the losses incurred in the magazine department.

Where is the money being earnt and lost? The top five selling categories in order are: Women’s Weeklies, Partworks (titles published in a series), Women’s Interests, Crosswords & Puzzles, and Teenager. The Special Interest, Sport & Leisure, Children’s, Motoring and Adult categories are all cash-flow negative. Special Interest is the worst performer and within that, the Travel & Tourism and Other segments are in trouble. Other is a catch-all segment that includes such seriously cash-flow negative titles as: New Dawn, Irish Echo, and Adbusters. These titles are not alone in causing the cash-flow problem: 90% of titles in the Other segment of Special Interest are cash-flow negative.

I doubt that any newsagent has calculated the full cash-flow impact of magazines, certainly not to the extent of this study. For the first time, my research includes the cost of real-estate and the cost of magazine-specific labour to reach an accurate cash-flow impact position for each title.

So, the answer to the question why would newsagents tolerate such a situation is: because they never knew the extent of the cash-flow problem for their magazine department as it has always been hidden by other successful departments and by the complexity of the magazine supply model.

Newsagents cannot sustain the current magazine supply arrangements for titles outside the top performers.

* (Cash flow was calculated by tallying Sales (for that month); Expenses (stock invoices last month less returns processed last month); operational expenses (labour for stock in and stock returned this month, real-estate cost this month); and net cash.)

Peter Fray

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