Information sessions

Stephen KayeCirculation Director

This is a conversation about defining and securing a sustainable and viable future for newsagents as a retail and distribution channel

For many years our Industry has heard increasing concern from newsagents about the viability of distribution territories

Increasing pressure on the viability of the territories and retail agents, jeopardising the longevity of the overall network

Home delivery is not economical in certain areas

Home delivery service levels are not meeting the changing lifestyle demands of our end customers

Current territory boundaries are not optimal

There is a conflict of interest between distribution agents and the subagents they service

Inconsistent presentation of retailers in terms of store presentation, service provided, IR management, OHS and store hours.

The current remuneration structure does not recognise different territories and the costs associated with operating in different areas.

The current Distribution network is over populated and not efficient.

The current Retail structure does not enable Publishers to benefit from the staff currently employed by retailers.

Anti competitive issues regarding other retailers should be addressed

Majority of newsagents were not making as much $$ as they thought they should from distribution

Their life is simpler without distribution

Their retail store is easier to run without distribution

They have more consistent cash flow without having to chase debt

Customers will still visit their store, even if they don’t deliver their newspaper

Separating distribution and retail

New consolidated territories

New remuneration structure for distribution

Bringing subscriber invoicing in-house

Standard retail commission continuing at 12.5%

6 months ago, News would not commit to the Newsagency distribution channel playing a role in the new model

Today, only those CURRENTLY within the “new territory” can tender for a distribution licence.

Already News has identified they need to put MUCH more value into the retail contract

Understand Educate Gather information Talk to others Newsagents Talk to VANA Attend sessions

…… All to assist in making the RIGHT decision

The following assumptions are made:-

2500 Fairfax products Magazine network = 5 current magazine distribution areasBoth publishers are running their distribution in the new world Home deliveries arrive at around 2am 10,000 daily papers = 5000 home delivery & 5000 sub agentsDistribution = domestic metropolitan area. Income and expense are “average”

5000 home deliveries completed by 6.30 am.

5000 home deliveries would equal around 14 rounds, each delivering around 360 papers each. This would take around 2 hours and cover around 30 kms .

Average cost of a delivery driver per day (over 7 days) around $80 per day plus fuel allowance of $23, totally around $ 103 per day, per driver. (Around $1500 per day)

This would be paying the driver @ 74 cents per km.

Wrapping to begin around 2am, two hours at least to wrap 5000 papers on 3 machines (Mon-Fri). Weekends would be 4 machines and 3 hours to manage the larger newspapers.

For efficiency and machine performance, having a dedicated wrapper/s.

Staff can normally move to sub preparation after wrapping and then into delivery of subs, position covers a shift 2am- 7am.

Therefore 3 wrappers (including subs prep and subs delivery) would cost around $300 per morning averaged over 7 days

5000 distribution per day would be around at least 100 subs/schools or special orders.

3 hours to prepare, pack and deliver. On weekends this would extend out another hour per day.

Staff wise you would use your wrappers, using strapping machines and vans. Average bulk size weight say15 kgs, 5000 papers would equate to around 3.5 tone of papers, therefore 3 vans to carry around 1.5 tonnes each on an average Saturday.

Eg: Hyundai ILoad vans can carry 1.5 tonnes costing around $30k each or around $700 per week including fuel, rego, insurance and average repairs.

To run an operation of this size you would need at least two full time staff. Management of staff, machines, finances, housing, and day to day operation.

A manager and an admin staff member would cost at least $150k per year or around $3k per week.

With 100 subs, this would take 4 staff members on a Monday all working at least 6 hours each on a Monday ...costing around $700 on a Monday to manage returns processes.

Housing of an operation of 10,000 papers would need at least a warehouse of around 400 sq. meters. The average cost of this would be around $35-50k per year.

You would need a computer system, phone system, office facilities and warehouse work benches. The average set up cost of this would be around $45k.

Missed and replaced papers

Top-up of sub agent network

Management of subscriptions

Management of staff

Finance and accounting

Preparation of next day

Assumptions

Herald sunsMonday - Friday $1.20Saturday $1.60Sunday $2.005000 home delivery, 5000 sub agents supplyBased on current distribution model

**** These projections are simply an example and should not be taken as true costing's and income.

Home delivery5000 M-F = 25,000 x $1.20 x 25% = $7,5005000 Sat = 5000 x $1.60 x 25% = $2,0005000 Sun = 5000 x $2.00 x 25% = $2,5005000 x 7 day delivery fee @ 1.27 = $6,350Total commission earned for home delivery $18,350

Sub agents5000 M-F @ 12.5%=$3,7505000 Sat @ 12.5%=$1,0005000 Sun @ 12.5%=$1250Total commission earned for sub agents $6,000

Commission earned on 10,000 herald suns = $24,350 p/w

Home delivery drivers $10,500 Wrapping and sub agent prep staff $2100 Sub Agents Delivery $700 Admin staff $3,000 Returns staff $700 Rent $1000 other costs $2000

Totalling $20,00 per week or $1,040,000 per year

Possible difference + $4,350 per week

No more 4 am starts … now 6am or 7am No more Sunday or Public holiday trading No more managing customer complaints No more managing customers’ bills No more early morning management…staff, machines, breakdowns, late

papers. Easier to have holidays having to only cover retail. More saleable asset to sell. 6 days a week, 7-7pm business

Still apart of the ‘newsagency industry”

agent

Toll project … Vic now

Toll return logistics - within 6 months

Toll - prepaid bags and boxes – within 6 months

Retail payment – Touch

$20 offer for retail subscriptions

parcel

prepaid

pay

subscribe

return

15 parcels per day x 5 days = $75 per week

23 cents x say 10 payments per day x 6 days = $13.80

$20 x say 2 sale per day x 6 days = $240

Possible income = per month $1424 or $17,097 per year.

Investment or cost of goods sold = zero. Other than … and a good clean, efficient retail outlet.

parcel

pay

subscribe

News Limited Brisbane trial feed back State based Publisher workshops Maps available early 2013

ANF Request for a meeting with News limited to discuss “details” about T2020 process eg: retail and country issues

Request to submit industry feedback document based on state association meetings around the country

VANA

October 24th MCG VANA conference – ◦ Guest speaker – Catrin Thomas, News Limited National Director, Retail Sales

November 2012 - Industry workshops◦ Understanding the business model◦ Licence process eg tender process◦ Legal and accounting advice◦ Model calculators ◦ Retail opportunities