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GNS / VANA Fair 2012

GNS / VANA Fair 2012. Information sessions. Herald and Weekly Times. Stephen Kaye Circulation Director. What is happening?. This is a conversation about defining and securing a sustainable and viable future for newsagents as a retail and distribution channel

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GNS / VANA Fair 2012

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  1. GNS / VANA Fair 2012 Information sessions

  2. Herald and Weekly Times • Stephen Kaye Circulation Director

  3. What is happening? • 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

  4. The following five issues were identified by News Limited ( February 2011 ): • 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

  5. The following issues have been identified by VANA Members at VANA workshops (October 2011): • 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

  6. Reality …. This is now

  7. The South Aust experience • 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

  8. The five key features of the T2020 model are: Separating distribution and retail New consolidated territories New remuneration structure for distribution Bringing subscriber invoicing in-house Standard retail commission continuing at 12.5%

  9. Don’t assume • 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

  10. Its about making a decision • Understand • Educate • Gather information • Talk to others Newsagents • Talk to VANA • Attend sessions …… All to assist in making the RIGHT decision

  11. What does 10,000 Distribution business look like ? The following assumptions are made:- • 2500 Fairfax products • Magazine network = 5 current magazine distribution areas • Both publishers are running their distribution in the new world • Home deliveries arrive at around 2am • 10,000 daily papers = 5000 home delivery & 5000 sub agents • Distribution = domestic metropolitan area. • Income and expense are “average”

  12. Home Delivery • 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.

  13. Wrapping • 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

  14. Sub Agents • 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.

  15. Administration Staff • 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.

  16. Infrastructure and technology • 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. 

  17. Day to day… in the life of Distribution • Missed and replaced papers • Top-up of sub agent network • Management of subscriptions • Management of staff • Finance and accounting • Preparation of next day

  18. So how does it add up ? Assumptions Herald suns • Monday - Friday $1.20 • Saturday $1.60 • Sunday $2.00 • 5000 home delivery, 5000 sub agents supply • Based on current distribution model **** These projections are simply an example and should not be taken as true costing's and income.

  19. Distribution Income, per week Home delivery • 5000 M-F = 25,000 x $1.20 x 25% = $7,500 • 5000 Sat = 5000 x $1.60 x 25% = $2,000 • 5000 Sun = 5000 x $2.00 x 25% = $2,500 • 5000 x 7 day delivery fee @ 1.27 = $6,350 Total commission earned for home delivery $18,350 Sub agents • 5000 M-F @ 12.5%=$3,750 • 5000 Sat @ 12.5%=$1,000 • 5000 Sun @ 12.5%=$1250 Total commission earned for sub agents $6,000 Commission earned on 10,000 herald suns = $24,350 p/w

  20. Distribution Expenses, per week • 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

  21. Retail …. The possibilities • 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”

  22. What new opportunities are there today? 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 return prepaid pay subscribe

  23. Example of “NEW” income: 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

  24. So what's next ? 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

  25. So what's next ? VANA • October 24thMCG 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

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