According to the Australian Lottery and Newsagents' Association (ALNA), the newsagency industry is ‘the largest non-franchised family owned small business sector’ in Australia.
They also state that ‘Australians visit their local newsagency 1.6 times a week’ emphasizing the industry as a ‘well known and trusted’ centre within many local communities.
Sadly, it's a well known fact that the print media sector is an industry in decline across the globe, with increased digitalisation and the ease of access to the news on the internet.
However newsagencies are evolving with the times, and are no longer just the place to pick up your paper or grab a bottle of milk in your pajamas.
The traditional newsagency has evolved into a convenience-based business, allowing entrepreneurs to try a different approach and embracing a wider choice of revenue streams.
A IBISWorld report last year in the Sydney Morning Herald stated that‘from the $2.1 billion in revenue, 25 per cent can be attributed to cards, gifts and party items, 20 per cent to lottery products and magazines, 15 per cent other goods, and 10 per cent newspapers and stationery’.
With 14 years marketing experience at Colgate-Palmolive behind him, and having owned and operated 5 newsagencies in the past 20 years, John Emmery has recently diverted his expertise.
Now helping clients buy, sell or improve their businesses, we take a look at some of his advice for budding entrepreneurs interested in the newsagency sector.
Acquiring a newsagency
Buying a pre-existing business, rather than starting your own has many advantages.
And the fact that you’re investing in a pre-established system that already works is just one of those perks. John Emmery gives his 3 recommended options for buying a newsagency business:
Buying a well-run business
This option has low risk but also low capital gain potential on the sale of the business.
However, buying into a well-run business with good systems in place, and a good staff record would be the most viable option for the first-time newsagency buyer.
Taking on a busy, but less organised business
This option may have a good customer footfall, but the systems may be outdated or poorly run.
Other issues may also be prevalent, such as poor presentation and merchandising decisions, so it could take a good deal of work.
This option has good capital gain potential but also holds a higher risk of failure if the buyer lacks the relevant skills and experience to manage it.
High distribution/ shopping centre based business
If you’re thinking of buying a shop with a distribution area covering high population growth, you will probably do well.
Or, if you are lucky enough to acquire a newsagency in an area with an approved new shopping centre (in which you would be invited to take up a store) there is a huge potential for growth capital gain. This option is rare, yet a very lucrative option if the opportunity comes up and you have a long-term vision for your business.
For anyone preparing to buy a newsagency business, there are several important things to consider:
The first thing for any potential buyer to consider is the rent: make sure it is a reasonable amount and in line with the sales and profits of other newsagents in the area.
Work life balance
Shop owners often work long, unsociable hours – some starting as early as 3am. Many newsagencies are choosing to increase their hours with late opening or 24-hour services to improve trade.
Location is integral to a newsagency business. Choosing an area with a high footfall is key to success – for example: in close proximity to train stations, residential areas, busy shop parades and shopping centres.
Think about what suits your local demographic. Look at what kinds of products are already proving popular and make sure these are constantly restocked.
Convenience is at the heart of the business and car parking will draw in more passing trade.
Range of goods and services
Expand your product range, especially in high margin gifts. To be successful, you have to develop skills in stock management and visual merchandising – the better presented your products are, the more sales you’ll make.
Taking the time to conduct due diligence checks is vital, providing peace of mind and avoiding any hidden surprises for the buyer.
Other financial costs
Other than goodwill, fixtures & fittings and stock, John believes you’ll need to allow around ‘$30,000 for a medium-sized business’ for items such as lotto fees, solicitor’s fees and stamp duty.
Newsagencies are often at the heart of the community, nearby and open when you need them most – but being the person behind the counter takes a considerable amount of work. Here are some things to bear in mind to successfully run your business:
Tailor your software to your business and make sure all staff are trained and up to date with the latest systems.
Staff are‘often your point of difference versus majors such as supermarkets’. They are the face of your business; well-trained, motivated and friendly staff will drive sales and create regular custom.
Make sure your stock is well presented, priced correctly and that approximately ‘95% of your stock’ is scannable ‘otherwise you cannot measure sales, stock or pilferage.’
Stock and order system
If you have a particular section that has high sales or has potential (for example stationery) – consider setting up an order system to enable you to manage your stock more efficiently.
It is extremely important to keep an eye on your cash flow alongside your profits.
John warns that:
‘Many a business has gone under because they run out of cash/credit, even though their P & L showed a profitable situation.’
As a convenience store people will be willing to pay a little more for the privilege of not travelling far.
However the biggest competition is the supermarket giants, and as they continue to build smaller convenience based stores they are getting harder to beat. If you are in (or near) a shopping centre make sure your prices are competitive.
Think about alternatives
Have you considered other options? Do you want to go into business with a partner or invest in a franchise?
‘Other alternatives might be working with a partner, which I have done successfully for all my businesses, or obtaining a guarantor - for example, a relative.’
And John’s final piece of advice:‘Don’t be afraid to ask for advice!’
‘We all need outside help and advice both at purchase time, and usually later. Ask for it. It will be an excellent investment. Many purchasers are too hesitant/proud to do so.’
Service with a smile
The first Australian newsagency was established in Melbourne in 1855, and there’s no denying the industry has come a long way since.
Advances in technology have played a large part in the evolution of the sector. With the decline of print media, shops have evolved to exist alongside the wealth of internet channels on which we now read and shop.
The convenience factor is now more vital than ever, and most newsagencies now offer services such as lottery terminals, cash points, travel cards and phone top-ups.
And providing facilities such as a money transfer facility and even competitively priced coffee and fresh sandwiches will also give a newsagency, which operates on very tight margins, a little ‘edge’.
Despite the challenges, newsagencies are still valued retailers in the community and they are still proving to be popular option – with that all-important friendly and more personal approach to business.
Interested? Take a look at our newsagencies for sale at Businessesforsale.com
John Emmery can be contacted at [email protected]