News retailers battle competition

The growing popularity of the internet has significantly altered the way consumers read newspapers, while increased competition from external players for a greater share of the book market has affected the industry’s trading environment. As a result, IBISWorld expects industry revenue to decrease at an average annualised rate of 0.3% in the five years to 2009-10.

Traditionally, newspapers, books and stationery items were the main product line of newsagents, and book and stationery stores, but over the past few decades these products have become increasingly available from other avenues such as supermarkets and post offices.

Over 2009-10, industry sales will only rise marginally and, faced with an increasingly competitive landscape, operators in the newsagency sector will continue to place a greater focus on avenues for ‘new money’ and less attention on ‘old money’ tactics such as newspapers, magazines, greeting cards and lotto products.

Industry retailers will also continue to have to place a greater focus on customer loyalty as a means of ensuring the success of their business. Enterprise numbers have been cut from the industry over the past five years, with the majority of rationalisation occurring as a result of significant competition in the industry.

The industry has been experiencing some pressing times, but it is not all bad news. Industry retailers will post a modest recovery of 1.1% per annum over the five years to 2014-15. External competitors have been a dominant force against the industry over the past five years and this trend is set to continue over the next five years. The industry will move away from price based promotion to brand promotions and factors such as range, quality of customer service and reputation.

Retail demand in 2010-11 will be driven by a significant recovery in the consumer sentiment index and income growth, which will spur consumer spending throughout the year. The remaining four years to 2014-15 will see retailers attempt to regain some lost ground, with sales expected to post a slow but steady rise. Enterprise numbers are set to post a marginal rise over the next five years.

The entry of new players into the industry will be affected by a number of factors including the industry’s maturing life cycle, strong competition from external operators and weak gross margins.

Key success factors for operators in the industry:

• Ability to control stock on hand. Operators need to be able to control stock on hand. This will assist operators in stocking key selling items, minimise slow selling stock and assist with cashflow.
• Ability to allocate product/service to area of greatest need. Operators need to ensure they stock popular selling items. This is particularly important for book and newspaper retailers.
• Attractive product presentation. Operators should ensure that displays both outside and within the shop assist in the conversion of sales from impulse buyers and shoppers.
• Having a clear market position. Operators should ensure they project a clear market position which enables consumers to develop brand awareness and aids in customer loyalty.
• Being part of a franchising chain. Operators who belong to a franchise benefit from the market exposure established by the franchisor and the brand awareness by consumers.
• Access to multi-skilled and flexible workforce. Staff should be knowledgeable about the goods they are selling and be able to provide consumers with helpful service and advice.