News wholesalers have a captive, but unhappy audience, says Tom Gockelen-Kozlowski
Imagine the depot down the road – your nearest and greatest competitor – disappeared. Vanished. Wouldn’t it be great? Yes, there’d be other wholesalers in the next town or county, but you’d become the only place your customers could go.
It might sound like an impossible dream, but there’s one place it’s happening. Rather than being a dream, however, the results are nightmarish.
Though sales are in free fall, newspapers are still an essential footfall driver for thousands of retailers. The Sun’s 1.6m-strong weekday circulation, for instance, brings more than £175,000 to retailers’ tills, with voucher and subscription sales adding even more. Even The Guardian – with sales less than a tenth of the Sun – brings 135,000 people into Britain’s stores every single day.
Yet retailers find it difficult to be enthusiastic about this vital category, thanks to the way two wholesalers, operating in different areas of the country, completely dominate its distribution.
In Scotland and the North and South of England, Menzies delivers news and magazines to retailers of all kinds, while in the Midlands, South West and most of Wales, it’s Smiths. Neither company directly competes with the other for retailers’ custom. And when, as happened in March, one ups its costs with little prior notice, those stores affected have nowhere else to go.
Does this situation have any effect on either of the companies’ performance? The evidence seems to suggest so. In Retail Newsagent (RN), the magazine of which I am features editor, the letters pages occasionally include complaints about grocery wholesalers.
By contrast, it’s an exceptional week where a reader hasn’t written in with a complaint about news wholesalers.
Wholesale expert David Gilroy has been pretty clear that the standards of news wholesale would be unacceptable elsewhere in the market.
“It’s outrageous that shops are being milked,” he says. “If a third player offered news at the current price, it would be goodbye Smiths and Menzies. A wholesaler would only have to make a 10% margin to make it worth its while.”
And now it seems that this is what’s happening. United Wholesale and Abra Wholesale have both admitted that they’re exploring the idea of delivering news, while Palmer and Harvey is boosting its category investment by offering beefed-up ranging advice – moves that would break down this two-horse market.
And you know what? With the traditional wholesalers having risen to the top in the hugely competitive grocery market, I’d say they’d be far better placed to thrive in a more open market than Smiths or Menzies.
Maybe that depot down the road is doing you a favour.