Newspaper publishers who make margin cuts risk driving retailers away from the category as business owners conduct range reviews to calculate how to pay the National Living Wage.
That was the warning from Nisa store owner Paul Cheema in the week that the Daily Mail increased the price of its Monday to Friday edition by 5p and reduced margins from 23.2% to 22.4%. While the price rise added an extra 0.58p margin per copy, the cut denied news sellers a potential £1.8m a year in profit according to RN analysis.
“The Mail is wrong to put the price up but cut our margins,” said Mr Cheema. “With the National Living Wage, we need to maximise our profitability. We’re looking at every category and cutting ranges drastically where they aren’t earning a good margin.”
Slow-selling products are also being cut, he added, and the Star is “a big question mark at the moment” following Northern & Shell’s decision to halve its price last October.
Londis retailer Atul Sodha added: “Everything is about margin. I’m looking at mine so closely right now, but I’m concerned that newspapers and magazines aren’t justifying the space they occupy for the margin they earn.”
With the National Living Wage, we need to maximise our profitability. We’re looking at every category and cutting ranges drastically where they aren’t earning a good margin
Earlier in the week, the Mail defended its move, saying retailers would benefit from the extra profit the price rise would earn store owners. A spokesman said: “Overall, this will generate an incremental £16.1m retail sales value and a further £1.9m profit for retailers from the Monday to Friday editions of the Daily Mail.”
Brian Murphy, head of news at the NFRN, urged publishers to engage with retailers to ensure newspapers remain a core category.
“Newspapers are still prime products and publishers must build relationships with the people who sell them,” he said. “Failure to do that will cause retailers to invest less effort in selling them.”