There was a lively Twitter discussion last week, following RN’s story that the Daily Mail had pinched £1.8m of potential profit from retailers after raising its cover price by 5p.
The opinion of the publishers, wholesalers and roundsmen involved is that pounds, not percentage points, pay the bills and retailers are earning more after the margin cut than they were before.
However, retailers are not convinced and I can think of a few reasons why. First, the extra £1.8m the Mail added to the £12.2m I estimate it’s making from the price rise will go straight to its bottom line. It will help fund the National Living Wage and offset the extra sales decline caused by the rise. This will inhibit retailers’ ability to do either.
It may be pounds that pay the bills, but you only have to look at RN’s Pricewatch page each week to see how retailers have never looked more closely at their margins
The second reason could be the Mail’s comment last week, that the price rise will generate an additional £16.1m RSV each year. But this will come at a cost – and you’ll be paying for it. Retailers will have to stump up an extra £12.5m to fund the increase, after your margin has been reclaimed. This is extra cash that will be tied up in your businesses and will be unavailable to be invested in other more profitable areas.
It may be pounds that pay the bills, but you only have to look at RN’s Pricewatch page each week to see how retailers have never looked more closely at their margins.
One retailer told me every part of his store is under the microscope to ensure he has the right products in the right quantity to earn the optimum margin. The two categories he admits he has barely looked at are news and magazines. For his 27 years in the trade, it has been assumed – by all parties – that they are untouchable.
But how many more cuts can the category, these long-held assumptions and retailers’ loyalty withstand?