Sub-retailing

A cocktail of declining newspaper and magazines sales, and a backdrop of continual increases in day-to-day costs, raises concerns that the news category is under threat more than ever before. The reality is that the news category is not new to threats about its future and is in fact highly resilient and very able to adapt to its marketplace.

Sub-retailing, however, offers solutions to those looking to expand their reach by supplying other outlets or for those with a low weekly turnover who are looking to increase their profitability from the category.

Sub-retailing is not a new phenomenon and is already commonplace throughout the UK and Ireland, enabling members to service consumers’ needs without the hassle of cumbersome administrational tasks or unwanted products and charges.

Following work carried out with the Plunkett Foundation to ensure consumers are able to purchase newspapers and magazines from an estate of very rural stores – and by spending time with members already offering or receiving this service, the NFRN Store2Door team has produced a guide on how to make the most out of sub-retailing.

Guide to sub-retailing

This guide has everything that you will need to consider if sub-retailing is for you. The guide is divided into two areas:

Host retailing: the provider of products to a sub-retailer

Sub-retailer: the receiver of products from the “host”

The following areas are covered:

  • Understanding and knowing when to consider sub-retailing
  • What processes to follow
  • Finding and requesting a supply from a host retailer
  • Testimonials and case studies
  • Best practice (reaching a binding agreement & payment terms, payments and record keeping, range management and advising 3rd party suppliers, management of the physical supply and return of products, dealing with consumer vouchers, adding value and services).

To aid you further, we have made available downloadable paperwork to help with you administration and can also provide personalised marketing (through the insertion of a passport sized photograph and the addition of a signature) to enable you to professionally introduce your services to another businesses. You can download these personalised marketing flyers below.

Download sub-retailing flyer (red)

Download sub-retailing flyer (blue)

To help you standardise your processes and communication, we have also added a selection of sample templates. These include:

  • Agreements between the “host” and sub-retailer
  • Delivery documentation (in development)

If you would like to know more about sub-retailing and how it could help with your business, please click on the appropriate link below.

For more assistance contact NFRN Connect on freephone 0800 121 6376 (free from UK landlines) or 020 7017 8880 if calling from a mobile.

Becoming a Host Retailer

Enhance your profits through the supply of newspapers and magazines to other outlets.

What is a host retailer?

In short, this is when a retailer who receives his supply from a main news wholesaler also supplies another retail outlet who in turn sells the products to the end consumer.

The host retailer becomes the wholesaler to the retailer he is supplying.

By creating additional revenue to the “host” and affordable supply to the sub-retailer, the relationship is beneficial to both parties and of mutual interest.

When to consider host retailing

Host retailing is a potential profit generator and a way to offset the costs associated with running a news account – understanding this is vital and knowing when to do it very important. The easy way to describe host retailing is to remember that you are providing a service to other retailers and whilst you will want to cover your costs sufficiently and produce a profit, your new customer will be expecting a high level of service and to also to make a level of profit themselves.

The secret to success is to ensure you have an amicable relationship that works for the both of you and a binding agreement. This agreement covers all aspects of the arrangement being undertaken by you along with the agreed commercials agreed by both parties and may be the only usable evidence in the event that you fall out or have a misunderstanding.

To enable you to calculate if any sub-retail arrangement would work for you, we would suggest you calculate profitability using the ready reckoner below.

NFRN Ready Reckoner

How to target a new sub-retail outlet

Once you have established that adding a sub-retailing element to your business is a direction you wish to pursue, you should spend some time identifying potential sites and visit them.

Ideally this should be in person and you will need to be clear and able to discuss how you could save an existing news stockist money or how you could offer an additional income stream to an outlet not currently stocking news products.

Alternatively, you may choose to generate interest through direct marketing. To help you with this we have provided two types of marketing leaflets:

  1. The first is aimed at introducing you to an outlet that already has a news supply but whose sales may have dropped and the category is no longer profitable for them yet they still want to stock it.
  2. The second is aimed at outlets who do not sell the category currently but who could benefit from the additional footfall the category would provide or to give their existing customers an additional commodity to purchase.

Potential outlets to target are existing low turnover newsagents or non-historic news retailers such as farm shops, holiday parks, hospital shops, university/college shops, community stores or even convenience stores that currently don’t sell the category. You may even come across small towns where no one stocks news at all and someone like the local greengrocer may be interested.

Once an outlet has shown an interest you should then discuss financials and whether the supply should be on firm sale or full SOR terms.  Whilst you are free to offer whatever terms you wish, it is generally felt that for SOR supply a 10% discount from RRP is fair, with firm sale attracting a better margin. Obviously this margin, whilst easy to calculate, may not necessarily cover your overheads especially if the outlet is not on one of your existing rounds and as such you may need to consider adding a distribution/administration charge.

You would need to discuss the level of any such proposed charge in advance and would need to be mindful that the sub-retail outlet may already be working on a reduced margin or have a minimum operating requirement. An inflated additional charge may make it less attractive as the net profit would creep closer to what they earned through the normal news wholesale process. In simple terms, if the figures don’t work for you walk away but don’t fall out as circumstances can change and you may also be able to build a HND round in the area through canvassing which would make the outlet less expensive to service in the future.

Informing your existing news supplier

You are obligated under your terms and conditions of supply to inform your supplying news wholesaler that you intend to supply another outlet under a sub-retailing arrangement.

The reality is that host / sub-retailing is commonplace and whilst the rules are there for good reason – many have not informed their wholesaler and there are few controls in place.

Wholesalers do understand the marketing place and have told the NFRN that they will be supportive.

A wholesaler cannot refuse the application as long as the supplied outlet is in the same distribution area as the supplying depot for news you are not competing against them.

Your wholesaler may however request an additional deposit if you have traded with them for less than 12 months or if there are any financial irregularities with your account.

Remember, how you operate your business is not their concern and as long as you monitor supply / returns closely, this will not be a problem going forward. If however you do suddenly start returning large amounts of copy, you can expect your supply to be affected, so trade fairly and above board.

Reaching a binding agreement & payment terms

Now you have an outlet ready for supply you should issue a service agreement. This outlines the operating parameters of your relationship to ensure everybody is clear of their obligations and requirements.

The following should form part of an agreement, although, you are free to add anything further should you choose to do so.

We would also advise that as this will in effect be a legal document you obtain any necessary legal advice before presenting to the potential sub-retail site for signing.

Checklist to consider:

  • Do you require a deposit? If yes, how much and how long will you keep it and what would be the process of return?Does the site require both news and magazines – what about other products such as milk or bread?
  • Is this to be a seven day or less operation and what about Bank Holidays?
  • What time does the site require delivery? Is Saturday/Sunday different to Monday-Friday?
  • What paperwork will you supply? A daily delivery note is a must as is a way to track unsold returns.
  • Agree a delivery point and establish if it is secure or not and in a well lit location.
  • If SOR, agree that daily news titles are available for next day pick up (if you wish to pick up same day or have them dropped off  you should ensure any additional costs are covered and that timings work for you). Your news wholesaler can accept news titles a day late for processing in these circumstances but always ensure your Sunday titles are returned no later than Tuesday morning to ensure they are processed before the end of week figures are closed down. Magazines and weeklies should be returned the following day.
  • Are you going to accept vouchers or not? If yes, you will have to agree a redemption process. Small amounts are easily added to your normal voucher returns but if the totals become more substantial you should provide separate voucher return envelopes and paperwork supplied to you from your wholesaler. Return these in the normal way with your details on but ensure you have noted the unique voucher envelope reference number in case there is any discrepancy.
  • Ensure you give a contact number for order placement and for claims etc
  • Agree whether the site orders on a weekly basis or if they would like you to manage the sales.
  • Agree a process for any claims and what action to be taken in the event of a re-run (many operators would either not deliver or charge a separate distribution charge  in a re-run situation but this needs to be clear from the offset and they should be informed on the day so they can decide if they want it or not. If you have sufficient or a similar title you could agree to send that with the initial delivery as a substitution)
  • Agree when invoices will be sent and when payment should be expected. Remember, you pay for your supply weekly and you wouldn’t want this opportunity to impact on your cash flow. It is not uncommon to issue an invoice by the following Monday with payment made the same Wednesday. Certainly with low turnover stores, liquidity could be a problem and you would need to be firm as if they can’t pay this week they will be unlikely to be able to pay double the amount the next week. Highlight the time by which you would expect payment and stop supply immediately if this is not kept to. Also highlight from the offset what payment types you will accept. Cash works for most although an increasing number of agents accept electronic BACS or similar. Be more wary of cheques as in essence these provide an additional period of credit and are not guaranteed.
  • Agree when the service will commence and the notice period required by both parties to terminate.
  • We would also advise you include a disclaimer on the lines of whilst you will make every reasonable effort to supply required titles, there maybe occasion outside your sphere of influence which may mean the title is unobtainable. In such circumstance you cannot be held responsible and would accept no liability for any monetary loss.

An example of an agreement can be found below. Please note all agreements will be different and it is important all aspects of the supply are clearly discussed between you and the sub-retailer before the arrangement commences so that such an agreement accurately reflects the operating parameters of your trading relationship.

Service Agreement example

Payments and record keeping

For those who already have an electronic rounds management system, charging and record keeping should be straightforward. We would advise that you contact your supplier to ensure that your system offers the following facilities:

  • Daily delivery sheet
  • Ability to process returns (in particular the ability through a live feed to cope with magazine returns – if not, these will need to be processed manually or not supplied at all)
  • End of week invoice
  • Application of a discount rate

Whilst we would recommend that everybody operates an electronic system of some sort, we recognise that a percentage of members undertake their business by way of paper accounting systems such as Huggler, and as such we will shortly provide downloadable versions of paperwork for your use.

Whichever management system you do use, we firmly recommend that you keep all of your sub-retail outlets on a firm 10 day credit basis – supplying an invoice by Monday and payment expected on the Wednesday of the same week. Failure to pay should result in immediate suspension of supply. Experience shows that at this level once payments start to slip there is an increasing likelihood that problems of future collection may soon follow.

Range management and third party suppliers

In most cases the outlets you will be supplying will have only a limited understanding of the market and we would suggest you initially work with them to identify the titles and quantities that would best suit their location. You don’t want to lose sales but by the same token if you continually put in titles and quantities that don’t reflect sales you may well find your allocations will be reduced which will impact on other parts of your business.

For low turnover units where space is at a premium, it is often best to work on the proviso that “more is less “ and stock up accordingly. Like other categories you may well find the top three or four selling nationals and the local paper may suffice. Magazines, if you decide to sell them, should also be well controlled. Ask your news wholesaler for a top 100 magazine list for your area and ensure your new outlets have a copy to show to their customers. Firm orders can then be taken without the headache of stocking and removing unwanted titles. Consider providing Just Ask material to promote the sale of magazines which can be requested by calling NFRN Connect on 0800 121 6376.

Whenever you add a sub-retail customer, ensure you stress to your wholesaler that additional copy will be required and agree with them a fixed supply by title for a fixed period.

For added support we recommend you join the NFRN Store2Door scheme which is free to members and can be accessed either online or via NFRN Connect. The helpline has already helped a number of members with supply issues under these conditions.

Whilst products from third party suppliers are often considered poor value for money, there are on occasion products that could drive additional revenue through your business and it is worth evaluating each on its merits and discussing with your sub-retailer if you believe they may have a market. Football trading cards may be a good example but remember some may incur VAT and should be invoiced as such.

Supply and return of products

Ensure this vital process is explained fully to your sub-retailer and is outlined in your agreement.

What to consider:

  1. Which days supply is required
  2. What time they are required (remember there may be different requirements at the weekend)
  3. Is there a safe lockable place for them to be delivered to /picked up from
  4. Is the delivery area well lit and accessible early in the morning
  5. Do they understand the paperwork
  6. Do they understand that any theft or returns sent back to you outside of the permissible period is down to them
  7. Is there and do they understand a claims or re-run process and any financial costs should you have included these in your agreement with them
  8. If a process has been agreed in relation to additional supply requirements

Return of products:

  1. Do they understand the returns paperwork?
  2. Do they know how to tie returns correctly and attach a returns note?
  3. If both parties have agreed to when you will receive them (end of the day or next day with the delivery)

Many believe that these returns have to be picked up on the same day and returned with that day’s returns from the host retailer. This is wrong and although some news wholesale houses may complain – they must accept them a day late. The only industry rule on this is that newspapers must be processed by midday on a Tuesday so in effect as long as the Sunday papers are received at the wholesalers by Tuesday morning, they will be credited. To ensure there are not huge numbers to be processed on one day, the industry norm is that daily papers are returned the next day. So papers returned a day late due to a sub-retail arrangement should not cause any issues with your news wholesaler.

Vouchers

There is no escaping the fact that newspaper vouchers drive significant profits in the category and you should consider carefully the implications of including voucher acceptance in your agreement with the sub-retailer.

Where local demographics dictate, you could find that a significant proportion of sales could come via this process and as such you should accept them, whilst in other areas you may feel that for the few you may receive it is not worth the extra work.

If you do accept vouchers from your sub-retailer you must ensure you have a robust process in place and that the sub-retailer must understand that vouchers should be treated as cash and as such collection at time of weekly payment would make sense.

If it is just a handful of vouchers these can be checked at the time of collection and the value agreed and signed for. For larger amounts you could leave a news wholesaler voucher envelope and relevant paperwork with them filled in except for actual voucher totals and leave them to fill in the quantities and seal.

Adding value and services

Any sub-retailer should be keen to explore other revenue streams and other cost saving services that you may be able to provide.

Here are just a few ideas that others already provide to their sub-retailers:

  1. Supply of milk/bread
  2. Supply of ambient grocery (remember many grocery wholesalers have a minimum spend for delivered goods but small operators like your sub-retailer may not be able to afford/require)
  3. Payment for referral of new Home News Delivery customers
  4. Local letter/parcel delivery
  5. Leaflet dropping for a local company
  6. Seasonal goods (eg Easter Eggs)

Testimonials

The number of shops operating news accounts under £350 is alarmingly high and there are many potential sub-retailing opportunities.

NFRN Store2Door is working with the Plunkett Foundation who currently has over 392 stores on their books, many of which would benefit from a sub-retailing solution.

If you are considering joining the growing number of host retailers, contact the Store2Door team on either 0800 9178 884 or email info@store-2-door.co.uk They will take your details and try to match you to this group or other retailers who are requesting an alternative service

To help you take the leap in to becoming a host retailer, we recommend you first speak to any retailer you know who is already growing their profits in this way. Alternatively, read the testimonials below from real retailers making real money from their sub-retail operations.

Derek Cook – Host retailer testimonial

Receiving a Sub-retail Supply

If you are struggling to justify the cost of wholesale supply – consider sub-retailing as an option.

What is a sub-retail supply?

A sub-retail supply is quite simply a supply from another retailer ( “host”) instead of direct from your main news wholesaler. In most cases there is little or no carriage/administration charge but margins are normally around 10% although each individual arrangement is agreed by the two parties involved.

We would recommend anybody whose weekly news sales are in the region of £350 or below, to seriously consider the option. Profit at this level of sales would be on a par with the net profits you currently receive from your main news wholesaler, less your current carriage charge, lost profit from missed credits, hours spent affecting your range and copy allocation not forgetting chasing credits and recharges.

With the host-retailer filtering out unwanted titles and working directly with you to fix your range and affect copy allocation, you will be free to concentrate on other parts of your business.

For new entrants into the business there will be a much reduced (if any) deposit request, and in the case of potential Menzies customers no minimum weekly sales value of £235 required which would mean it would be easier to enter the category (Smiths News do not have a minimum sales value but reserve the right to refuse delivery to uneconomic locations).

Before deciding if becoming a sub-retailer is for you, it is recommended you use our ready reckoner (below) which will give you a rough idea of what sort of profitability you currently have in the category whilst being supplied by one of the main news wholesalers.

NFRN Ready Reckoner

Finding a host sub-retailer

If you are looking for a host sub-retailer to supply your newspapers and/or magazines you should contact the NFRN Store2Door team on 0800 917 8884 or email info@store-2-door.co.uk They will look to see if there is anybody in the area who would be interested. Alternatively, you could actively seek out local independent retailers or HND operators to see if they would be interested in supplying you with newspapers and /or magazines.

What is the process?

When contact has been made you should arrange to discuss your requirements and the ability of the host-retailer to fulfil these.

It may mean some compromise but if agreement can be made between the two parties, the relationship can progress.

We recommend that a written agreement is drawn up and signed by both parties as this will save any potential confusion later on.

The following points should be discussed:

  1. Is a deposit required? If yes, how much, how long will it be kept, and what would be the process of return?
  2. Does the site require both news and magazines – what about other products such as milk/bread?
  3. Do you have a seven day or less operation and what about Bank Holidays?
  4. What time do you require delivery? Is Saturday/Sunday different to Monday-Friday?
  5. What paperwork will be supplied? A daily delivery note is a must as it is a way to track unsold returns.
  6. Agree a delivery point and establish if it is secure or not and in a well lit location
  7. Will delivery be firm sale or SOR? If SOR when will returns be collected – same day or next day with delivery?
  8. What about vouchers? You will have to agree a redemption process. Small amounts are easily added to the host’s normal voucher returns but if the totals become more substantial a separate voucher return envelope and associated   paperwork should be supplied .These can then be processed in the normal way and credits allocated based on validated values.
  9. Ensure you have a contact number for order placement and for claims etc.
  10. Agree whether the site orders on a weekly basis or if the host-retailer will manage the sales.
  11. Agree a process for any claims and what action to be taken in the event of a re-run
  12. Agree when invoices will be sent and when payment should be expected.
  13. Agree when the service will commence and the notice period required by both parties to terminate.

An example of an agreement can be found below. Please note all agreements will be different and it is important all aspects of the supply are clearly discussed between you and the host-retailer before the arrangement commences so that such an agreement accurately reflects the operating parameters of your trading relationship.

Service Agreement example 

Informing you current news wholesaler

If you do decide to move your supply across to an independent host-retailer, you will need to contact your current wholesaler and give notice of your intention to cancel supply and cease trading with them. This period is outlined in your terms and conditions of supply and is likely to be not less than 12 weeks.

Payments and record keeping

Your new supplier should provide you with sufficient paperwork to enable you to be able to keep track of your supply and check invoices. As a minimum requirement you should receive:

  1. Daily delivery sheet
  2. Returns sheet
  3. End of week invoice
  4. Order sheet

The paperwork you will need:

Weekly Invoice

Returns Sheet 

Daily delivery sheet (coming soon)

Order Sheet (coming soon)

Range management and third party suppliers

Whilst products from third party suppliers are often considered poor value for money, there are some products that could drive additional revenue through your business. If you believe they may have a market it is worth evaluating each on its merits and discussing with your host-retailer. Football trading cards for example may be a good example but remember these may incur VAT charges and should be invoiced as such.

Supply and return of products

Ensure this vital process is agreed fully between you and your host-retailer and is outlined in your agreement.

  1. As far as supply, you will need to agree:
  2. Which days supply is required?
  3. What time they are required (remember there may be different requirement at the weekend)
  4. Is there a safe lockable place for them to be delivered to /picked up from?
  5. Is the delivery area well lit/accessible early morning?
  6. What paperwork you will get and when
  7. The claims or re-run process and any associated financial costs to do this
  8. A process in relation to additional supply requirements

What to agree in relation to the return of newspapers and Magazines:

  1. Paperwork
  2. Returns process
  3. When will returns be picked up or returned (end of the day or next day with the delivery)

Many believe that these returns have to be picked up on the same day and returned with that day’s returns from the host-retailer. This is wrong and although some news wholesale houses may complain, they must accept them a day late. The only industry rule on this is that newspapers must be processed by midday on a Tuesday so in effect as long as Sunday papers are received at the wholesalers by Tuesday morning, they will be credited. To ensure there aren’t huge numbers to be processed on one day the industry norm is that daily papers are returned the next day. So papers returned a day late due to a sub-retail arrangement should not cause any issues with your news wholesaler.

Vouchers

There is no escaping the fact that newspaper vouchers drive significant profits in the category and you should consider carefully the implications of including voucher acceptance in your agreement with the host-retailer.

Adding value and services

There are a number of ancillary services and money making opportunities that your host-retailer may be able to offer you and these should be discussed on a one-to-one basis but again should form part of any agreement.

With rising costs and falling margins, it’s not surprising that smaller news retailers are questioning their current route to market. For many a sub retail supply could provide the lifeline they require. Store2Door has already helped numerous highly successful independent operators provide this service. The demand is there and it’s a win win situation!

Phil Williams

NFRN Business Manager

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