NFRN CEO Paul Baxter makes the case for the Competition and Markets Authority to take another look at the news market.
Despite operating in a declining market, both of the two main news wholesalers continue to perform well.
For the year ended August 2016, Smiths News owner Connect Group announced total revenues up 1.7% to £1.9bn and, although revenue was down 2.4% in the news wholesaling division, it was better than expected.
Meanwhile, John Menzies interim results reported profits before tax of £3m for the six months to June 30, with Menzies Distribution performing steadily.
Both companies attributed their successes to utilising their assets during daylight hours, by diversifying into the click & collect market and by rationalising depots to reduce costs. Yet, with both companies, the carriage charges they levy on news retailers continued to go up.
Earlier this year, Menzies customers got a second carriage charge increase in less than six months, which was blamed on the National Living Wage, claiming it would create “the most substantial shake-up of our supply chain’s cost base for many years”.
More recently, Smiths News said it would apply an average increase of £1.18 a week from November 27. Many NFRN members had taken up an offer to have their charges frozen for two years from August last year, so fortunately, only one in 10 will be affected by the rise.
While the NFRN understands increased labour costs, we find it bewildering that the news wholesalers ignore the fact that their retail customers also have to contend with higher wage bills.
Unlike Smiths and Menzies, however, independent retailers do not have the opportunity to recover these from their customers in the form of increased prices.
To make matters worse, all too often the service our members receive from their news wholesalers does not meet the needs of their businesses, which impacts their customers.
What’s more, carriage charges deny retailers a large slice of the margin they should receive from selling newspapers and magazines, and each year, they go up when newspaper and magazine sales decline.
If this isn’t market abuse and a direct result of an anti-competitive market then I dread to wonder what is. Perhaps it’s time to ask the Competition and Markets Authority to take another look at this market? I’d be interested to know what you think.
This article first appeared in Retail Express