High Gross Profit Margin + Cost Reduction = Sales for NewsXpress

WHSmith’s recovery over the past 10 years has shown how combining a range designed to deliver a high gross profit margin with an on-going cost reduction program can be a highly successful formula.

When I saw this photograph of the recently opened NewsXpress store in Westfield’s Southland shopping centre on the Australian Newsagency Blog, I immediately saw the similarities, and so asked Mark Fletcher, author of the blog, to tell us more about his business background and the ideas behind this concept store.

Mark Fletcher: I am owner of an EPoS company, Tower Systems and have operated newsagency stores since 1996. I am also a director of NewsXpress, a marketing group with over 300 members.

Steve Denham: How did the Southland store opportunity come about?

MF: NewsXpress were approached by Westfield, with the offer to take a 1500 sq f .unit at their shopping centre in Melbourne. There had previously been a newsagency trading under a different fascia in the centre, but it had gone out of business.

SD: What’s different about the new store?

MF: The store is the third NewsXpress corporate outlet. We’ve used our previous outlets to test ideas and concepts, which we then pass on to our members. At the Southland store we created a business designed to meet specific goals. The key goal was to generate a Gross Profit of at least 50%. It’s a tough ask, as the average Australian newsagency generates around 30% GP.

SD: How did you set about delivering these goals?

MF: The decisions on space allocation were driven by this high GP target. To achieve it, we needed a flexible shop fit. The NewsXpress preferred supplier, Caem, worked with us to deliver fittings that would allow us to easily change the floor layout if necessary.

SD: So what about category layout?

MF: The first products our customers see when entering the store are all high margin. Greeting cards are on the left, soft toys on the right and gifts on the floor. Everyday cards are on wall fixtures and the seasonal and promotions are on floor gondolas. I borrowed the soft toy wall idea from stores in the USA, and it works very well for us and other NewsXpress members.

SD: What about the traditional newsagency categories, like magazines, confectionery and tobacco?

MF: Firstly, we don’t stock tobacco. I stopped stocking the category several years ago because regulations had made it very difficult to sell. The store has a full range magazine offering on the back wall, which is still very visible to customers and fits with the margin-driven layout.

SD: How is the store preforming?