The paper round has been a source of pocket money for generations of youngsters, reports Beth Phillips. But with newsagents’ profits being squeezed, are we about to witness the death of the paperboy?
A nightmare. That’s how one delegate at this month’s ACS Summit succinctly described home news delivery (HND).
And he’s not alone in seeing it in such a negative light.
Although HND can be lucrative for independent newsagents News International estimates that the average weekly profit from one paper round is £35 many retailers believe it is more trouble than it’s worth.
Many newsagents have gone under because they can’t shoulder the debt associated with HND an estimated £50m industry-wide and if they don’t get the help and support they need for their rounds, it could signal the death knell for paper boys and girls, they warn.
So why does HND remain such a double-edged sword and what can be done to tackle the problem?
At present, retailers are typically billed for their newspapers on a weekly basis. HND customers, however, take much longer to settle their bills than newsagents have to, meaning retailers often have to shoulder the financial burden of HND themselves.
This issue has been a massive problem for newsagents in recent years, according to Stefan Wojciechowski, the former head of newspapers and magazines at the National Federation of Retail Newsagents (NFRN), and now MD of Localink.
“At the NFRN, I spent about five years working closely with newspaper publishers on the provision of new HND orders. We canvassed in areas where HND was already being offered,” he says. “Even when we knew there was an HND service in an area willing to take on new HND orders, one-third of all new orders generated were never started because the newsagent refused to take them on.”
The main driver of this was the unspoken overbearing weight of HND debt. Consumers paying with cash or cheques were paying ever later and more erratically and business customers were even worse, says Wojciechowski.
“Consequently, more and more personal capital was being paid by newsagents to prop up their debt money that should have been going towards more effective investment in HND and their shops”.
He is unequivocal about the outcome if greater support is not given to retailers. “It is blatantly clear that unless things change, the demise of HND will accelerate towards extinction,” he warns. “I experienced first hand a huge number of newsagent closures, not because customers didn’t shop the shop any longer, but because cashflow had dried up as a result of HND.”
Wojciechowski carried out a survey of 94 HND retailers who delivered to nearly 37,000 customers last summer and found that on average it took between five and six weeks for outstanding debts to be settled.
For the industry as a whole, this could equate to a debt of as much as £50m, claims Wojciechowski, adding that the situation is largely avoidable. Last month, he launched Localink a direct debit service for HND that allows customers to regularly pay for their newspapers ensuring HND debt doesn’t spiral out of control. Unsurprisingly, it already has strong support from retailers, wholesalers, trade associations and publishers.
Such a service is crucial, say wholesalers. Many newsagents don’t chase their HND debts because they don’t want to upset regular customers and, in failing to do so, they are putting their business under increasing financial pressure.
“It’s down to retailers to manage credit,” says one wholesale representative. “We can share good practice and ideas but we can’t chase debts for them. They need to keep on top of it and make sure customers don’t fall too far behind.”
Another problem is the inconsistency surrounding how much a retailer should charge customers for the service. Because there are no standard guidelines on HND, newsagents charge what they want, leading to huge disparities in charges from retailer to retailer. “I’ve seen retailers charging as little as 35p a week, when £1.60 is about average,” the representative adds.
“Newsagents have to look at the service they are offering. They are receiving and sorting newspapers very early in the morning and then delivering them straight through a customer’s letterbox. That’s a great service.”
David Daniel, trade relations manager for the NFRN, agrees: “There are no hard or fast rules on what retailers should be charging. As a guide, if they are charging less than £1.50 a week for a seven-day delivery, then we would suggest they take an urgent look at the costs and charges to make sure their HND is not a profit drain on their business.”
According to Smiths News, charges related to HND shouldn’t just cover basic costs including news deliverers’ wages, news bags and trolleys, but also any money spent on promoting the service and bad debt. This should then be multiplied by the number of drops a year, the cost per drop and the delivery charge.
Newsagents need to do more to help themselves, say experts, either by following such advice, using services such as Localink or just being a bit canny like Steve Denham (see left). There’s plenty of help available to those thinking of taking up an HND service: the NFRN is currently working on a downloadable leaflet that its members will be able to customise for their own doorstep canvassing.
More is on the cards, adds Daniel. “In addition to canvassing leaflets, giving advice and assistance to HND retailers, we will include guidance on employing juvenile and adult deliverers and help with assessing HND costs to ensure an adequate level of delivery charges are being set.
“We’ll also provide valuable assistance in setting up new orders, understanding size and density to achieve viability and managing debt and different payment options for customers. In addition there will be advice on sources of supply for equipment and consumables and a simple, but detailed, best practice guide to help both new and experienced HND retailers to get the most out of their business.”
Calls are mounting for the creation of a single set of guidelines for the whole industry. As one independent CTN chain director puts it: “HND is a guessing game. What do you charge? When do you get payment? It’s all very well getting advice from everyone, but we need one rulebook.”
Greater clarity will help ensure that paper rounds do not become a thing of the past, believe proponents of a single rulebook. But don’t expect the sector to remain the exclusive domain of adolescents on bicycles trying to earn a bit of pocket money. A growing number of pensioners are picking up rounds.
“Many retailers are now moving towards adult labour,” says a spokesman for Smiths News. “Mature adults are extremely reliable, enjoying the early mornings and the regular exercise a news round provides. Many hold a driver’s licence and have a vehicle, which could be useful should a retailer want to expand delivery area.”
So the day of the paperboy could indeed be numbered. But with a little luck the paper round itself should survive.
Billing time: it’s all about the process
Struggling retailers could learn a thing or two from the business practices of Steve Denham, owner of Cherilyn Village Stores in West Chiltington, West Sussex. Denham, who has run HND for 22 years and has 13 rounds, keeps on top of finances by billing his customers monthly for their newspapers.
“It is all about the process,” he explains. “I bill monthly but I don’t offer deliveries on a Sunday, so when customers come in to buy their Sunday paper they usually pay their bill then. So in effect they’re actually paying weekly.”
Another trick he employs to keep a tight rein on cashflow is to encourage customers to use the pre-paid subscription schemes offered by national papers such as the Daily Telegraph or The Times. Customers receive the subscription in vouchers, which they then give to their local retailer. Denham estimates sales of around £1,300 a week from the vouchers alone.