Sadly, too often because of a lack of foresight, sensitivity or an unwillingness to take into consideration forecasts and projections by external sources about evolving circumstances lessons can be challenging, if not dire.
Take for instance retail newsagencies. For a long time these individual and collective businesses have been exposed and vulnerable to the vagaries of fast evolving sector structural changes.
Critical reviews would have (and indeed did) readily identified, isolated and enabled analysis of certain business fundamentals which needed to be addressed and redressed. Among the more obvious aspects were:
There has been a noticeable lack of broad spread consumer recognised brand names in the sector. Some industry insiders will dispute the proposition. However, repeated research has established consumers possess little recall of newsagency trading names, have isolated or marginal loyalty and are most influenced in newsagency selection by the convenience/location of "their" local newsagency.
Thus, value propositions, with a few exceptions, are rare.
TOO MUCH CONCENTRATION
No business should be overly reliant on one or a few suppliers or customers. As a rule of thumb, a 20% share is deemed to be a maximum tolerable ceiling.
Sadly, for many newsagencies revenue from Lotto, Lotteries and like gambling activities constitute between 50% and 70% of gross receipts. The margins are typically single numeral. Hence, percentage rental payments can be and are burdensome, taxing and profit squeezing.
A looming reality is the evolution of on-line consumer purchasing of lotto, lotteries and "Super Ball". Physical distribution and availability for a significant percentage of patrons will become redundant and obsolete.
Compounding that scenario is the increasing availability of newspapers and magazines in supermarkets, service stations and convenience stores. The recent world-wide release of the Apple I Pad and competitive branded products have muddied the waters.
Today, regardless of the business, its size, nature or sector, management and owners need to recognise their primary activity is supply chain management.
Lack of control of the supply chain or profound leakages in and from it, exacerbates the exposure and vulnerability of individual businesses, newsagencies in particular.
IT'S ABOUT STRUCTURE
Many people have chosen to ignore or dismiss our statements about the fact that current economic circumstances are not part of seasonal or cyclical trends, but rather are part of a significant structural change.
During the past decade and a half the attrition of newsagencies have seen their national Australian numbers fall from around 7500 to some 4500.
It is conceivable that within a three year period that number will reduce further and with it will be the emergence of smaller lottery kiosks which retail a limited number of high volume selling newspapers and magazines, complemented by a relatively broad range of cigarettes, cigars and related products.
Sin, it seems, still sells (in the forms of gambling and cigarettes).
WINNERS AND LOSERS
Fortunately, in a period of consolidation, rationalisation, mergers and acquisitions there are inevitably winners and losers.
Newsagencies per se will not disappear from the business landscape. A few recognisable brands will evolve, shop sizes will change, so too will product mixes. The introduction of services will be the fore for those committed to developing their business, increasing their relevance to consumers and seeking to enhance the newsagency's value.
As the level of professionalism is upgraded, so too will the barriers of entry, which up to this time have been consistently low.
BUT WAIT, THERE'S MORE
The scenario confronting existing newsagents is not isolated.
Changes to legislation and regulations will have immense impact on the viability and operations of a number of smaller accountancy practices. Raising the minimum taxable income levels to $25,000 per annum and simplifying tax return requisites will remove many local suburban accountancy practices from consideration by Pay As You Go income earners.
Financial planners and mortgage brokers will not be immune to the gathering forces of change. The omnipotent presence of the four major Australian banks throughout Australasia will become increasingly evident.
Retail pharmacists will need to undertake some serious strategic analysis, forecasting and planning.
The protection accorded individual retail pharmacies and the sector at large by the agreement with the Federal Government expires in the near future.
A casual perusal of this sub-grouping highlights a profile similar to that of newsagencies.
Little brand recognition, a strong influence of locality and convenience, and decreasing client loyalty. An industry-wide bias to revenue generated within the dispensary (averaging close to 60% of total retail pharmacy receipts) is a cause for concern.
The Federal Government is cutting back on health payments and is encouraging greater use of generic medications. The latter instance will reduce prices, margins and overall profits.
Pursuit and promotion of complementary health products, weight reduction counselling and beauty products are both timely and appropriate. Terry White Chemists are strikingly successful.
Given the education standards and entrepreneurial nature of many retail pharmacists, many will address and redress these challenges, some of which are forces from within the profession.
The chemist warehouse concept is asserting its presence and importance. This genre had its genesis in South Africa, and with international migration to Australia the trend is growing locally.
Submissions to Federal Government for protection from the ubiquitous major national supermarket chains are being undermined by the practices of pharmacy professionals within the industry. Chemist warehouses are, in essence, pharmacy supermarkets.
Upon reflection, these trends and innovations are part of significant and sustainable change and the restructure of industries, professions and sectors.
Managing Director of Marketing Focus