nickshanagher

Ben Thompson's Stratechery site is a constant source of inspiration. Last week he was tackling the development of Amazon and speculating that it could sell lots of products at a loss by adopting a Costco model. "Consider Costco: last year the wholesale retailer had net income of $2.3 billion on sales of $114 billion to its over 81 million members; the total sum of membership fees was $2.5 billion," he wrote. "In other words, Costco’s 11% gross margin didn’t even quite cover the cost of running the business; the difference, along with all of the profit, came from a “tax” levied on Costco customers." For retailers in the UK unhappy with paying a "tax" to news wholesalers to get their newspapers and magazines, this makes uncomfortable reading. The UK's regulators, now the competition commission, have gamed the system so two companies can make a profit out of "carriage service charges" for wholesaling newspapers and magazines in exclu...

Exasperated, Paisley retailer Des Barr this week went out and shopped for 230 copies of the Daily Mail and then posted them at his own expense to Kevin Beatty, group managing director of the company that publishes the newspaper. His challenge to Mr Beatty was a simple one - see how long it takes you to put 230 posters into these papers on a weekday morning before you home deliver the copies. Mr Barr's story illustrates well the frustration that news retailers have with the newspaper supply chain. It shows how publishers can act like feudal landlords when it comes to working with newsagents - increasing at will the rent they extract from the goodwill and investment of small businesses. Mr Barr has built a home news delivery business based on exceptional service. He has canvassed local people and won their newspaper orders. Ironically, he is full of praise for Associated Newspapers, which Mr Beatty leads. It has pumped millions into supporting delivered newspaper sales, Mr...

The Newsagents Federation is calling for the newspaper and magazine industry to be referred to the Competition Commission and will be heartened by the views expressed by Baroness Kingsmill, a former deputy chair of the Commission, in the latest issue of Management Today. "All markets require regulation," she writes. "Market forces are red in tooth and claw and, unregulated, will lead to the survival of the fittest monopolist." Regulators usually restrict their findings to considerations of pure consumer benefits, which are "thought to be synonymous with the public interest". However, Lady Kingsmill argues that there are clear distinctions to the interests of consumers and of citizens. She also says that regulators had fettered themselves. Under the Fair Trading Act 1973 they could have been taking into account criteria such as the distribution of employment and enterprise around the UK - or environmental issues. In more than 20 cases she took part in t...