Newsagent - Newsstand Business Plan

The market for People’s News products is broken into a few separate groups, each with their own needs:

• Non-English speaking Chinese-American residents of Chinatown
• English speaking Chinese-American residents of Chinatown
• Chinese and Chinese-American tourists from elsewhere
• Other English speaking tourists from outside of New York City
• New York City residents shopping in Chinatown
• New York City commuters passing through or changing trains in Chinatown

The type of customers cannot be influenced by People’s News beyond its selection of location. The business will rely 100% on serving the type of customers who use the subway lines out of Chinatown. These six groups are the primary market segments People’s News will serve.

Market Segmentation

The market’s six groups are estimated based on Census data, NYC tourism data, and NYC commuter data. These groups are all growing, but Chinese tourism to the US and Chinese immigration to NYC is increasing faster than the other segments due to growing openness between the nations.

The following are descriptions of the specific needs of each segment as they relate to People’s News.

• Non-English speaking Chinese-American residents of Chinatown: Desire Chinese-language periodicals (Mandarin and Cantonese at least) that they are familiar with. As they attempt to learn English, many begin to read English-language publications as well.
• English speaking Chinese-American residents of Chinatown: Desire Chinese-language, Chinese-American, and English-language periodicals
• Chinese and Chinese-American tourists from elsewhere: Desire Chinese and Chinese-American snacks, and sometimes periodicals. They pass through the subways on their way to see tourist destinations and are less likely to be reading magazines and newspapers while in New York.
• Other English speaking tourists from outside of New York City: Also will purchase snacks and drinks more commonly. They may want to sample Chinese products when in Chinatown rather than products they can purchase at a newsagent anywhere.
• New York City residents shopping in Chinatown: Potential to buy English-language periodicals and snacks/beverages when they arrive or leave Chinatown from shopping trips.
• New York City commuters passing through or changing trains in Chinatown: Potential to buy English-language periodicals and snacks/beverages when they pass through Chinatown subway stations. This group is larger, but with a lower likelihood of buying if they are merely changing trains.

Target Market Segment Strategy

The market segmentation is based on the belief that the key drivers behind a customer’s purchases at a newsstand are related to what brought them to that newsstand. Tourists value the experience of “authentic” products (as well as familiar products at times). Commuters and shoppers value products they can use while on their subway ride (reading materials, snacks, drinks). Residents of Chinatown look for news and magazines on an almost daily basis for education and entertainment. Because the greatest sales will be generated if all of these groups are served to some extent, People’s News will provide English, Mandarin, and Cantonese language periodicals to serve a wide range of customers.

Industry Analysis

Answers.com provides some of the following key information on the newsstand and news dealer industry (SIC 5994 or NAICS 451212):

• 1997 Census showed 2,313 establishments with $853 million in sales and 9,770 people employed
• This averages to $369,000 annual revenue per location
• Outdoor news dealers may be seasonal and close in the winter due to lack of insulation, especially in the northern United States
• Most businesses are small single-proprietor establishments
• Larger chains and franchise operations are increasing
• Most businesses have five or fewer employees
• The industry has been declining over the past several decades due to a trend towards getting news online and on TV

The following passages reveal some of the specific dynamics of the industry and support the People’s News concept and business model:

• “Morning patrons generally limited their purchase to a single newspaper or periodical. Later lunch-hour and afternoon customers lingered over the magazine racks and often made impulse purchases. Many larger newsstands also acted as local bookstores, stocking popular paperbacks and sometimes even hardcover editions. A typical newsstand drew its sales primarily from the sales of daily newspapers, but in cities such as New York or Los Angeles, with many citizens transplanted from other areas of the country or globe, foreign newspapers and magazines were also big sellers. There, the International Herald Tribune, the Times of London, as well as European weeklies such as Paris Match and the German magazine Stern, sold well.”
• “In the late twentieth century, the industry shifted toward more standard business practices as a result of corporate ownership. For example, cash registers appeared at newsstands even though most customers on their way to a job or commuter train did not want to be held up for the few seconds longer these machines require.”
• “A news dealer or newsstand typically made a small profit from every item their establishment sold. A dealer would typically receive a maximum of 20 percent for each daily newspaper sold. Magazines had a higher profit margin because the intense competition between magazine titles and publishing houses resulted in courting the retailer. In addition to the 20 percent sellers received from the sale of each magazine, they would often obtain an additional 10 percent in the form of a retail display allowance. This premium came most often from larger magazine publishing corporations, such as Conde Nast or Time-Warner, as an incentive to keep their magazine titles prominently displayed near the transaction counter. Additional incentives could be paid to the news dealer for positioning a certain magazine overhead above the counter or for allowing poster displays of current issues. Such premiums could become a large part of revenue for major newsstands in New York City, where competition for display space was fierce. The monthly fees could sometimes reach into the thousands of dollars.”

Competition and Buying Patterns

Direct competition for newsagents kiosks comes from the following:

• Convenience stores
• Grocery stores
• Mass-market bookstores
• Magazine stores
• Street newspaper salespeople (without kiosks)
• Specialty stores

Indirect competition comes from:

• Subscriptions to magazines and newspapers
• Television news
• Internet news
• Radio

The primary advantage a subway-location newsstand can offer against these competitors is convenience, as the purchase can take place while waiting for a given subway or in a minute or less when arriving at a location. Other stores generally offer a wider range of products, but shopping and checkout time is increased significantly. This is not true for street newspaper salespeople. This type of competitor offers the lowest level of choice (often only one paper sold) and the fastest and often most convenient transaction. For those who value some choice and high convenience, subway newsstands are at the top of the list.

Indirect competition can erode readership for newspapers and magazines in general, but sales of food items at newsstands counters this element. By offering food and drinks, customers can be enticed to look at the reading material and may make impulse purchases for a few dollars or less to have something to read on their ride.

For those who buy on impulse and for convenience, brand names of the store are not important. The products are packaged and the periodicals are standard products which customers trust, regardless of the name of the store.