The digital onslaught has had a significant impact on the world of print, and nowhere is that more obvious than in the newsagencies across Australia. So is there still life and business potential in the sector?

Remember when buying a newspaper on the way to work was standard practice, if it wasn’t delivered to your house in time for breakfast? When going to the newsagency to buy the latest comic was a pocket-money treat? We might still pop in at lunchtime to purchase a birthday card for a friend or to catch up with the celebrity gossip in one of the myriad weeklies, but Australians’ spending patterns in the newsagencies have changed considerably, according to a report from research firm IbisWorld.

Today the trend for gambling is providing a lifeline for newsagents who take a significant part of their revenue from lottery ticket sales.

Despite this – and in spite of all the magazines, newspapers, cards, stationery items, gift merchandise, lollies and Lotto tickets – IbisWorld reports newsagencies have seen a decline in turnover.

For the five years to 2014-15 the drop has been 2.7 percent to $2.1bn – that’s slowing to a predicted decline of 1.5 percent to reach an industry revenue of $2bn in 2019-20.

In its January 2015 report Newsagencies in Australia, IbisWorld indicates the following are external drivers to the market:

• Real household discretionary income
• Gambling expenditure per capita
• Consumer sentiment index
• Internet connections
• IT and telecommunications adoption

Australians consume their news and information much more readily online, even though some publications are forging a place for themselves in the media landscape.

There has been significant consolidation within the industry as operators are classified either as growing or contracting newsagencies.

Report author Claudia Birgio-Ficca says “Growing businesses have achieved this status by expanding and diversifying their product range and effectively generating avenues to attract new traffic. Conversely, contracting business are those that have refused to evolve from their original operating model, and have therefore continued to lose sales across traditional product segments including newspapers and magazines.”

The traditional mix of merchandise is now seen in just over half the newsagencies across Australia.

Today newspaper sales by these businesses may account for as little as five percent to 20 percent of revenue. IbisWorld indicates that differences in the product segmentation could also be attributed to location and whether the operator is a franchise or an independent.

IT has had an enormous impact on this sector, and there is no alternative for business owners in this arena but to alter the model.

The report reads: ”Newsagencies are expected to reinvent themselves in a bid to address the structural changes shaping the industry.

“The industry needs to prepare itself for a future without newspapers.”

Non-traditional sources of revenue

One solution to the problem of declining sales is Connect, an on-counter screen that offers consumers to access a range of expanded products and services that they would normally purchase from other retailers.

“The uptake of the Connect system by newsagencies is expected to provide a much-needed boost to revenue and profitability and slow the rate of decline across the industry,” the report reads.

The Connect system was introduced last year and allows customers to undertake tasks they would previously have completed at alternate outlets like the post office: paying bills, shipping parcels and printing photos.

Consumers can also access online deals with Groupon coupons and pay for them in cash in-store.

“The on-counter screens offer newsagencies the potential to increase their foot traffic, margins and the size of purchase baskets. Newsagencies are also expected to benefit from an increase in revenue that would generally have flowed to retailers outside of the industry.”

So supermarkets, Australia Post, stationery retailers and online retailers have become the industry’s major external competitors.

What is going to drive turnover is the forecast growth in incomes, and the consequent discretionary spend for new product categories such as parcel delivery, Groupon online deals and travel insurance.

Diversification, new services and a better collaboration with suppliers will help newsagencies to survive.

There needs to be a greater focus on presentation in-store, grouping similar items together, implementing colour blocking with displays and placing key selling items at eye level to encourage impulse purchasing, Birgio-Ficca suggests.

Key categories that will provide average gross profit margins of at least 50 percent include stationery, greetings cards, confectionery and beverages.

Predictions indicate that the greetings cards segment in 2014-15 will account for 25 percent of the market, with lottery tickets and magazines each bringing in 20 percent of the business. Newspapers will provide just 10 percent of turnover, with other goods making up the remaining 15 percent.

But we aren’t just spiraling down to disappearing outlets.

As the industry changes in response to consumer habits, so the profile of the sector will alter. Sure, smaller businesses are likely to drop away but that leaves us with larger, consolidated newsagencies able to support a niche magazine presence on their shelves.

The likely end of free online news content may also have an impact on newspaper sales as publishers turn to paywalls to access digital information.

• In part two of this focus on newsagencies, we look at what it takes to be a success, and the franchise brands determined to make their mark in this sector.