Yes, home delivery can boost sales - but at a price

Roy Greenslade
23 Jul 2008

The pressure on newspaper publishers to innovate is unceasing in these days of digital nervousness and credit-crunch mania. Every possible cost-cutting opportunity is being explored. One area that has been of increasing concern for years has been the system of distribution.

The worry has become more acute in recent times because of the gradual demise of home deliveries as some newsagents close while others find it too stressful and unprofitable to run a squad of paper boys and girls. Supermarkets are not an alternative because they refuse to deliver.

Yet home deliveries are crucially important for newspaper owners and editors, for obvious reasons. Not only do they ensure continuity of purchase among a core audience, the consistency helps to keep down the need to print huge quantities of copies in the hope of attracting casual sales.

There is another benefit too. Families who take a paper regularly and get into the habit of reading a title on a daily basis generally find it much harder to give up. Casual buyers, on the other hand, tend to cherry-pick by taking a title maybe only two or three times in the course of a week, either selecting a different paper on the other days or not bothering to read one at all. The rise in casual sales in the face of falling home deliveries has caused wide fluctuations in newspaper sales throughout the week. For example, some titles do well on Mondays and gradually lose sales in subsequent days until they pick up dramatically on Saturdays, the day on which British people now buy more papers than any other.

Three national publishers are therefore trying to solve the home-delivery conundrum by cutting out the middle man, who has traditionally dealt face to face with customers. They are, in effect, becoming their own newsagents.

The Financial Times was first out of the blocks with its premium delivery service, which began 10 years ago and was pumped up last year. It offers readers within the M25 and in the Home Counties the chance to have copies delivered to their homes every day before 7am. Though it adds a small delivery charge, this can be offset by cover-price discounts of up to 30%, based on the length of the agreement. There are other benefits too, such as deals on FT.com subscriptions.

The FT has a minority stake in the distributor, 2 The Door, which is also used by the Wall Street Journal to delivery copies of its US edition in central London at £2.50 a day.

A couple of weeks ago, The Independent decided to get in on the act by piggybacking on the FT's service to give its readers the chance to have Monday-to-Friday copies delivered at a cost of £6. Across the counter, the joint cost is £4. If you also want the Saturday edition, it will set you back £7.50 (as against the usual £5.40 total). That is a hefty charge but I am told it is in line with delivery fees in the Greater London area - and arguably a small expense for someone working in the City.

But News International, the Rupert Murdoch company that first launched a cover-price war 15 years ago, has completely undercut both papers by starting a home-delivery service entirely for free. Readers of The Times and The Sunday Times have the chance to sign up for packages of either weekday, weekend or seven days' worth of the titles. The more frequently they agree to purchase papers, the smaller their outlay. They will even be able to pay in arrears, and it could mean Sunday Times buyers saving as much as £50 a year in delivery charges.

There are advantages in knowing exactly who your readers are and how to reach them easily, providing a great marketing database for newspaper companies. But the overall economics of the News International project are breathtaking. Potentially, it could end up costing Murdoch a fortune, and The Independent cannot hope to compete at such a level.

However, it was the Indy's Irish-based owner, Independent News & Media (INM) that first went public on the need to assume responsibility for home deliveries and to form direct relationships with buyers.

INM announced last month that it would no longer allow newsagents in Northern Ireland to deliver the Belfast Telegraph because it said their service was inefficient. It was clearly a trial because its UK chief executive Ivan Fallon predicted at the time that newsagent deliveries would soon be a thing of the past throughout Britain.

"It's just not practicable in today's changed circumstances," he said.

I share the view that newsagents' days are numbered. I am aware of how inefficient they can be, although I know some very efficient ones too. I also think, naturally enough, that publishers have to plan for the future.

However, it strikes me, to borrow Fallon's phrase, that it is not practicable to organise home deliveries on a nationwide scale. The FT and the WSJ sell to a niche market of upscale consumer, so it makes sense for them.

But if a company charges a lot for its service - as The Indy is doing - it will surely prove counterproductive. Readers will walk away. On the other hand, if newspapers charge nothing - as is the case with News International - then the on-cost will be crippling. Only a deep-pocketed risk-taker like Murdoch can afford to support such an initiative. That, of course, is what this latest miniwar is really all about.

It is a further example of the way in which newspaper economics are becoming so tight that only those publishers with the biggest pockets can hope to survive.

There cannot be any doubt that, as the financial pressures mount, plurality is being squeezed.