News racks: Are they for show or are they for dough?
May 9, 2016
By Bob Bobber
Is a coin rack worth it? One of the more frequent questions I have been asked over the years is, “How many newspapers should a coin rack sell to make it worthwhile?” It’s always a great question without a clear-cut answer, but here are some guidelines that I like to use.
First, you need to determine why you have a news rack in a particular location in the first place. Many years ago, our ad agency representative at the Orlando Sentinel, Bill Raffle, brought up a great point to me that I have always remembered. Racks are mini-billboards and act to define and stake out your territory as a newspaper.
How many times have you been in a smaller town and looked to see what the local newspaper is? Keeping that in mind, there are times when you place a rack somewhere not because you necessarily think it is going to sell a lot of newspapers, but because it is in a high profile part of town with a lot of foot traffic or important foot traffic. For example, racks at the county courthouse do not always sell that well because most of the people who work there are already subscribers, but it is a place where the shakers and movers frequent, and it is important that they know you are watching them. So you must first decide if this rack is for show or for dough. I would suggest you limit your “show” racks but understand there is a definite time and place for them.
Now let’s move on to the more important question: How many newspapers should my rack sell to make it worthwhile? I usually use a simple mathematical formula—one that gets me back what I paid for the rack in a year. What is a decent return on investment? (As a “full disclosure” statement, it has been several years since I have bought any new racks, so the prices in my example could be a little low but you will get the idea).
Obviously, dailies and weeklies will vary on this, and you might go a little longer time period (maybe 18 months) for weeklies. Let’s use an example of a twice-weekly paper that sells for 75 cents and gives the carrier 30 percent of the gross so the newspaper is getting 70 percent. Let’s also assume you paid $500 for a new rack. You get $1.05 for every paper sold per week or $54.60 per location per year. If you divide $500 by $54.60, you come up with roughly nine papers per edition per rack.
Doing the same formula for a daily newspaper that sells each copy for 75 cents and $2 on Sunday, you get $4.55 per week in revenue or $236 per year, and you only need to sell about two papers per day. You obviously would also factor in any subsidy you might have to give the carrier to service that rack above and beyond his or hers 30 percent. Two papers a day does not normally get a daily, single-copy carrier excited, so one last consideration to factor into your formula is that carriers have an “is it worth it” consideration. The carrier has to make some money on this deal, and if he or she is only selling two newspapers a day, that means he or she is only making $1.95 a week on the stop, and if it takes an extra mile or two to service it or an extra 10 minutes to get to it, he or she is probably not going to want to service the location.
So here is my advice to weeklies and twice weeklies: Buy refurbished racks that generally cost in the $200 to $250 range or less for smaller sale locations. Limit your “show racks” to just 5 percent to 10 percent, and don’t service any racks meant for profit that can’t sell eight or nine newspapers per publication day.
For dailies, your return on your investment can be better, but I would still identify my “show racks” and not have more than 5 percent to 10 percent of my locations fall into that category. You can also get by with selling two to three newspapers per day out of a rack, but make sure that the locations are close to another location and easily accessible. Although it is easier to get your return on new racks at a daily, I would still try to buy refurbished racks for lower selling locations. © Bob Bobber 2016
BOB BOBBER is a newspaper consultant specializing in circulation sales, training and public speaking. You contact him at firstname.lastname@example.org.