Awesome Loss Leaders: Sunday Newspapers

by JT McGee

Using a loss leader to drive foot-trafficI’m fascinated by dollar stores; I always have been. The concept is brilliant—a business that is entirely based around price points. At $1.10, something is expensive. Make it a dollar and it’s a deal!

Well, there’s a dollar store near me that adds another marketing concept with price points by using the Sunday newspaper as a loss-leader.

Every Sunday at 9AM there are literally several people waiting outside their door to get a morning paper. Everywhere else the newspaper is $2.00, but at the dollar store…well, as you can imagine it’s only a dollar.

All things considered, saving a dollar on a newspaper isn’t a very good use of your time. It may be for some people—we go there mostly because it is the closest place to get a newspaper—but in most cases it really doesn’t make all that much sense to go out of your way to save a dollar. But that’s the beauty of marketing, the best marketing is that which doesn’t really make all that much sense. That’s how you create value!

So anyway, back to newspapers. You walk in and right next to the checkout are several shopping carts filled with $1 papers. There have to be at least 200, and given the number of people that show up to get a $2.00 newspaper for $1, I imagine they sell all of them over the course of the day.

One thing that bugs me about the dollar store

I should preface this by saying that I have no experience with retail, and I’ve never worked in retail. However, I know how to make money, which is pretty much covered in my disclaimer that I’ve never worked in retail. 😛

Anyway, the store needs to move the newspapers from the front of the store to the back. First, putting them at the checkout makes for confusion when people wander out of line, or proceed directly to the front of the line to grab one.

Secondly, moving newspapers from the front of the store to the back of the store is sure to incite additional sales. But we’ve got to place them strategically…let’s think about our target customer:

  1. It’s Sunday. People who show up at 9am to get a paper probably just left church and are probably on their way to the grocery store to pick up what they need for the next week. That understood, placing newspapers near the essentials like garbage bags, aluminum foil, etc. would be a good way to grab easy extra sales for products that are relative commodities.
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  3. Sunday papers have all the jobs listings…and people on the job hunt are going to want a copy. Job seekers are also very price-sensitive shoppers, so we need them to spend time in our store since they’re likely to do some shopping to save some cash. No job = dollar stores rock.
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  5. The newspapers need to be in an area where they don’t interfere with the checkout line because it’s pretty disruptive to the flow of the line.

The perfect location is in the back corner of the store. Another MS Paint diagram:

Creating new business with interesting loss leaders--the Sunday newspaper.

See? Much better…can’t make loss leaders that easy to find. Ever played Publishers Clearinghouse? That sticker could beat Waldo at hide and go seek. Ever been to any big discount chain? The milk is in the back of the store for good reason. 😉 I don’t think they lose money on milk, but you might as well put the most popular products in the back to get everyone to walk through the high-margin stuff in the center/sides of the aisles.

Exploiting Opportunities

Ask anyone in print media how business has been recently and they’ll probably slap you across the face. Only one newspaper managed to add subscribers through the downturn, and that was none other than the Wall Street Journal. Combine a poor subscriber base with falling adspend and you’ve a recipe for disaster.

However, on the flip-side, there’s some serious money to be made for the fast-moving entrepreneur. This marketing model would be perfect for a convenience store or gas station.

Step-by-step

  1. Strike a deal with the local newspaper. Local newspapers are a dying breed, and they need promotion and cash more than anything right now. Offer up a co-op advertising schedule where you offer to run X amount of radio advertising about their newspaper (especially the $1 deal!) for a period of time. This would absolutely help in getting exclusivity for the deal.
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  3. Push the heck out of the newspaper on Sunday mornings, right when people are getting ready to go shopping, or are travelling to/from church.
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  5. Upsell. Coffee is super profitable, and probably something that people will grab with their $1 paper. I’d create a special color loyalty card for coffee + newspaper customers to track performance of the program. Think about it…if you give them another reason to come back—getting a free coffee after purchasing 6, for example—you’re creating even more loyalty that extends beyond what is probably a temporary newspaper promotion.

That’s how I’d do it. Having seen how popular newspapers are as a loss-leader, I’m certain that they could be used wisely to bring in new customers inexpensively. Gas stations and convenience stores are perfect—if I owned one (or ten) I’d be milking this model until the newsprint was permanently stuck to my thumbs.

Photo by: Alaivani

{ 7 comments… read them below or add one }

Meg April 21, 2011 at 01:39

Haha, I can’t say we pick up a newspaper at the dollar store but we do buy a lot of other things there. My husband and I go there before we go anywhere else.

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Ravi Gupta April 21, 2011 at 08:22

You make some excellent points, and it would be an interesting case study to see the readership increase or decrease after implementing your changes. You’re very creative, I would have never thought about something like that. Kudos.

-Ravi Gupta

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Jasmine April 22, 2011 at 13:38

Funny yet point spot on! One cannot deny the products sold in a dollar store. I personally won’t get the newspaper without buying some stuff as well. However for some people, buying something that’s less than the usual retail price is something they cannot miss – you’re idea is really a good marketing / sales strategy every store should consider.

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Barb Friedberg April 23, 2011 at 19:02

Very clever-Add value to the already awesome “dollar store” concept. I visit the dollar stores regularly for necessities and treasures 🙂

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101 Centavos April 24, 2011 at 14:07

Great idea… add some fresh donuts to the coffee and paper, and you might up more customers, including a cop or two. I pick up the Sunday paper on occasion just for the bulk newsprint. It’s great for worm bin bedding and landscape weed blocker.

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JT McGee April 24, 2011 at 16:55

@Meg – That’s the way to shop! There are some good deals, and some not so good deals, but if you’re willing to invest the time then finding what you need at the lowest price isn’t all that hard.

@Ravi – No creativity here…I stole this idea. 😛 My interest is in exploiting what is an excellent opportunity–people won’t pay $2 for a paper, but they’ll pay $1. So why not sell them something at $0 profit to you if you draw people who will buy other things. 😉

@Jasmine – They usually get me for a couple of other things too. If I go in there late, I’m almost sure to grab a 20oz soda, on which I’m sure they make 50%+ margins. Total sale = $2, profit of $.50, and it takes them literally 20 seconds to send me through the line. If you can do that all day, that’s $90/hr in profitability per checkout. Cha-ching!

@Barb – My grandpa actually calls them “gotcha” stores because everyone gets suckered in for that $1 deal, LOL. Those treasures…aren’t they great?

@101C – Bam! Coffee and donuts = few dollars of revenue with insane profit margins. Plus, you got them into the store, and creatures of habits love to come back. Btw, do you have a post about your worm bin? I actually had one for a good while with the little “red worms” (I’ve long since forgotten the scientific name) so I’d love to read about your bin. It’s a cool little hobby, if I do say so myself.

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101 Centavos April 25, 2011 at 04:50

Eisenia Foetida is the latin name for red wriggler worms …. meaning of “foetida” has some kind of connotation with smell or odor, which is not really appropriate since as you know worm bins don’t smell at all if done right.
I wrote about vermicomposting sometime back in October/November, look under the gardening category, and there’ll be a post on it, including some pictures.

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