Retail in 2012: the holistic approach

This short piece was originally published earlier today by My Retail Media, in their “Insight” section.  myretailmedia.com is a website dedicated to the Retail Sector, covering all the major retail categories, and offering finance news, videos, comment and insight.  They also produce News at Nine, a free daily eNewsletter, and offer bespoke subscription services, aggregating retail news from over 4,000 sources, and tailored for individual subscribers.

As we enter 2012, we asked Philip Downer, the owner of retail consultancy Front of Store and former CEO of Borders UK to tell us where he thought the major trends and shifts for the year ahead would appear.

The retail industry enters 2012 in the throes of profound change driven by two factors:

  • The continuing belt-tightening of Britain’s consumers, which will continue into the mid-decade, as cuts in government spending and the rebalancing of the global economy continue to change our working lives.
  • Along with this, the channel shift from physical stores to online provision, in which the UK – according to Bain & Co – leads the world, with over 9 per cent of all retail transactions now taking place online. None of us can predict where or when retail behaviour will “settle” as technological change continues to accelerate.

Many established retailers found themselves in difficulties in December 2011, with profit warnings, administrations and rumours of collapse circulating across the industry. Here are some key pointers for 2012 – all equally applicable to major chains and to indies/start-ups:

First up, it’s no longer feasible for any retailer not to have an active online presence. And “active” doesn’t simply mean an online store; customers expect integrated online and instore browsing and purchasing. The rise of click-and-collect underlines this change.

Thanks to the power of web research, consumers are now often better informed than sales staff instore, both on product specification, price and value. Poorly trained or unmotivated sales staff are a greater liability in physical stores than ever – some retailers are recognising this, others still don’t “get it”.

What’s more it’s become a truism that a chain now only needs 50-80 stores to achieve national coverage – where 20 years ago they needed 300 or above. Understanding which centres or towns will be winners, and which are the also-rans, is going to be critical for retailers and for legislators. It’s telling that Grant Shapps, the new “Minister for Retail” – who has to deliver the Government’s response to the Portas report – is attached to Eric Pickles’ Communities and Local Government department, and not to the Department for Business, Innovation & Skills. High street revival is, perhaps rightly, viewed as a whole-community strategy, rather than simply a commercial challenge. This should at least mean that a holistic approach is taken to the many good points that Mary Portas raised.

Finally, things will get worse before they get better – but as the structure of the retail industry undergoes a once-in-a-generation change, the opportunities for entrepreneurs and visionaries to create retail success stores for next decade is wide open.



Online retail sales growth, by country and by category

There’s an interesting report in The Times today; if you have a Times subscription, I urge you to take a look behind the paywall.  The purpose of the story is track sales growth online, and there is much additional data regarding online research, different online trends across luxury/premium/mass market products, and so on.

The data has been provided by Bain & Company, and I’ve reproduced the gist of two of the graphs below.  Please note:

  • the graphs merely mimic graphics from today’s Times
  • copyright rests with Bain & Co

Just treat these charts as trend indicators:

1.  Internet retail as a percentage of total retail:

No doubt about it, we are leading the world in Britain, which makes the repurposing of our high streets and an intelligent repsonse to the Portas Report all the more vital.  The flatter growth in the US is surprising; the sudden take-off in China is no surprise at all.

And it looks as though we’ll be maintaining our UK lead in the future:

2.  Online sales forecast as a percentage of total sales, by category:

Music and video close  the decade with 95% of sales online, and books are at 75%; within these percentages a large (but unspecified) proportion of the whole will be digital downloads.

In physical products, electricals soar to just under 60%, and clothing/footwear and homewares grow significantly.  Travel and food are more stable, but still likely to see  growth.

Both charts show a percentage of spend, and are therefore not suggesting that total spending by category could rise.  They simply illustrate channel shift, and spending might just as likely fall.

As the sector returns to work, we brace ourselves for the Christmas trading statements (which we’ll be following closely on this blog) and, of course, the progress of the administrations and restructurings that were being signalled in the run-up to Christmas.  Consumers are making the most of clearance sales now, but the medium-term future for  most retail categories is very challenging.  Watch this space…


The Portas report: it’s a great start, but we need local power, not national edicts

After a week of mixed news from the high street (all is well at Moss Bros and Sports Direct, but things are grim at La Senza, Blacks, Peacocks, HMV…), we have had time to digest the Portas report on the future of our high streets.  This has garnered thousands of column inches, most of them soaked in olde English gloom, and offering up a hundred reasons why little can be done, or why consumers really prefer the mixed offering they suffer today – after all they’ve voted with their feet.  Most commentators agree that parking charges should be lower, and thereafter, everyone diverges.

In part, this is because of the Portas Effect.  It’s easy to paint Portas as an underqualified media star, plucked off the telly by a prime minister seeking to curry popular approval, but who lacks the experience or influence to deliver a report that will really make a difference.  Many retailers will recall (with a shudder) her fall from grace at Channel 4, whereby the engaging advice/”reality” pep-talk she gave to independent shopkeepers on BBC Two was replaced with megaphone stampedes and questionable attacks on retail chains at the C4 theatre of cruelty.

But I would urge you actually to read the report.  It doesn’t run like a government paper, drafted and redrafted into flaccidity by middle-ranking civil servants; it rings with Mary Portas’s voice.  Sometimes Portas may be unconsidered or quick to judge, but she writes with a passion and commitment that is sadly missing from most government-sponsored publications.  She writes about high streets, not with the dry authority of the great and good, but with verve and imagination.

This doesn’t make all her proposals good ones, and nor does it mean that implementing them would solve retail’s problems and create community hubs in every town in the country.  But it exposes – for this reader, at least – the extent to which centralisation stifles our neighbourhoods.  My personal view is that the real challenge is not the extent to which this or that idea is practical or worthwhile; it’s whether we, as communities and as an electorate, might prefer greater local control and accountability over the strategic direction of our town centres – and indeed, over much other public provision.

The Portas Report breaks down its recommendations under a series of headings, which emphasise that this is about more than just shops.  I’ve added in a few responses of my own.

Vision:

To breathe economic and community life back into our high streets.

This is actually the most difficult thing to define.  What is a “high street”?  I’d say it’s the centre of a community, offering a number of mixed uses – pubs, banks, surgeries, churches, launderettes – as well as shops.  It can be urban, suburban or rural; a local centre or a county town.  It can run on a medieval street pattern or a new town grid.  It might – thinking laterally – be centred on a properly-provisioned retail park, providing there is a broader community provision and universal access.

On that basis, the biggest city centres don’t count – people commute into London’s Oxford Street from around the world, but they don’t go there looking for 70w light bulbs or pints of real ale.  Tesco shut down on Oxford Street, it’s that unhighstreety.   The same applies to some extent to the centres of Glasgow, Manchester and the like, which are city centre equivalents of Westfield or Bluewater.

A high street needs a community generating economic activity in its own best interests, and it’s important not to get London-centric, as much of the capital can look after itself more effectively than most of the rest of the country, thanks to the concentration of wealth and power.  Marylebone High Street is terrific, in an eye-wateringly chi-chi way, but this is down to a single landlord working constantly to balance the retail mix; few other locations have its advantages.  Good high streets/community hubs really matter when they’re the only option you’ve got; I have five proper high streets within a 30 minute walk of my house, including two major centres, Kingston and Richmond.  A great many people across the country have just one, a drive or three bus rides away.

The implementation of the Portas report needs to be focussed on the Dunstables and the Camberleys, the Rotherhams and the Morpeths.  Getting these right isn’t just about having “nice shops” – it’s about ensuring that communities function economically and socially, rather than as dormitories or places of last resort.

It also needs to recognise that plenty of communities just don’t have what we might describe as a “town centre”.  Bleak suburbs in places like Basingstoke have no connection to their downtown mall; had they developed on the London pattern, over many centuries, they would have many high streets, but being built in one M3-driven splurge, there’s nothing there but supermarkets, trading estates and roundabouts.

Then there’s this sort of thing – the legacy of a previous age of optimism.  Pictures are of Cumbernauld, the planners’ dream and the reality.

Getting our town centres run like businesses:

1.  Put in place a “Town Team”: a visionary, strategic and strong operational management team for high streets.

2.  Empower successful Business Improvement Districts to take on more responsibilities and powers and become “Super-BIDs”.

3.  Legislate to allow landlords to become high street investors by contributing to their Business Improvement District.

4.  Establish a new “National Market Day” where budding shopkeepers can try their hand at operating a low-cost retail business.

5.  Make it easier for people to become market traders by removing unnecessary regulations so that anyone can trade on the high street unless there is a valid reason why not.

I’m in favour of this group of recommendations.  Of course, market traders travel around – they can’t be everywhere on the same day; but more, and more vibrant markets would be welcome.

The Town Team needs teeth, though.  There are some terrific traders’ associations around the country, but their agenda isn’t always the same as the local council’s, and neither has the legal powers to make the sort of radical changes needed.   (Many councils also lack the vision and the will, but that’s another matter, see below.)

Getting the basics right to allow businesses to flourish:

6. Government should consider whether business rates can better support small businesses and independent retailers.

7.  Local authorities should use their new discretionary powers to give business rate concessions to new local businesses.

8.  Make business rates work for business by reviewing the use of the RPI with a view to changing the calculation to CPI.

9.  Local areas should implement free controlled parking schemes that work for their town centres and we should have a new parking league table.

10.  Town Teams should focus on making high streets accessible, attractive and safe.

11.  Government should include high street deregulation as part of their ongoing work on freeing up red tape.

12.  Address the restrictive aspects of the ‘Use Class’ system to make it easier to change the uses of key properties on the high street.

13.  Put betting shops into a separate ‘Use Class’ of their own.

I’d like to see governments free up councils to make things happen – at the moment, our local authorities have little real power, and it shows in much of their decision-making.  Making high streets accessible, attractive and safe (number 10) means ensuring that there is a variety of uses bringing life to high streets throughout the day and into the evenings.  Too many are either dead after the shops close, or no-go zones after the pubs and clubs open.

Levelling the playing field:

14.  Make explicit a presumption in favour of town centre development in the wording of the National Planning Policy Framework.

15.  Introduce Secretary of State “exceptional sign off” for all new out-of-town developments and require all large new developments to have an “affordable shops” quota.

16.  Large retailers should support and mentor local businesses and independent retailers.

17.  Retailers should report on their support of local high streets in their annual report.

I probably diverge at this point, as I don’t believe playing fields of this size and variety can be levelled (unless the whole country is handed over to the de Walden estate).  It should be the job of local councils, businesses and communities to create the environment they want, rather than the job of central government and (multi)national businesses to make life easy for them.

Defining landlords’ roles and responsibilities:

18.  Encourage a contract of care between landlords and their commercial tenants by promoting the leasing code and supporting the use of lease structures other than upward only rent reviews, especially for small businesses.

19.  Explore further disincentives to prevent landlords from leaving units vacant.

20.  Banks who own empty property on the high street should either administer these assets well or be required to sell them.

21.  Local authorities should make more proactive use of Compulsory Purchase Order powers to encourage the redevelopment of key high street retail space.

22.  Empower local authorities to step in when landlords are negligent with new “Empty Shop Management Orders”.

23.  Introduce a public register of high street landlords.

Landlords are every retailer’s favourite bogeyman, but it would be good sense to make empty stores an unattractive prospect for their owners.  However, many communities simply have too many shops, and I’d support creating more residential space, or offices/workshops for small businesses, away from 100% prime pitch.  It isn’t so long since every high street had workshops on it – the blacksmiths are of course long gone, but sadly so are many of the garages/repair shops, craftsman jewellers, hardware stores and so on.

Giving communities a greater say:

24.  Run a high-profile campaign to get people involved in Neighbourhood Plans.

25.  Promote the inclusion of the High Street in Neighbourhood Plans.

26.  Developers should make a financial contribution to ensure that the local community has a strong voice in the planning system.

27.  Support imaginative community use of empty properties through Community Right to Buy, Meanwhile Use and a new “Community Right to Try”.

Portas writes about the seemingly wilful destruction of Ely in her report, where the council and developers created exactly what the townspeople appeared not to want.  I’d like to free councils up to make more imaginative planning decisions, and ensure that communities can hold them to account for doing so.

Re-imagining our high streets:

28.  Run a number of High Street Pilots to test proof of concept.

OK.

Let’s assume that there is some desire in government to implement some of these recommendations.  (That’s the risk of hiring TV stars, rather than judges and civil servants, to write reports.)

Most governments talk about returning power to local authorities and communities; most governments have a conflicting and overriding desire to centralise and control.  Local authorities today are pretty impotent – the bulk of their funding comes directly from central  government, their scope to raise local taxes is capped, and, as a consequence, much of local politics is drivellingly petty, with little changing (apart from the ongoing implementation of central government dictats) from one party’s term in office to another.  About the only area where local authorities have free rein is in managing traffic and parking, which is why it can seem so much easier to get away with, say, burglary, than with overstaying a parking meter by five minutes.  [Sorry, slight attack of the Daily Mails there.]

There is a way (neither quick and easy, nor cheap and uncontroversial) to revive our high streets, restore civic pride and focus local government on commerce as well as welfare and education, and that’s to give councils broader fund-raising capabilities.  This may be through uncapping the rates, or by implementing a local sales tax (with a reduction, not necessarily an equal one, in national taxes), or  through issuing local bonds.

Of course, a greater fund-raising remit requires democratic accountability.  Mayors and council leaders shouldn’t be honorary positions, they should (as we have seen in London and a random bag of other towns) be elected political leaders with real powers.

This is, of course, risky – very risky – for any national government to pursue.  Real local accountability leads to the creation of local power bases that conflict with national party leadership (Ken Livingstone, Boris Johnson).  Real accountability means that things might get worse, not better – there would be more of a “postcode lottery” in a world where, say, Council A decided to halve its business rates, and Council B chose to double theirs.  The calibre of local councillors would have to improve, and national politicians would have to be as mindful of council leaders in our great cities as the US Senate must be of state governors.  I reckon that Eric Pickles might have achieved more as a truly empowered Mayor of Bradford, than as Secretary of State for Communities and Local Government.  I’d like to see Tristram Hunt’s reflections on the Victorian New Jerusalem reimagined for the 21st century.  (The author is now an opposition MP for Stoke-on-Trent – if ever a city needed reinventing, it’s Stoke.)

I don’t think these aspirations are knee-jerk libertarianism, though I recognise that there would be at least two parliaments of disruption before any sense of settling down.  I appreciate that you may think I’ve gone from setting up ad hoc market stalls to a permanent shift in the national power base, in a single jump.

“All politics is local”, and it would be a welcome change to see intelligent, competent local  politicians making the right decisions for their town.  Nothing is more local than the revival of a town centre, or the creation of a proper place where people want to settle, work, and raise families.  Elected local politicians should have the discretion to allow appropriate development and changes of use, laid out in their manifesto, and subject to as little Whitehall interference as possible.  Any council should be able to explore Portas recommendations 1, 2, 3, 5, 6, 7, 8, 9, 11, 12, 16, 19, 20, 21, 22, 23, 24, 25, 26, 27 or 28, if they see fit, without urging or permission from central government, without national laws having to be passed, intentions watered down, and further red tape wrapped around communities.  And the councillors that enacted all of the above will probably have been elected on a local landslide after they committed to slashing parking charges…

And now, back to reality.  You can read the Local Government Association’s initial response to the Portas report here.

Cumbernauld pictures: treasuredplaces.org.uk; blitzandblight.com


Amazon: discounts, desire and dissent

There’s been an explosion of righteous anger directed at Amazon in the United States over the past week, following the launch of its one-day Price Check programme:

The gist of this – as you will already know – is that the Amazon customer pops into their local bricks-and-mortar retailer, chain or indie, scans the barcode and price of their desired product into their smartphone, pings this free sample of market research over to Amazon, and enjoys a discount on the product as a result.

From sea to shining sea, there has been an explosion of disgust from competing US retailers and commentators  – although Amazon is only formalising and rewarding a long-entrenched consumer behaviour.  The practice of “showrooming” – online consumers using brick shops as unpaid research and product testing facilities – is well established.  As Jonathan Main of Crystal Palace’s Crow on the Hill bookshop tweeted last weekend:

Jonathan Main

ooh look, a pair of showrooming hipsters.It’s not a good look walking all the way around the shop with yr phone set to camera, book in hand.

However, Amazon has crossed a line by encouraging and rewarding this behaviour, and is suddenly under fire from US Senators, noted authors and others.  Here’s a digest of opprobrium from the MobyLives blog, complete with a splendid suggestion that Amazon should pay an “affiliate fee” to the brick retailers from whose knowledge and curacy they’re benefitting.  And here’s Richard Russo in the New York Times, reporting reactions from well-known authors – Stephen King, Scott Turow etc – to Amazon’s move, with less hysteria, and a more considered appreciation of what’s at stake.

Scott [Turow] reminds me what happened the last time someone stood up to Amazon. Nearly two years ago, the Macmillan publishing group adopted a new sales model that would cost Macmillan in the short run, but allow other companies to enter or remain in the e-book market without having to take a loss on every sale. Amazon’s response to more competition? They refused to sell not merely Macmillan’s e-books, but nearly every physical book Macmillan published. Amazon eventually backed down, but its initial response helped shape a widespread sense that it envisions a world in which there will be no other booksellers or publishers, a world where, history suggests, Amazon may not use its power benignly or for the benefit of literary culture.

And yet, and yet…

Amazon’s positioning is consistent – like Wal-Mart, their constant focus is on reducing prices and adding value for their customers, and all of their actions are directed at this goal.  As Jeff Bezos pithily sums up:  “There are two kinds of companies, those that work to try to charge more and those that work to charge less.  We will be the second”.

Amazon discounts heavily, but doesn’t appear to its millions of customers to be an asset-stripping, cost-shredding retailer – its website and apps work like a dream, its web content is compendious, its eReader has defined the market, and its logistics are impeccable.  Unless the customer has a vested interest in the status quo (in itself a suspect motivation), what’s not to like?

The Word magazine (tag line: “Intelligent Life on Planet Rock”) operates a busy blogging site, with hundreds of regular contributors who are literate, informed and witty.  It’s been running a thread titled:  How is the Kindle working out for everyone?, and the answer – almost unanimously – is, it’s working out brilliantly, thanks, and I’ll never buy another paperback as long as I live.

Amazon delivers what customers want, but for some profound psychological reason, this doesn’t appear to be enough for Amazon – a win somehow isn’t a real WIN unless the competition is left coughing up blood in the gutter.  It holds its retail competitors, its suppliers, and the jurisdictions in which it trades, in barely disguised contempt.  Because they don’t share Amazon’s absolute commitment to value for the customer, they are, ipso facto, incomprehensibly selfish and feeble.

So, for Jeff Bezos, there are two types of company.  However, there is only one type of world. One in which we need to cooperate as well as compete, one in which our actions have a social cost as well as a fiscal value.

There’s a sense in which Amazon’s mantra is Tea Party Commerce – the only thing that matters is what’s good for the individual; on balance, the customer’s low price is worth any number of negative outcomes elsewhere in the value and quality chain.  As author Tom Perrota puts it in Russo’s NYT piece:

People have to understand that their short-term decision to save a couple bucks undermines their long-term interest in their community and vital, real-life literary culture.

This is about much more than poor, lovely bookshops, and the whole “Bookstores–those holy, papery pockets of goodness and light” argument.  Indeed, while book people will always be vocal and often small-c conservative/big-L liberal, books weren’t formally included in the Amazon Price-Check promotion at all.

Amazon provides individual consumers with a great-value, highly reliable solution to many of its shopping needs, and books are just a minority part of its commercial mix; there is every indication that it aspires to become the largest retailer in the world.  However, Amazon is so pointedly committed to YOU, the Always Right, Always First, Individual Customer, YOU, that they create impoverishment elsewhere which perhaps YOU (the customer) haven’t considered, or might not be wholly comfortable with.

Now, we are on very shaky ground here, because I don’t want to imply that giving the customer a good deal is depriving manufacturers of their Bentleys, publishers of their corner offices, or brick retailers of an extra slice of toast for breakfast.  And lecturing consumers on how to spend their limited personal budgets is at best sanctimonious, at worst just crass.  There is, however, a broader cost to pursuing lowest prices and disregarding everything else, when the value to the consumer starts to deprive the broader community.

Mary Portas’s report High Street Review, commissioned by David Cameron, has been published today.  You can read it here, and I’m going to withhold comment until I’ve digested both the report and the reaction over the next couple of days.  In introducing the report, Portas has stated:

I don’t want to live in a Britain that doesn’t care about community. And I believe that our high streets are a really important part of pulling people together in a way that a supermarket or shopping mall, however convenient, however entertaining and however slick, just never can.

Our high streets can be lively, dynamic, exciting and social places that give a sense of belonging and trust to a community.  I fundamentally believe that once we invest in and create social capital in the heart of our communities, the economic capital will follow.

Her argument is being framed as anti-out of town, but it is also implicitly anti-online.

Out-of-town shopping can certainly suck the life out of a town centre, if that centre isn’t pro-actively managed and repurposed.  But local retail jobs will still exist (albeit fewer of them), and the retailers will still be paying their business rates to the local council, and their taxes to central government.  The consumer is getting better value and convenience, but at the expense of a vibrant town centre.  These things can be fixed.  And most brick retailers, wherever they’re situated, will raise funds for charities, support local schools and sports clubs, and add something back into the community they serve.

The very best value for the individual consumer, however, comes from online retailers who eschew these niceties; who avoid paying sales taxes and corporation taxes by every legal means (typically relying on laws that pre-date the creation of the online channel), and whose contribution to charity, education, the arts or recreation, is negligible.  Local retail employment vanishes, and both high street and retail park will in due course be tinned-up.

It isn’t the job of consumers to seek anything other than the best deal for themselves and their families; and constant change has been a factor for retailers since the first recognisably modern shops opened in the 18th century.  But we are running the risk that, by saving ourselves money in the short term, we will become more impoverished, both financially and spiritually.  Interesting times indeed.

Lord Kitchener: University of Bolton, data.bolton.ac.uk


Missing the point – a customer service fable

Here’s a lovely true story I heard from a friend last week.  He’d been shopping in one of the West End’s spiffier gents’ outfitters, and (the retail climate being what it is) things were a bit quiet instore.  Indeed, he was the only customer in the shop.

He went unacknowledged at the front of the store, and headed off to another area to look at some jackets.  He had a few hundred quid burning a hole in his pocket.

There was a clutch of staff behind the basement counter, but no one came forward, for they were all too busy.  Busy discussing… the Mary Portas show they’d all watched on TV last night, and the extent to which they agreed (or disagreed) with her conclusions on the importance of good customer service.

My friend listened to their animated debate for a little while and then, feeling himself to be a supernumerary, cleared off to spend his cash elsewhere.

There’s a moral here somewhere…



WH Smith – how does it keep on squeezing those margins?

I mentioned WH Smith’s continued walk-on-water results in my last post, with sales down and operating margins up, and I’ve started to worry that I might be obsessing about a single brand.  However, on reflection, this is understandable – Smiths is the only retailer in the book sector whose current performance is visible to the public.  Waterstone’s is now privately held, so it’ll join Foyle’s with Companies House filings only published many months after they cease to be relevant.  And Amazon of course never breaks out UK performance, and reveals no more than it chooses to through its Luxembourg base.

We all know that WHS is no longer the serene multi-layered-management arm of the Imperial Civil Service that it once felt like.  We can only speculate as to its market share in the critical Toblerone sub-sector.  And as a well-known retail guru and government advisor observes on Twitter this morning:

Mary Portas

@maryportas I truly hate WHSmith. Used to be a loved British biz & now a dump. Rush hour, 7.45am at Euston. One person on till. Queues. And shitty promos

But, spitting feathers aside, and noting obvious savings in staff costs, shop-fit etc, where is WHS’s continual margin gain coming from?  With twenty minutes to kill in their new store at Westfield Stratford yesterday, I went strategy spotting.

One of the best ways to drive margin is through own-brand, and WHS continues to extend own-brand and unique stock throughout all its categories.  WHS has always carried a sizeable slug of own-brand stationery and the like, but many of its categories are now dominated by own-brand to an unprecedented degree.  Take calendars.  There are multiple suppliers of wall calendars in the market.  Some of them own valuable IP – eg Top Gear, The Simpsons – but a large proportion of the market is generic – kittens, landscapes etc.  And WHS (at least in Westfield) no longer stocks generic calendars that aren’t own-brand.  The opportunities to increase margin are significant.

Value publishing – creating attractive books to be sold at a lower-than-expected price – has been a staple of store chains like The Works for many years.  It served us well at Borders, and WHS has always had a toe in the water, but its commitment to value publishing is now more substantial, and takes many forms.  Value titles are no longer separated out, highlighted as “second-class” goods – they’re integrated into the main offer.

WHS is proving particularly adept at providing alternatives to current trends/titles – eg baking books to accompany the Great British Bake Off.  This can be yours for a fiver:

Placed strategically close to the Guinness World Records dumpbin is a selection of similar facts’n’entertainment titles like “You Won’t Believe It But…”, “Gruesome Facts”, “Planet Earth” and so on.  These are retailing for £5, half the price of Guinness (which in turn is nominally 50% off its £20 RRP, though I defy you to find any chain merchant selling it for over a tenner).  WHS offers a cheap alternative to Guinness which isn’t as time-sensitive, and will earn a higher cash margin per unit sold than Guinness.  Win-win.

Now, here’s an interesting offer – any two for £10 on over forty best-selling hardbacks.

That’s a great deal in today’s market, but it’s also a clever deal, recognising that WHS’s average customer isn’t a Bookseller subscriber or regular attendee at the London Book Fair.  These are, for the most part, last year’s books (long available in paperback), or they’re illustrated publishing of the sort that The Book People specialise in – big print-runs on reliable topics, sold into specific outlets at low-low prices.  Describing these books as “best-selling” is accurate – they certainly have been best-selling in their time, and with offers like these, perhaps Ant & Dec will sell better second time around…

Here’s another way to get mileage out of old books.  On the new books table at the front of store, two hot biographies of major cultural figures, both best-sellers, but Keith Richards was published 12 months before Dickens/Tomalin:

The River Cottage Veg book is new, and appears to be selling at full price – though keeping up with stickering is hard work in this environment.  (The Cheryl Cole at bottom right was published in September 2010, and is on a not-wholly-attractive “2 for £10 or £4.74 each” offer, if I’m reading that sticker right.)

The Keith Richards was a huge success last year, and representing it for Christmas 2011 works for everyone.  At 70% off, it’s retailing for £6 – somewhat higher than a traditional remainder seller would price it, but excellent value nevertheless.

Elsewhere, WHS has bought heavily into what is essentially “Jamie Oliver’s Greatest Hits”, a collection featuring previously published recipes from all over Europe, priced to sell at £9.99.  This is more heavily featured, and more cheaply priced than this season’s new Jamie – and as a recipe selection, it may well be more attractive to many customers.  Given WHS’s stock commitment, a better cash margin also looks likely.

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These are just a few examples, culled from a brief stroll around one store, but they underline WH Smith’s absolute commitment to creating a consumer offer that will drive the strongest possible margin.  Lest this sounds merely blindingly obvious to any general retailer, this isn’t how a traditional bookshop works – stock selection is driven by frontlist publishing, and by the creation and maintenance of a diverse and credible backlist range.  The bookseller will haggle with the publisher for margin and payment terms, marketing support etc, but their commitment to the “right” titles will limit their ability to grow margin.

What WH Smith has done is to free itself from the old dependence that retailers of copyright products (books, news/mags, music, movies, games etc) have on producers, by analysing what its customers want to buy, turning the screws on suppliers in exchange for exclusive deals and big buys, and generating large volumes of unique and own-brand stock across all categories, from bookazines to giftwrap.

I still share the general bogglement at Smiths’ ability to keep pulling off this trick, again and again – last month, Kate Swann announced that a further £11m-worth of savings had been identified across the business.  And I wholly understand the dismay that Mary Portas and many others have in the current WH Smith store environment – these are no longer pleasant stores.  (Younger readers, when I were a boy, WHS and John Lewis felt very similar to each other…)  But WHS now has a much greater level of control over what they stock and sell.  How all of this will fare if digital content takes over 50% of the book market (and the magazine market?) is hard to say, but as a survival strategy this looks more robust (if less attractive) than that of the old “stockholding bookshop”.


Everything’s different now – high streets, Portas and the future

Somewhere in another part of the room, Downton Abbey was grinding along, and I looked up from my copy of Retail Week to note Hugh Bonneville observing that the war was over, and that everything might just not get back to normal.

It’s been three years since Lehman, RBS, Iceland and all the rest spread like an influenza epidemic across the planet.  Few of us feel any safer or more secure than we were in October 2008, despite the trillions of dollars that have been poured into supporting banks and averting a major slump – and despite the necessity of most of those actions.

But, like Lord Grantham, we aren’t going back to normal, although it appears necessary for the political classes to suggest we might.  We don’t believe them, but we all need to dream – just cut the deficit, overhaul social security, inject some unspecified vigour into the economy, try to ignore the pensions timebomb, and we’ll be back to the way we were .

We all know this isn’t going to happen, and George Osborne knows it, and he knows we know it too.  The fall-out from the financial crisis runs alongside a rebalancing of world power, in favour of newer, stronger and not always wholly democratic nations, and it accompanies a revolution in the management and availability of information.  The new normal isn’t going to be a return to anything like what we’ve seen before.

Retailers know this, because they are always the first to feel any shifts in consumer spending, and they’re the first to notice trends developing and old certainties evaporating.  DSG has made a habit in recent years of announcing terminations – no more cassette players, no more cathode ray tube TVs – which garner column inches, but also remind us that nothing is forever, and this year’s big earner is next year’s forgotten fad.

There’s a big, covering-all-the-bases piece to be written about all of this, but a single example can also give us a point of focus.  Mary Portas, who is heading up the government’s retail task force, has drawn some flack in the past week for suggesting that there may be too many charity shops on our high streets.  The babble has drowned out her balancing remarks – not that charity shops should be penalised, but that the advantages they enjoy in terms of rates relief should be spread to other businesses – eg retail start-ups.  This seems eminently sensible – privately, the charities know that they cannot thrive on otherwise dead streets, and that more charity shops drawing from a diminishing pool of donations will fail anyway.  We aren’t replacing stuff like we used to, so (once we’ve emptied the self-storage and cleared the loft) we aren’t going to be donating like we used to either.

The legal and fiscal structures that support our high streets are outdated.  Whether we are talking about planning laws, the powers of local councils (real powers, not just the enactment of statutory duties) vs those of central government, the attitudes of landlords, the expectations of consumers, and changes in demographics, everything assumes a growing retail sector within a buoyant economy, where successful businesses are fighting tooth and nail for leaseholds, and where rapacious consumers must be all but discouraged from spending.  Why else would start-ups be discouraged, transport solutions so poor, landlord attitudes so hidebound and regulations so onerous?

The future high street is going to shrink, partly because of the shift to online shopping (which will continue), and partly because absolute per capita wealth will shrink, as my generation lives longer on enfeebled pensions, and today’s youngsters struggle with debt.  We don’t know how this future will rebalance itself economically, but trying to preserve the high streets of the past, using the solutions and procedures of the past, will be inadequate.

The high street – as commercial centre, as meeting place, as community focus – has been an essential part of the human experience since the first traders, and high streets and markets exist in every culture.  They aren’t going to go away.  But a society as sophisticated as ours needs to find solutions to stop high streets from furring up and decaying, and in this (as in so many other things) it would behove government, councils and landlords to be a little bolder.  Roll on, the Portas report.