The Bookseller has published a column I’ve written in response to WH Smith’s prelims announcement last week, which delivered the double whammy of £100m+ profits, and the upcoming departure of Kate Swann as Group CEO. I’ve reproduced it below.
When the WHS announcement was made last week, two sets of instinctive responses crashed into each other. The City reporters raised the roof for Queen Kate, during whose reign earnings-per-share have been driven to ever higher peaks, thanks to a combination of margin enhancement, cost-cutting and share buybacks. And the naysayers pointed out that, yet again, sales were down – even in the go-go Travel division, like-for-likes keep falling. Oh, and BTW, the store environment is pretty poor.
I try to take a slightly more nuanced (or reflective) view. Swann has delivered extraordinary numbers through torrid times, but has she left her heir apparent, Steve Clarke (who is promising more of the same), with a sustainable model?
WH Smith has made every decision with its shareholders’ interests paramount – and that’s as it should be, am I right? However, it is hard to escape the conclusion that those decisions have been predicated on short-to-medium term returns, rather than the sort of long-term investment that leading retailers make. WHS is still a bricks-and-mortar company (notwithstanding a long-standing but rarely promoted transactional site, and the slightly more forward-looking Funky Pigeon online offer), trading in categories – printed books, newspapers and magazines – that are in long-term decline. Its overseas Travel expansion plans are broad-based – but winners need to be idenified from a pot-pourri of investments across several continents.
Retail Week has just dropped through the door, complete with a profile of Steve Clarke. In the meantime, here’s The Bookseller piece:
Clinton’s new Chief Executive Dominique Schurman has spoken to Retail Week about her plans for the brand, following her appointment by new owners Lakeshore Lending, a subsidiary of Clinton’s largest creditor and supplier American Greetings.
Schurman has enjoyed a thirty year career in card and gift retail in the US, where she will continue to serve as CEO of Schurman Retail Group, which is part-owned by American Greetings, and comprises the Papyrus, Carlton and American Greetings shopfronts and online sites.
Adding 397 well-worn UK stores to this mix is a tall order, and Retail Week concentrates on three elements of her short-term strategy thus:
1. Renegotiate lease terms out of administration. With retail chains falling like flies, landlords will be interested in reducing rents to secure tenancies, particularly in the sort of secondary mall locations that Clintons has historically filled – locations that are less attractive to fashion users.
2. Refurbish the stores. The extent to which Clintons had allowed its estate to go to seed looks like a long-term death wish – either that, or simple disdain for customers and competitors. The design of the typical Clintons store – inside and outside – has moved on very little since the 1980s, as the business became captive to its own heritage. And maintenance has been poor: carpets are tatty, and fixtures and lighting well-worn and out-of-date, creating an ambience of “downmarket without the value-add”. It is hard to see how you just freshen up these stores – they will need to be gutted and started again.
Schurman has indicated that she will drop the chain’s signature orange. I’d think hard about the name, too; “Clinton Cards” has had out-dated connotations for a long time, and though it never quite shot itself in the foot (cf Gerald Ratner), it’s become a brand for which there is little consumer loyalty. The store and online offer is going to have to be completely reinvented – why keep the old name, when you could do a Next-out-of-Hepworths, or River-Island-out-of-Chelsea-Girl, and properly reposition your business.
3. Improve the product mix. Clintons is another middle-market retailer that has fallen between the two stools of value (personified by Card Factory) and designer/quality (think Paperchase or Scribbler).
This is likely to mean a broader spread of gifts. What does Schurman sell in her US businesses?
In addition to cards and stationery, upmarket brand Papyrus offers photo frames and albums, bags and purses, soaps, books and bookmarks, candles and diffusers, mugs, glasses and tableware, entertainment products, jewellery, scarves, journals, toys, games, plush and much more; Schurmann’s other brands provide mid-market ranges of similar products.
The US has a greater appetite for printed invitations and formal partyware than the more casual Brits, and this is reflected in the offer. It also memorialises public holidays to a greater extent. We do birthdays, Christmas, the spring seasons (Valentines, Mothers, Easter, Fathers), and a few personal milestones. We don’t send a lot of cards celebrating Halloween or New Year, we’re disdainful of industry-created opportunities like Bosses’ Day, and – for instance – we express our patriotism rather differently to the US (did you receive any Diamond Jubilee cards?). There’s no market for UK versions of the 4th July selection at American Greetings’ website, however keenly we support Help for Heroes.
Of course, it’s too easy to point up how we’re divided by a common language etc etc, but Schurman’s team will need to quickly recognise how different our attitude towards each other can be, and how this affects our preferences in cards and gifts.
All of the above will cost a lot of money, and a reinvention of this sort cannot be delivered overnight – American Greetings will have to run fast to deliver store prototypes and revised ranges for next Christmas. And Schurman will of course have to address Clinton’s unexciting online offer, out-manoeuvred by Moonpig and prey to WH Smith’s new Funky Pigeon brand.
As a manufacturer and supplier, as well as retailer, AG will have to manager its supplier relationships with the supermarket chains, who are muttering about boycotting AG’s cards. It would be counter-productive to save Clintons (at significant short-term cost) in order to lose long-term supermarket business.
Similarly, Clintons has important retailer relationships with AG’s direct competitors, like Hallmark. Much triangulation will be required…
So, what’s the endgame? – a long-term presence as a retail owner in the UK, or a turnaround and exit in the course of the next five years? While it’s good news that nearly 400 stores (and the jobs that go with them) have been saved, can profitability be grown at all of those locations? And if you were setting out to build a 400 store chain, how many of these locations are the ones you’d choose? This is not a quick-fix business.
Welcome back to the second part of the Front of Store Westfield tour…
Sticking with the Lower Ground Floor, we emerged from the phone shops into a world of children’s specialists. Build-a-Bear, Lego and upscale clothes stores like Polarn O Pyret and Atelier de Courcelles are already in evidence; Mamas & Papas will follow on a higher level. (Observation: upmarket children’s stores have foreign names. JoJo Maman Bébé would be another. Whereas the mass market has clunkier, English names.)
So, The Entertainer. The six-day toyshop is a staple in many shopping centres, and this was a pretty standard store – reasonably fully stocked, but many popular brands had been allocated limited space or were unstocked, and generic product took their place. Putting all the rollerblades in “Boys Toys”, including the pink ones, summed up a rather formulaic experience; staff stayed firmly behind the tills (including those wearing “can I help you?” sashes), which rather defeats the experiential joy of a good toyshop. We left, feeling a bit flat, and crossed the mall to Mothercare. Here, shopfit quality has been lifted (attractive light woods and pastels), and roomsets show off nursery furniture to advantage, but again, there were no staff on the sales floor. The customer may have sought assistance with car seats or buggies, or wanted some show-and-tell in the curiously unbranded Early Learning section at the rear, but all staff were again coralled behind the tills.
Retailing isn’t easy at the moment (you may have noticed), but it does seem curious to under-staff your most important new stores within a week of opening. If you can’t throw some payroll hours at converting new customers to your brand, and you don’t have a high-concept store design or radical new products, how are you going to get your store to stand out from 300 others at Westfield?
Pausing to admire the publishers’ pack-shots on the Foyles hoarding (opening next month), we headed into one of Westfield’s biggest draws, the John Lewis store. And our initial impressions were… oh dear. This has all gone badly wrong.
The Partnership has built a large store that feels small. Perhaps the escalator cut-out is too big, but where M&S is spacious, JLP is cramped and tight, particularly on Lower Ground, where the juxtaposition of menswear to the right and kitchenware to the left feels absurd. The shopfloor has been segmented using fretworked screens and other devices which only serve to further cramp the feel of the place – the aisles are tight, and the product juxtapositions frankly bizarre. And the severed hands hanging from the ceiling are downright creepy.
Things improve on what Westfield calls the Ground Floor, and JLP calls First (women’s fashion, accessories and beauty), and things are as they should be here and on First/Second (furnishings and fabrics). The top floor is strong, with the best toy offer we’d seen all day – at last, someone carrying all the brands, facing the plush towards the customer, and keeping the offer clear. But the top floor also contains a big fat compromise of a space, which may explain why the bottom floor is such a dogs’ dinner. A huge London 2012 shop sells every imaginable take on Olympic mascots and logos, complete with a viewing gallery offering a sensational panorama of the Olympic park. This must take up over a quarter of the total retail space on the floor, so you have to conclude that several categories will exit the lowest level and move to the top in due course – but not until autumn 2012.
An aside – isn’t it about time we stopped treating the 1960s as the pinnacle of British grooviness? Routemaster buses, Concordes and original Minis barely exist in modern London, and are surely irrelevant to our image of a 21st century cosmopolitan capital city. At least red phones boxes and beefeaters still exist, but we need better, more modern icons.
Back to the shops, but before we leave John Lewis (after a reliable lunch at The Place To Eat) I should note that customer service was as exemplary as ever. There’s nothing unfixable about this store, but it wasn’t delivering the experience we’d come to expect.
What makes John Lewis more profoundly disappointing is the quality of Marks & Spencer. M&S has created a proper department store in a free-standing building that provides a sense of occasion on every level. I haven’t seen the prototype fit at Kensington High Street, but this was a classy, well laid-out and very shoppable offer. Menswear (complete with a tailor running up alterations, and much clearer definition for brands like Blue Harbour) was simply the best I’ve ever seen in an M&S; home and furnishing were strong, and a delightful top-floor cafe offered treats that the customer could also buy from the Foodhall. I’ve written recently about the challenging legacy of old stores that M&S has to deal with; by contrast, in a brand new space, they are creating some of the best retailing in the UK.
Clinton’s has made a bold attempt to update its image. The orange and purple trialled in St Albans is much in evidence, but some of the shopfitting was cheap, and the juxtaposition between a funkier feel and some of the granny-targeted merchandise was jarring. Service was excellent, though; Clinton has too many shops, many of them desperately old and tired, but there’s a place afor a mid-market gift/card chain, and one hopes that the new management team can move the business forward.
Timothy Melgund at Paperchase has often asserted he runs a fashion brand, rather than a stationery shop, and the new store is on the prime fashion pitch, beautifully presented and ideally sized. Cards can be generic things, and Clinton/Scribbler/WHS are subject to constant price comparisons with the supermarkets; Paperchase overlays some quality and product uniqueness, and lifts itself well clear of the fray.
A few years ago, a vast HMV would have taken dominant space in a new mall like Westfield. Not any more – a smaller unit on a side aisle has to suffice. The CD/DVD offer is what it is, slowly and inexorably declining (though it doesn’t look as though anyone has told the buyers – stock density is extreme); games appear to have been circumscribed, and the technology offer – pitched to save the business – hasn’t noticeably moved on from the Islington protoptype. This was very disappointing; Apple, Currys/PC World Black, and the upper end phone stores were displaying better tech on better fixtures, with dangly cables under control, and staff to explain and sell. HMV offers MP3 players, boomboxes (archaic term, sorry) and accessories, but it’s hard to see for whom this store would be first choice for this product. Execution of these ranges will have to be more stimulating if they’re to offer any real hope to HMV.
Next time I visit Westfield, I look forward to seeing more stores trading – there are still a lot of “under constructions” and “to-be-lets”. I’ll rope in a teenage daughter and we’ll take a proper look at fashion. However, I also wanted to understand where the customers were coming from. Great play has been made of Stratford’s connectedness – two tube lines, Overground, DLR, national rail and direct links to the Continent, plus an adjacent bus station. You can reach Westfield directly from any of these, but plenty of people are entering on foot from “old” Stratford.
Old Stratford compares very badly to Westfield and the Olympic Park, reminding the visitor of how deprived parts of our capital can be. A one-way system encircles the old Stratford shopping centre, so that most foot traffic passes through a dingy mall and across knackered highways to reach Westfield. Display boards promote upcoming public realm improvements (clouds on sticks!), but it is hard to see how this sort of surface flim-flam can improve the residential and commercial environment.
Stratford’s old mall is big, dating back to 1970s planning models that brought whole town centres under one roof (think Camberley, Eastleigh). The interior is dark and crowded, stinks of cheap disinfectant, and is full of the crowds you can see on the bridge above, pushing their way through and past the old shopping experience and on to Westfield.
Massive regeneration will surely help the area, creating jobs and housing. A masterplan was signed off by Newham Council at the end of last year – just five years after the successful Olympic bid. Serious thought needs to be given to local shopping provision – presumably the duplicate chains in the old scheme will be seeking to exit, leaving market stalls and pound shops behind them. A decent, modern supermarket would be a good start, but at present, the contrast between Westfield and its immediate surroundings is too stark. The number of shoppers in Westfield suggests long-term success (though, as I indicated in Part One, the Olympics need to come and go before retailers will have an objective picture of their performance). To the south, Canary Wharf’s wealth has largely failed to trickle out to its immediate surroundings, beyond the gated apartments and highways. A scheme like Bluewater – turn left off the M25 and head for the quarry – has little integration with Dartford and Gravesend. Westfield and Stratford City, on the other hand, are in the heart of the deprived East End, and can – must – do better.
Photos: Telegraph, Design Week, Mail/Getty