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WH Smith High Street: Facing the new realities

WHS used to be the be-all and end-all of magazine sales (well almost), but not anymore. Whilst WHS is still important, a changing retail landscape has steadily reduced its share of the market. Recent research from Marketforce, writes Christina Lucas, shows what publishers need to do to optimise their retail reach.

By Christina Sequeira

The magazine retail landscape has changed considerably over the past two decades. Grocers entering the market have created new competition for the existing players, who have been affected in different ways. Many are surviving but few are thriving.

What were once emerging retailers are now regarded as the mainstay of magazine sales, with magazines now a core category in supermarkets. And as those supermarkets have increased their retail footprint across the UK, one of the traditional first ports of call for magazine purchase — WH Smith High Street — has been challenged.

The question of WH Smith’s role in the magazine category is particularly interesting. As a newsagent, it can be critical for some publications: particularly at the specialist end. But in the changed retail landscape, how do consumers feel about the stores? Do they consider WH Smith integral to their magazine buying behaviour? And for which type of shopper is it most important?

To go some way to answering these questions, we need to take a step back and look at some of the key dynamics driving the magazine market.

Market dynamics

Consumer lifestyles are changing fast, with more of us taking part in more leisure activities. Recent research shows that half of all consumers want to be more constructive during their leisure time, whilst a third tend to pick activities where they can learn new skills. In recent recessionary times, people have been trying to maintain their lifestyle, but less expensively and often through being more self-sufficient: signified by the growth of craft and ‘grow your own’ pursuits.

The growth in these interests has helped fuel the desire for more and varied consumer magazines, resulting in a highly successful specialist sector, often with the ability to drive high cover prices. Some of the new titles come from ongoing fragmentation of sectors to satisfy increasingly niche needs (eg. puzzles or food) or are based on emerging interests (extreme sports or genealogy). Successful retailers know that to stock a good range of titles within these niche segments is key — publishers and readers want a broad and deep range.

In recent years, the retail estate for magazines has expanded as well. There are around 14,000 — or 30% — more retailers selling magazines than there were in 1992. The number of non-traditional outlets has grown by over 50% in just five years. And in the twenty years since they started stocking magazines, grocers have leapt to a 32% share of sales.

This growth demonstrates that retailers recognise the financial and customer-experience benefits of selling magazines. Readers don’t really care where they buy their titles just as long as they can get hold of them easily and conveniently. The impact of non-traditional outlets has clearly had a significant and negative impact on WH Smith High Street, which had been the established market leader.

Lean times for the High Street

WH Smith’s position has been compounded by the downward spiral of the traditional UK high street, the place consumers expect to find their stores. In the last two decades, we have seen growth in out-of-town and online shopping, and latterly the recession has forced store closures and empty retail space. All of which has led to less footfall on the high street. As some retailers leave, they are replaced by charity shops, beauty salons, discount shops and coffee bars. The result of all this activity has been a literal change to the face of many towns’ traditional shopping artery. And a change in the type of shops means a change in the type of shopper and therefore a change in the type of purchases made.

WH Smith’s performance

According to TGI, the number of shoppers at WH Smith has marginally declined, with the biggest demographic shift going from younger to older shoppers. This is somewhat in line with national trends, but half of all WH Smith shoppers are now over 45 years old.

Interestingly, WH Smith High Street’s overall profits are going up as they cut costs and strip out underperforming categories. Their latest report shows a 4.3% rise in annual profits but revenue is falling by 5%. For the total magazine category, value and volume have been declining year on year, every year, at an average volume fall of 9%. That’s in comparison to a total market decline of just over 2%.

But it’s not all bad; WH Smith still has some pretty impressive stats. Every year, 70% of the population visit a WH Smith store, and there are over 560 high street stores. WH Smith sells 78 million magazines a year; that’s 1.5 million every week or 24,000 magazines every hour it’s open. Despite the decline, it still accounts for over 5% of all magazine sales, and importantly, 17% of specialist magazine sales.

Ranging comparison

WH Smith’s expertise in the specialist sector is evident but so is the downward trend. Tesco recognise the benefits of an extended range and are hot on their heels. If WH Smith want to keep the UK’s largest retailer at bay, they need specialist publishers and readers to help them stem the decline.

Let’s look at the range aspect of WH Smith versus Tesco.

Firstly WH Smith:

* Their current position as a range retailer is good.

* They stock over 2,000 magazines, which means that we have a viable retail outlet for our expanding and fragmenting category.

* Their top sectors are special interest led. In fact, a quarter of all sales are achieved just through the Sport and Motoring sectors.

Compare this with Tesco:

* At their maximum, they stock 700 titles.

* Top sectors are aligned to their core customers, therefore Children’s and Women’s Interests dominate.

* A quarter of their sales comes from these segments.

So, WH Smith do hold a “unique” strength of being able to range many titles.

Alongside this, WH Smith is sending a positive message to its customers, with its own strategic activity:

* Engaging with shoppers and looking to convert browsers into purchasers.

* De-cluttering point of sale material and re-launching their Magazine Ordering Service to drive partworks and specialist titles buying.

* Store operations are being enhanced with scanners and improved communication from head office to store staff.

These developments are encouraging and should be borne in mind alongside the cost of doing business with this retailer.

Consumer behaviour in WH Smith

So what does the consumer make of WH Smith today? In a recent Marketforce survey, when asked their reason for visiting WH Smith, around two thirds of respondents said that buying a magazine was part of their intention. Over 40% visited purely to buy a magazine. For many, WH Smith retains its position as the magazine specialist — due primarily to its niche sector ranging.

We then asked how they select the magazine they eventually end up buying. There’s a certain elitist attitude with WH Smith customers; a strong belief that the magazine they buy is the best in its sector. Free gifts and front covers, they claim, are less important. They’re looking for a title with authority and expertise in their specific interest area.

We also explored where they would buy magazines if they couldn’t purchase them from their WH Smith High Street store. Our survey showed that a relatively high percentage (33%) would opt for subscription or posted magazines. These were closely followed by those who would use their local newsagent (26%). Then respondents named a selection of alternative retailers, from Asda to Co-op to WH Smith Travel to Marks & Spencer. A worrying 13% answered “don’t know” when asked where they would go.

Let’s look at each of these areas in more detail.

* Subscriptions. They are proven to be a growth area, now accounting for 18% of UK sales. But of course, subscriptions don’t work for all sectors or titles, nor the majority of readers, so maintaining a healthy newsstand presence is crucial.

* The local newsagent. We know that most people have a repertoire of around three different stores from which they buy magazines. One of them is likely to be a CTN — but the number of these stores is in decline. A quarter of our sample said they’d go to their local newsagent as an alternative to WH Smith, but if the trend continues, that will become less of an option for them. Publishers and their distributors need a strategic approach to supporting independents because the consumer demand in the magazine category for flourishing indies is still there.

* The grocers. It’s a solid upward trend for the dominant grocers, taking sales from other quarters, pushing their share from 26% in 2004 to 32% in 2009. Here we can continue to try and build the right ranging within these stores across formats.

The concerning figure is that 16%, one in six people, will either stop buying magazines or don’t already have an alternative store to WH Smith. Publishers need to be more focused in marketing brands to would-be buyers — be that in-store, online or through advertising. The task is to help readers become more aware of where and how they can buy magazines easily.

The good, the bad ...

Despite what we may perceive, there are some positives for WH Smith. Their store layout and capacity means that they have a near-unique ability to stock a large range of titles. Shoppers still regard WH Smith as the “magazine expert” and the retailer themselves wants to rebuild their authority as a specialist store. Given that magazines account for 21% of their business, a higher proportion than other retail multiples, we’re an important category for them.

But, WH Smith’s long term future is debatable. If the high street is moving from a retail space to “Pound Street” or leisure spaces, where does this fit with the WH Smith consumer offer? Sales are declining at a faster rate than the total market and clearly WH Smith are losing share to supermarkets, who in turn are recognising the value of the specialist sector and are developing their ranges accordingly.

... and the future

Publishers need to balance the consumer benefits of being with WH Smith against realising the opportunities that lie elsewhere. From our survey, these are the main alternatives:

* For the very loyal readers, subscriptions and home delivery are good options. This is about understanding the level of loyal readers you have and how to harness them for the long-term, cost-effectively.

* For the regular newsstand shopper who uses two to three stores already to buy their magazines, including their local independent, a clear strategy to drive awareness, availability and sales is required. As well as independents, this shopper will buy at supermarkets, travel or convenience stores, where it’s all about ranging and promotions.

* And finally, those who say “don’t know” or would “stop buying magazines” are likely to be low participants in the category. Here we need to impress upon them the personal reward they get from reading a magazine and commit to making it as easy as possible for them to buy one.

Actively pursuing these options can only benefit publishers by lessening their reliance on a single retailer and capitalising on all the options out there.