WordPress.com



.

WH Smith

Introduction

Having started off as a small newsagent/retailer in 1792, WH Smith (WHS) is now one of the leading High Street retailers in the UK. In general, over the years, the company has made moves into publishing, music and the travel industry, but the greatest strength of its business has always been stationery, books and magazines sold through various outlets. However, I n recent years there have been lower sales and lower profits. Although many people still come into the WHS shops, they seem to be spending less and less as other, more focused shops come in to the market. Waterstone’s is a specialist bookshop; Clinton cards are specialist greeting card shops, HMV and Virgin Megastore specialise in DVD and CD sales; independent news agents sell newspapers and magazines; and games seem to be in decline as more children watch TV or use the Internet.

What does WHS sell?

WHS sells newspaper; magazines; greetings cards and wrapping paper; stationery, including pens, pencils, (coloured and graphite), rulers, school supplies, calculators and engineering drawing equipment; wall posters; CD, DVD, videos; books for all ages, both fiction and non fiction; games, board games and computer games; snacks of chocolate, crisps and canned drinks and cigarettes. They have recently started selling mobile phones.

The organisation has three strategic business units, predominantly active in the UK:

a) UK Retail, based mainly in High street Locations;

b) News management, a B2B warehousing and newspaper distribution

c) Travel, based at railway stations and airports.

Key facts about the company:

• WHS has stores in 399 out of the top 400 High Streets in the UK

• The company has 542 High Street stores and 200 Travel stores across

125 airports and railway stations

• WHS employs 24,061 people across the UK

• Every year, 70% of the UK’s population visit a WHS store

• On average, just over 1.2 million people visit a WHS High Street store every day of the year

• Every year, 125 million travellers pass WHS’s busiest Travel store at London’s Victoria Station (Source: Network Rail)

• WHS sells 1.5 million magazines every week - 24,000 every hour they are open.

• Every year, WHS sells in excess of 40 million books

• On average, the company sells 3,000 A4 note pads a day

• End to end, the sales of the company’s 3 best-selling rulers would stretch from London to Spain

Values

Within the last year, the company has emphasised the importance it places on values and the drive to be customer focused. All employees are judged according to their progress on the Values in Practice (VIP) scheme. This scheme is also kept alive by good communications and engagement with staff at all levels within the organisation. This has been an important aspect of the turnaround strategy at WHS.

As part of its values, WHS has also chosen to behave ethically and responsibly towards the community it serves. It is regarded as one of the most ethical companies in the country, with strong community-based activities and supporting cause-related marketing. Recent research carried out in 2005 by the Guardian newspaper indicated that WHS is one of the most generous companies when it comes to the amount of charitable donation allocated per Christmas card. WHS continue to set targets fro recycled stationery; limit deliveries to bio-fueled vehicles and reduce packaging. Indeed, recently they proposed to stop using plastic bags and, where customers preferred, return to old fashioned, bio degradable recyclable paper carrier bags. Till receipts are printed only on demand. Calculations show this will save several hundreds of tonnes a year in CO2 emissions, although there is some cost to the company, which will further eat into the profit targets set for recovery.

Turnaround

In 2003/2004, the new CEO, Kate Swann, carried out a strategic review of the business and felt that certain changes needed to be incorporated in order to return WHS to profitability. It was clear that the company had a good strategic position in the High Street, but whether this position was leveraged to the best possible extent was under question

Publishing

Hodder Headline, a subsidiary of WHS, was delivering good sales and profit growth with strong market share positions in fiction and the high-margin areas of education. Hodder Headline was number 2 in fiction and secondary education, and number 1 in consumer education and further education.

Given this position, the response to market challenges was to manage promotional spend effectively and tighten financial controls. The emphasis on customer service was also strengthened.

UK Travel

This area of the business had a clear position within the UK travel market. The company was well organised and offered tailored prodcuts to clients, and the sales and profits were healthy. The main areas targeted for improvement were operational efficiency, partnerships with shop landlords, better productivity within the space that was occupied, better customer conversion and an improved service proposition to the customer.

High Street Retail

This area of the business, the biggest, needs much attention, due to the weak

retail market in the UK. The main areas of focus are:

i) stabilising the business from an operational angle

ii) improving the culture and structure through the creation of a simpler, less

bureaucratic organisation

iii) finding areas of growth for the long-term health of the business

Performance in this area was weak because of the pressure on sales and margins from the changing competitive environment and changing customer behaviour. The Internet was also taking customers away. WHS was losing its authority on the High Street. To the customer, the value proposition of WHS was not clear, as it offered a very wide range of products, including music.

The following table shows WH Smiths market share .

| |WH Smith |Nearest competitor |Market growth rate |

| |% |% |% |

|Newspapers |11 |76 |2 |

|Stationery cards and wrap |13 |72 |12 |

|Books |18 |19 |5 |

|Music |4 |56 |22 |

|other |5 |13 |6 |

Table 1

Retail

As the company offers a range of products to consumers, its performance needs to be tracked against various other retailers (who may specialise in one or more of the product categories). WHS retains a strong market share for stationery and books, but generally struggles to make an impact in other categories. WHS is doing better on cards but it still remains well behind Clinton.

| |Buyer Profile |WHS Customer/Consumer Profile |

|Stationery |* Fewer social group DEs buy |* Penetration high among those in |

| |* Women buy more than men |education |

| | |* ABs likely to buy from WHS |

|News and |* ABs more likely to buy |* Older customers Des least likely to buy |

|Magazines |(90% vs. 82% DEs) |from WHS |

| | |* Local outlets preferred |

|Children’s |* Mainly bought by family gatekeepers |* Under 25s unlikely to buy here |

|Books |(57%) and browsing husbands |* Browsing husbands more likely to buy |

|Adult books |* More likely to be bought by Abs (63%, |* Middle aged more likely to buy from WHS |

| |vs 30% Des) |* Middle aged most likely to buy from WHS |

| |* More likely to be bought by women (47% | |

| |vs 39%) | |

|Entertainment |Aged up to 45, all groups are active in |* Pre-family is least likely to buy from |

| |this sector |WHS, |

| |* Under 35s more likely to buy |but penetration is poor for all segments |

| |CDs/Computer games | |

|Gift Wrap/ |* Women and family gatekeepers most |* WHS has low penetration amongst the |

|Cards |likely to buy |‘discerning’ young traditionals/family |

| |85% and 85% respectively |gatekeepers |

| | |Time poor FT/PT employed more likely to |

| | |buy |

Table 2 : WHS Sector Penetration by Customer/Consumer Socio-economic

Grouping – shows the key segments that are willing to shop in WHS.

Other key findings were:

a) Local independents continue to dominate for newspapers, taking a 70% share, with WHS at 6%, Tesco and other major retailers trailing behind

b) Local independents also dominate for magazines, with 40% purchased from this sector and 20% from WHS. Tesco, Asda and Dillons have shares of 10%, 8% and 4% respectively. The supermarkets pose a real threat in this area

c) There is strong rivalry between WHS and Waterstone’s for leadership in the adult book category, with WHS at 18% compared to 19% share for Waterstone’s.

WHS does not fare as well as Waterstone’s during the busy Christmas period

d) For children’s books, WHS retains the lead, with around 18% purchasing from the stores and 7% from Waterstone’s during the Christmas period

e) WHS remains behind the specialists for satisfaction and the likelihood to be recommended for books

f) WHS’s share of music purchase is negligible for adults and around 4% for

children. Although one in ten purchasers have visited WHS for these products, the specialists and supermarkets continue to lead. Many consumers would not recommend WHS as a retailer of CDs

g) WHS remains the first choice for stationery, although Asda and other

supermarkets are posing a threat. WHS’s share is around 13%, with convenience stores at 12%. Asda and Staples command a share of 8% each, with Woolworths at 7%. The company is also a favoured location for calendars and diaries. In general, customer satisfaction for WHS stationery remains high (around 49%)

h) For Christmas card and card purchase in general, Clinton has the largest market share at around 22%, with local newsagents at around 17%. WHS has a share of around 3%. For cards and gift wrap, WHS scores better and is in second place at around 11%, tying with Woolworths, with Clinton at 15%. However, in a recent Guardian article*, WHS had a good write-up regarding its policy on cause-related marketing through Christmas cards

i) For games and jigsaw puzzles, WHS and Asda (owned by Walmart) tie in second place with a 7% share, whereas Woolworths takes the lead with a 24% share

j) Local newsagents lead the pack for lottery tickets, commanding a 53% market share, with the supermarkets hovering around 6% each. WHS has a share of 2%

k) Appendix 4 contains some of the reasons why consumers think that WHS has become a better or worse retailer

l) In general, the larger stores sell more items per square metre than the smaller shops. The smaller shops, however, give WHS a presence in small towns.

All the points made above and the ones featured in Appendix 4 are based on a market research survey carried out by BDRC on behalf of WHS.

Advertising Strategies

The company constantly reviews its media spend to look for the most effective

ways of attracting customers to spend their money at WHS. WHS’s media spend is much smaller than that of many of its competitors,

Advertising Spend 2006

|1 B&Q £32.1m |

|2 Tesco £24.7m |

|3 Argos £16.3m |

|4 Asda £23.7m |

|5 Sainsbury's £23.5m |

|6 PC World £15.2m |

|7 Woolworths £19.2m |

|8 Currys £19.6m |

|9 Boots £18.4m |

|10 Homebase £21.1m |

|11 Comet £10.7m |

|12 Iceland £7.7m |

|13 Phones 4 U £5.8m |

|14 Dixons £5.3m |

|15 WHSmith £8.2m |

|16 Debenhams £7.7m |

|17 M&S £7.9m |

|18 Morrisons £7.9m |

19 Somerfield £5.1m

AVERAGE £15.6m

Main sources of information when buying a product:

| Product> |Books |CD |Stationery and cards |Games |newspapers |

|Seg | | | | | |

|V | | | | | |

|AB |The Times |The Times |No effect |TV adverts |Brand loyalty |

| |recommendation |recommend-ation | | | |

|C |Word of mouth |Radio |Brand Loyalty |TV adverts |TV advertising |

|DE |No response |Radio |Brand Loyalty |TV advert |TV advertising |

|Under 10 |Parental recommendation|Radio |No response |packaging |Don’t buy |

|Under 18 |Film adaptations |Internet |Peer pressure |Cinema |sponsorship |

|Under 25 |Billboards |Radio |Don’t buy |Cinema |convenience |

|All men >25 |Billboards |Magazines |Brand Loyalty |Internet |convenience |

|All women >25 |Radio |Magazines |Sponsorship |Don’t buy |radio |

|Travellers |On shelf |In store promotion |price |Don’t buy |convenience |

| |recommendation | | | | |

Summary

WHS has clearly not only addressed the main issues for surviving the generally dismal retail environment, but has also embraced a successful turnaround strategy under the leadership of the CEO, Kate Swann, and the Chairman, Robert Walker.

The company is a major player on the High Street in Britain and has excellent

exposure within the travel network in the UK, servicing most railway stations and airports. However, there is growing competition for the retail market from online providers, and most retailers now have excellent websites for the Internet shopper.

WHS also faces competition from specialists such as HMV for CDs and DVDs and the supermarkets for cheaper books, magazines and stationery. The company has responded by offering customers better gift vouchers, such as music downloads.

The main challenges facing WHS are the same as those facing many High Street retailers, such as store layout, product offerings and range, brand image and the continuing growth of Internet shopping.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download