Home / Advertisers / The UK’s most-unloved retailer WH Smith: rip off the customers so long as it keeps the shareholders happy

The UK’s most-unloved retailer WH Smith: rip off the customers so long as it keeps the shareholders happy

UnknownExactly one year ago I wrote a piece about how WH Smith rips off travellers with their monopoly in airports, train stations and motorway service stations. It provoked quite a lot of comment with complaints about their aggressive pricing.

However if you were an investor a year ago you would have paid around £7 a share and today that share would be worth around £10, an increase of 43 per cent.

Fantastic work if you can get it. Also WH Smith have £50m of our cash they are about to give to shareholders via a share buyback scheme They claim to have bought back 1.6m shares at £9.57 and have also trousered another little profit for the business in the process.

This week I pulled in to a service station on the M40 for a comfort break and decided to get some water and, you guessed, the only place selling water was WH Smith. The 500 ml bottle of Evian was £1.99; I pay 80p for a two litre bottle in my supermarket; that’s £7.96 for 2 litres versus 80p, a massive 10 X the price of water elsewhere. I nearly walked away but was thirsty so I queued up to buy my expensive water – and also noticed a packet of 20 Silk Cut was £9.99, versus £8 in most shops, another 25 per cent extra.

According to their latest trading statement for the 20 weeks to 18th January 2014 total sales were down four per cent year over year. High street shops were down by seven per cent whereas their ‘travel’ outlets were up two per cent. The statement went on to say margins were up and they are managing costs ‘very tightly’. Customers, though, complain incessantly about their stores not just about prices but how scruffy they are – the carpets, in particular, come in for a lot of stick.

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So in a competitive situation such as the high street they are experiencing declining sales, and I’m not remotely surprised. Whereas their growth in absolute sales and increasing margins is being driven by the monopolies they enjoy – service stations, airports etc – serving people who have no choice, like me the other day. The classic consequence of a monopoly.

This feels like a business where the focus is on 100 per cent on shareholder value and little to do with their customers. The service levels at the WH Smith outlets I’ve sadly been forced to visit are dire. If questioned about any aspect of their offering the assistants just mumble and can’t answer any direct question. The chap at the M40 outlet didn’t look up, say hello, thank you or goodbye, just grunted.

I would have thought any large shareholder would be questioning the customer experience because, ultimately, it must impact on the value of the business; just reflect on Ryanair as a result of Michael O’Leary’s dismissive attitude towards their passengers.

However so long as the share price keeps rising at this remarkable level, I suspect money does the talking. EX-CEO Kate Swann’s reputation in the City, as someone who delivered value and growth, is intact. But I wonder what value has been eroded with their customers as a result of this business strategy of greed.

If there was an alternative at airports, train stations and service stations I for one would actively choose the other one as my protest at WH Smith’s disregard of their customers for the benefit of their shareholders.

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About Paul Simons

Paul joined Cadbury-Schweppes in brand management and then moved to United Biscuits. He switched to advertising in his late 20s, at Cogent Elliott and then Gold Greenlees Trott. He founded Simons Palmer Denton Clemmow & Johnson in the late 80s, one of the leading creative agencies of the 90s. Simons Palmer then merged with TBWA to create a top ten agency. Paul then joined O&M as chairman & CEO of the UK group. After three years he left to create a new AIM-quoted advertising group Cagney Plc. He is now a consultant to a number of client companies. Paul also shares his thoughts on his blog. Visit Paul Simons Blog.

One comment

  1. Great stuff, Paul. This answers my question of many years: “What exactly is WHSmith for?” – since you can buy everything they sell from much smarter, more polite, cleaner and cheaper retailers. It seems that WHSmith is simply a mechanism to exploit trapped consumer cash and send it directly to shareholders without passing GO. I note Kate Swann is now at Upper Crust – similarly located to WHSmith but with serious competition. So there’s the answer? Time for someone to create the perfect competitor – with ‘net based fluid support maybe.

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