Goodbye to the High Street for WH Smith

Following speculation about imminent closure of its High Street stores, there is anecdotal evidence that visits to WH Smith spiked in recent weeks. This is a familiar phenomenon when a much loved brand is about to be discontinued - see it or buy it while it's still there. Sadly, most nostalgic visitors would have seen fairly empty stores and understood the reasons why the company’s demise from High Streets is imminent. At least the High Street stores won’t be closing for the time being, but reemerging with the new TG Jones brand identity of their new owner.

What went wrong?

WH Smith started life as a news agent, and in its early days was very innovative, seizing the opportunities presented by train travel with the first station news stand in 1848. Innovation didn't end there. Over time, it diversified into books, music, toys and stationery among other products. It invested in channels and collaborations, for example it became involved in direct mail selling of books and the addition of Post Office branches in its High Street branches.

The problem for WH Smith has been that its High Street diversifications were easy for others to copy. Books are now routinely sold by supermarkets following the ending of resale price maintenance. Similarly, greetings cards and music are now routinely sold elsewhere, often with better choice and lower prices.

Internet woes

The internet took away a large share of the book and music market, and contributed to the decline in newspaper and magazine sales. News had been a draw which created footfall to entice sales of other items in the store. Post Offices can act as a similar draw, but not as powerfully as a daily visit to buy a newspaper.

The general decline in High Streets has been the final straw for WH Smith. High streets are increasingly thin with shoppers, who have moved first to out of town retail parks, and more recently online. For a business which relies on passing trade, a reduction in the number of people passing the front door is bad news. Its product diversification was driven for the right reasons, but it made for a bland store with no overwhelming reason to make it a destination for a shopping visit.

High Street retailing is not all doom and gloom. Some of the most successful retailers in recent years have focused on specialism and depth rather than breadth of product range - sportswear, mobile phones, and cosmetics for example. WH Smith had become a miniature department store with no single overwhelming reason to visit.

WH Smith on the move

The most profitable part of the WH Smith business is not affected by its High Street departure. The travel division, which includes branches at railway stations, airports and in hospitals, continues to thrive and the company has been innovating with these formats. These work in a way that the High Street stores don't. The passing trade for these branches has continued to increase and the stores often have a much more captive market. The stores serve a need for people in a hurry who might have forgotten items. Within these settings, the threat of online competition is less relevant, so better margins can be achieved by providing convenience to people on the move.

What now for the current High Street stores?

WH Smith has been gradually closing High Street stores, and this will most likely continue with the new owners. This is normal in retailing where current trading conditions, the effects of nearby developments, and the status of a lease lead to routine close / continue decisions on a branch by branch basis. The new owners also own the Hobbycraft chain of stores, mainly located in out of town retail parks. In principle, there may be some opportunity for introducing Hobbycraft lines to former WH Smith stores, but this may just accentuate the problem of having a very broad product range which isn't deep enough to be competitive.

WH Smith and Henley Business School

There is a close connection between the WH Smith family and the splendid Greenlands campus of Henley Business School. Greenlands was built by the family and mocked at the time by Jerome K Jerome as a vulgar Thames-side property owned by an upstart news agent. The family has moved on, but Henley Business School now has a long history of innovation in higher education provision, which Mr WH Smith would be proud of.