WHSmith is one of the largest book retailer chain stores in the United Kingdom, operating with just about nine hundred High Street stores and five hundred other sales points in the country with the strong focus on the intuitional sales to the their customer by exposing the products through the windows.
Merchandising plays tremendous role in the developed sales proposition of WHSmith and the company seem to reach impressive results. The company started its operations from the small store on the railways station and have grown to one of the largest retail chains with High Street, rail stations and airport stores around the United Kingdom.According to the internal reporting of the company WH Smith’s High Street stores experienced unprecedented profit results in 2011. In addition, as based on the same document company profit increased by 4. 3%. At the same time the reality over the last five years reflects significant downfall in the total sales volumes and revenue of the company.
This indicates the challenges and gaps in the strategic organizational planning that could be further explored on the basis of the Strength, Weaknesses, Opportunities and Threats (SWOT).Mission statement of WHSmith is defined as follows: “Our business goal is to rebuild our position as Britain’s most popular stationer, bookseller and newsagent. We strive to be an outward facing, customer-focused, store-responsive organisation that delivers on our promises. ” (WHS, 2011) The vision of the company is focused around the understanding of the customer needs and predcting their expectations. WHSmith positions itself in variour customer segments and acts as a provider of instant “reading and entertainment solutions” for its clients.The strategy of WHS includes diversification of the product portfolio to complement the needs of the customers, such as snacks, drinks, games, journals and magazines.
|Strengths:|Weaknesses| |S1: One-stop-shopping solution for entertainment. S2: Large scale of operations of WHS allowed the company to increase entry barriers for small competitors. S3: Different store proposition that captures bigger market (High Street, station and airport stores, kiosks). |W1: Lack of customers’ brand loyalty due to undifferentiated product. W2: Lack of differentiation in in-store environment.WHS rather follows its competitors than sets the tone.
W3: Management style is very authoritative that takes the authority from the individual stores to enhance customer in-store experience. | Opportunities|O1: Impulse shopping is becoming more and more popular among middle and high class customers due to higher purchase capability. O2: Developing Online shopping market|Strategy: S1/O1- as the purchase power of impulse customer is increasing, WHSMith should further foster its merchandising activities to increase the share of impulse sales.S2/O2 – with the growth of online shopping a lot of customers will prefer to make purchase at one store.
In order to capture this opportunity, WHSmith should widen the product range to attract customers with associated products. |Strategy: W1/O1 – impulse shopping apriori means lack of loyalty. With the lack of differentiated proposition, WHSmith should foster creation of innovative store environment to gain impulse clients in stores and enhance its web site sales through user-friendly and interactive web site.W1-2/O1 – to leverage the market challenges and capture the opportunities of the growing online segment, WHSmith should look at decentralization of the management and giving more authority to stores themselves to create effective in-store environment. | Threats|T1: Changing shopping habits of average customer in the UK.
More focus on price, less on experience. T2: Very oligopolistic market, 40% concentrated within large retail book chains. T3: Growing e-book market that takes a large share of traditional book sellers.Strategy:T1/S1-2 – with the changing focus and preference to the price, WHSmithcan further focus on reduction of its operational costs and use the scale of operations to compete on price. T2-3/S3 – e-books became a significant threat for traditional books and it is inevitable change.
Impulse shopping, ease of access to reading and price of the traditional book is something that WHSmith can offer through the variety of stores. It should continue to focus its merchandizing strategy on “offering”, showing “irresistible traditional books”.StrategyT1/W3 - Centralized authority does not allow for bottom up approach to improvements. Decentralization of the management will allow WHSmith to bring fresh approach to the in-store experience and, thus, attract new client groups.
T2/W2 – with strong competition among just a few large chains innovation comes as an essential asset. WHSmith should bring through innovation culture to all the levels of its operations. T3/W1 – customer loyalty is one of the assets that basically does not exist in the book retails. Appearance of e-books even further challenges the stores.
To leverage this threat WHSmith should develop –book proposition and look at differentiation in virtual sales. | WHS Strengths WHS has a strategy to gain sales on the scale of operations and through offering the variety of store options. With that in mind, the company has a number of strengths. First of all, the books are not the only products that individual can purchase in the WHSmith store. To complement the customer experience all the stores offer snacks, drinks, electronic devices, magazines and other items that can become a part of an impulse purchase.
Secondly, WHSmith operates large amount of stores that makes its brand very visible and makes it to always be on the customers’ way to somewhere. This aspect is definitely differentiated from other book retail stores that WHSmith competes with on the UK market. This strength is complemented by the company strategy to define its proposition not by the customer groups, but by offering all types of stores that potentially can meet all the customer needs. With that, the third strength of WHSmith is the variety of stores, going from fancy high street locations to the small walk-in rail station and airport stores.WHS Weaknesses WHSmith is generally not perceived as a Brand with strong customer loyalty.
People go to WHSmith on the way, but very rarely one would choose to go for shopping at WHSmith as the primary option. Books in general are the secondary purchase, where individuals are looking for price and availability and all the competitors as well as WHSmith have equal proposition. Waterstones and The Works, however, manage to attract its clients with the in-store environment and complementary sales.This lack of brand loyalty is, undoubtedly, a weakness of the company. Secondly, WHSmith is an affordable shopping proposition, where customers do not expect extended in-store experience. With that in mind, the WHSmith stores are lacking unique proposition that will come together with book shopping, such as coffee shop inside the store, customer information centre and other aspects that extend the shopping time of the clients.
Waterstones were the first to open a coffee shop inside their stores. The Works created entertainment areas.WHSmith attempted to follow their competitors, but at this time the improvements in the store were no longer order winners, but rather necessities to compete with the others. WHSmith has very centralized management and decision-making system in regards to the store layout and the range of products. With almost thousand and five hundred stores it is possible to argue that centralized marketing and management will not be so effective as the eyes and ears of people at stores themselves.
WHS Opportunity There are numerous trends on the market, determined by the changing business environment that creates impulse habits.Customers who have more money available for spending and less time for shopping value the proposition of the good merchandizing and often make significant impulse purchases. Impulse market can become a significant opportunity for the book stores, as it attracts the clients with the “wish” rather than a “need”. WHSmith already realized the value of these customers, but it can still further grow this market at its convenience locations and High Street stores.
The second opportunity is the online market. It is not a secret that same reasons that drive people for making impulse habits, drive online shopping.There are several advantages that people see in online shopping comparing to the traditional in-store experience. These advantages include price, availability and time saving. Based on the research, conducted by the British government, more than 50% of the UK citizens make purchases online regularly (IR, 2010).
Given the situation, online market becomes a direct competition for the traditional retail book stores. WHS Threats Purchase habits and the expectations of the customers change with time.This change is determined by the market conditions, growing average income of the middle class and the choice and availability of shopping options. With online market in place, strong competition is fostered by the lowest price and high quality proposition. WHSmith is one of the largest book retailers; however, the company does not offer the lowest price of its product, especially taking into account the difficulties to differentiate the product in book retail sector. With that in mind, it is difficult to argue that shift to price sensitivity and fast shopping would not affect the sales of WHSmith.
Book retail market is oligopolistic. Entrance barriers are quite significant, leaving smaller competitors behind. At the same time the market concentrated in the hands of just a several large retail chains puts a lot of pressure on the price competition and puts cost reduction on the agenda for WHSmith. With the outlined management issues and defined sales volume it is evident that WHSmith is falling behind its competitors.
E-books is a relatively new occurrence on the market, but already today it is possible to see that this elements significantly impacts the sales of traditional books.E-books are cheaper and more convenient to carry, the proposition for this type of product also put accent on the fact that e-books are more “green” and “society friendly”. Such offer is a significant threat to the companies that are focused and exist due to the high demand for reading. Summary In the previous section the document outlined a number of aspects in which the WHSmith business should be seen. The SWOT table have summarised the strategies that the company could adapt to capitalize on the opportunities and leverage the threats.It is, however, important to identify the general direction of the future strategy as it is seen after performing this analysis.
First of all, WHSmith has a clear advantage of the scale and scope through its books and associated product sales at various locations across the city. With the management change and decentralization of the authority the company will be able to gain “eyes” locally and improve on one by one basis the sales at its critical locations. As the shopping experience is not critical for some group of customers, WHSmith should further foster impulse sales at its station and High Street stores.While the range of products and effective merchandizing strategies are essential here to achieve results, the company at the same time could invest in technology and reduce its fixed costs for sales force at stores. With the difficulty to create brand loyalty among the customers in the segment, impulse shopping focus can become a great opportunity.
It is determined that e-books are becoming more and more popular. Being at the same time new product and direct competition, this product cannot be left without attention of the traditional book stores.It is suggested that WHSmith should join the focus on online sales and increase its participation in the e-book market as this can create significant competitive advantage already in the nearest future. Online market is offering good price, time saving and high availability of products at a low cost for the stores.
At the moment, WHSmith is operating in a vary high cost environment as it owns numerous stores at very expensive locations and high operational expenses. Leveraging its activities and including online sales in core focus can help WHSmith to reduce its overall logistics and storage costs.
