W H Smith reboots distribution operation

W H Smith (WHS) is increasing its focus on book distribution to its stores in a bid to make cost savings.

The company’s book buyers have been working within its new “books operating model”, which involves more focused targeting of big titles to key stores, which will be a priority going forward, The Bookseller understands.

In its annual financial results statement, which it released last month, the chain said the new model would ensure “margin improvements and efficiency savings” in its High Street business.   

WHS reported that overall book sales were down 8% year on year for the 12 months to 31st August; a figure which follows year-on-year declines of 6% in 2013 and 7% in 2012.

The retailer said sales were affected by “the quality of the publishing” yet it has also looked to tighten its distribution and speed up the supply chain to make savings.

The new model involves buying the same quantity of titles as before, but targeting them according to different stores’ demographics. This prevents overbuying and trying to move titles round the estate, which is expensive. As a result of the new model, returns from the retailer have improved.  

WHS is concentrating on recommendations, and is trialling a “Buyer’s Choice” promotion in stores on fiction, non-fiction and children’s titles. The outlet will focus on children’s books, as well as building on areas of relative strength, including education, travel and fiction.

It is also promoting its click and collect offer, and trialling a service whereby customers can order products through its website and collect them at London Victoria and London Liverpool Street in in the run up to Christmas. “We have recently been promoting our service online as well as trialling the service in a small number of selected travel stores to gauge customer interest,” a WHS spokesperson said.

While the High Street arm of the business continues to be hit by falling sales (overall sales were down 6% in a year when the company closed 11 High Street shops), W H Smith Travel is trading strongly, with overall sales up 4% in the same time period. WHS currently operates 725 Travel outlets (50 more than in 2013), 29 of which have been refurbished in the past 12 months.

Some of the Travel outlets also have an increased emphasis on books; 11 of its UK shops now operate under the name W H Smith Bookshop, most of which are in airports. The most recent W H Smith Bookshop opening was at Gatwick Airport’s South Terminal this summer, the spokesperson said.  

Despite WHS reporting annual pretax profits of £112m in 2013–14, up 9% year-on-year, analysts believe the gap between its High Street and Travel arms is growing.
Nick Bubb, independent retail analyst, said: “It’s hard to imagine any serious book buyer shopping in stores with such poor lighting and demoralised staff, but WHS has managed to establish a strong position in the kids’ market and its ability to promote and shift big volumes of popular fiction and non-fiction will continue to generate publisher support. Meanwhile, the Travel operation continues to enjoy a captive audience that even Amazon can’t reach.”

Douglas McCabe, analyst with Enders, said: “WHS is a company with two increasingly differentiated businesses: its Travel stores, which are performing well; and its High Street stores, which are challenged. Its book offer is challenged by the discounters, the supermarkets, and by the convenience and discounts of online—Amazon in particular.”