Tailoring the offer, understanding the consumer

“We can’t control how many passengers are going to be coming through airports but we can control what we sell, the layout and the conversations we have with customers. So for us it’s about spending per passenger, it’s about having a really good consumer offer, it’s about tailoring it and it’s about thinking through how consumers are changing.”

That’s how WHSmith CEO Carl Cowling sums up the approach to the travel essentials and speciality retail business at airports in today’s COVID-19-hit world.

In an exclusive interview with The Moodie Davitt Report – conducted as the company opened its new ‘blended essentials’ store at London Heathrow Airport Terminal 2 in late August – Cowling acknowledges that the market remains challenging, but he retains a positive attitude about the company’s and the industry’s future.

The retailer’s latest trading update, released in early August, summed up the scale of the decline that has struck the market this year. Travel revenue fell by -73% year-on-year in July, after plummeting -84% in June. WHSmith said that it expected a pre-tax loss of £70-75 million for the year ended 31 August and announced a proposed restructure of its UK business that could result in 1,500 job losses.

Cowling, whose CV includes senior roles with Dixons Retail and Carphone Warehouse, barely had time to find his feet after being promoted to CEO at WHSmith in November last year – following five years as Managing Director – when news of a killer disease thought to have originated in Wuhan, China rocked the world.

“We have tried to work collaboratively to come up with a solution that works for landlords and works for us. It varies around the world, but I would say that we work well with pretty much all of the landlords and that we are in as good a position as we can be.”

The scale of WHSmith’s challenge in the current retail crisis is emphasised by its recently enhanced geographic diversity. Through concession gains and acquisitions, it now has a presence in 32 countries. That means working around multiple sets of government policies on the movement of travellers, lockdowns, quarantines and store reopenings.

“If you go back just ten years, outside the UK we were in Scandinavia and that was about it,” says Cowling. “But we are now a worldwide business and the current situation has actually opened up some new opportunities for us. We have health essentials categories that launched and have done well and we have a great range of masks.”

He continues: “We are keeping the team motivated, are pushing forward and talking to landlords about how we can make the most of the passengers we have got. One of the things that we talk to all of the teams about is that you can’t control what is going to happen with people flying and passengers going into airports. But what we can control is how we think about the layout of our stores, how we talk to customers and how we can attract more people into the shops and help them to put more products into their baskets.”

Despite the distractions caused by COVID-19, WHSmith Travel has pressed ahead with two major airport investments this year, including the newly-refurbished store at Heathrow Airport (see previous page). The other is the 15,000sq ft Bowery Bay Shops complex at New York La Guardia Airport Terminal B, opened in June by subsidiary Marshall Retail Group (MRG), the speciality retailer it acquired in late 2019. It features artisan confectionery, gourmet food, electronics, locally-sourced gifts and global beauty products in an immersive space that pays homage to New York’s architectural grandeur and cultural diversity.

Of this, Cowling says: ”You come through security at LaGuardia Airport and you walk through a whole row of shops that are all MRG. We think it’s a game changer in retailing in US airports. There’s nothing quite like it.”

He adds: “MRG have always pushed the envelope in terms of retailing – they have a huge amount of contracts. They have a big store at San Francisco called the District Market and there is nothing else like that in US airport retail. And we thought it was really important to get The Bowery open.”

Asked about the prospects for MRG and InMotion, Cowling says: “Some 85% of passengers in the US are domestic and it’s a big country, so while international travel is going to be challenged, probably for years, the evidence seems to suggest that domestic travel is returning slowly but surely within the US.

“The proposition that we have got with InMotion and MRG together is a powerful one. The US speciality retail market in airports is worth US$3.2 billion. It’s a big market and we have got an array of brands from inMotion and with MRG we have got news, we have got convenience, fashion and souvenirs. We can bring all of that together as stores under one roof and we have done that in a number of different airports. I think the opportunity now is as strong as it ever was. So we are still very excited about the US.”

Summarising the WHSmith travel retail strategy now, Cowling says there is “still an appetite to open more airport stores”.

He continues: “We need to think about how we can create a nice environment for customers and how to inspire them with the different categories as they go through. That’s where our focus is going to be.”

Cowling concludes: “It’s difficult for everyone at the moment and if you are a single category retailer it’s very, very difficult. We at least have the advantage of having a number of different categories so we should be able to fare better than most by thinking through that and adapting our arrangements.

“More space could become available because of this crisis – we would like to take the opportunity to move into more airport space around the world.

“We offer something very different to our competitors and we are pretty excited about the next few years. We have proved that our brand can work in the US, in Asia, in the Middle East and in Europe and there are a lot of opportunities out there for us.”