WHSmith Intl planning ‘careful’ InMotion expansion

By Luke Barras-hill |

InMotion has three shops outside the US, including at Perth Airport (pictured).

Further international travel retail expansion of InMotion – the largest airport-based tech accessories retailer in North America – is under consideration but only where it makes sense, WHSmith has told TRBusiness.

WHSmith completed the acquisition of InMotion in 2018 and the brand currently has three stores outside the US at Leeds Bradford Airport, Perth Airport and Alicante Airport.

“It’s a fantastic brand and what it does brilliantly is customer service, the way in which it ensures the product gets into the hands of the customer; the trial and demonstration is a fantastic skill,” WHSmith Managing Director – International Phil McNally told TRBusiness in an exclusive interview.

“We’ve been very careful to transplant that customer service as we transplant the brand and we need to do that carefully so we can deliver against those brand values.

“We’d be very happy to take the brand wherever the market is ready. At this stage, very much in travel retail and airport retailing as opposed to any other retailing. But if there is a gap in the market, by all means we will look at any opportunity that is there and are committed to doing so.”

Phil McNally Managing Director – International, WHSmith.

LIFTING CONVENIENCE SHARE

Within the international ‘Travel’ division, North America currently represents approximately 50% of the Group’s stores outside the UK.

While WHSmith commands a relatively small share of the international news, books and convenience market outside of North America it acknowledges the solid opportunity to grow its presence in the space.

The Group posted a £33 million/$42 million trading loss across its Travel division in the full year ending 31 August, of which £32m related to losses in its international business that includes InMotion and US travel retailer Marshall Retail Group [latter acquired in December 2019 – Ed].

Travel revenue was down 32% to £533m/$724 and sales from the international division dropped by 17% to £209m.

McNally said no one could have foreseen what lay ahead in February last year, but there were some clues.

“We got a sense of what was coming, but like I think all of our competitors you create a model one day and the situation changed. As the full scale of the Covid crisis became apparent, we were pretty sure there would be a material impact of the tune to what we’ve seen.”

Weathering the storm has not been easy, but TRBusiness is told that liquidity remains strong, cash burn is down and the international business in particular remains extremely agile.

In fact, the Travel division enjoyed a raft of new store openings for MRG and InMotion in 2020.

InMotion opened eight units during the year, including new fascias at San Francisco, Washington Dulles and Salt Lake City International Airports, bolstering a North America portfolio that encompasses around 116 stores across 43 airports.

WHSmith’s global Travel business outside the UK includes a presence in more than 100 airports and 30 countries, although the bulk of its units exist in North America.

In the UK, the Travel business covers more than 580 points of sale across airports, railway stations, hospitals and motorway service areas.

In July, TRBusiness broke the news that WHSmith was set to open a blended travel essentials store at Heathrow Terminal 2. This duly occurred in August, with the shop incorporating a best-in-class design with a complementary in-house pharmacy.

WHSmith has worked hard to optimise its store layouts and assortments in a manner that responds to changing customer preferences and social distancing requirements.

“It’s early days for people to see the concept as no one can really travel,” stated McNally. “What we would ordinarily do when we have good concepts in countries is invite a number of our partners over to show them what we’ve done and gauge their appetite for it. We think there will be a reasonable uptake, but it’s difficult to say because the economics need to be worked out.”

Elsewhere, ‘Hospitals’ sat as the second biggest revenue segment for Travel pre-Covid behind air and in front of rail with brands such as Costa Coffee and M&S Simply Food leading the charge.

“Hospitals have been a really important channel for us; through this crisis we’ve tried to keep all our hospital stores open, where safe to do so,” said McNally. “We’ve enhanced our ranges to help NHS workers and work very closely with the trusts. That part of the business has been pretty resilient.”

Like all travel retailers, WHSmith International keeps a close watch on three core metrics – penetration, average transaction value and spend per passenger and has developed a good track record in driving forward these metrics, notably when it takes over new business.

“We are seeing average transaction value, penetration and spend per passenger going up. What we did pretty quickly as we started to reopen our stores, was change our customer offer as we knew the customer pre-Covid was not going to be the same post-Covid,” said McNally.

DIVERSIFYING ASSORTMENTS; DYNAMIC NEGOTIATIONS

McNally explains that this was underpinned by a move into different categories such as health and beauty – stocking hygiene products such as hand sanitisers and facemasks.

The firm has also witnessed traction from its food proposition, spurred on by a combination of passengers’ wariness of spending a lot of time in F&B areas at airports together with scaled-back inflight F&B provision.

Store layouts have also been materially influenced by the requirement to socially distance; as many WHSmith shops are not walkthrough formats, a lot of work has taken place to respond to restrictions placed on footfall i.e optimising category layouts within a one-way system, explained McNally.

Heathrow Terminal 2 opened a blended travel essentials shop from WHSmith featuring a ‘Well Pharmacy’ in August. 

Product adjacencies have been made more intuitive and till-points are well-merchandised. Though despite this, some categories such as travel accessories have suffered due to the lack of travellers.

While air travel remains a far more difficult scenario for the business, McNally is nonetheless expecting a steady recovery in passenger traffic.

“If you look at the forecasts, people are talking about passenger numbers going back to 2019 levels in late 2023/early 2024. But all those were announced before the vaccines.

“Wherever we can open a store – we will, to serve the customer and landlord. We have opened far more quickly in a number of locations than our peers because we think it’s really important to be there serving travelling customers.

“Therefore, as passenger numbers come back we will be very well placed to take a higher share of where we are currently. We are actively looking at opportunities right now and are very keen on growing within many markets around the world.

“We’ve had to be very agile and go the extra yard with our landlords to get through the front door and tailor our offer by location to drive our spend per passenger.

“While I can’t tell you what the future holds, I can tell you that when passenger numbers come back we will have a better relationship with our customers, a better relationship with our landlords and we will be more efficient and agile.”

To read the full interview, see the December issue.

 

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