Magazine article Management Today

What on Earth Has Happened to WHSmith?

Magazine article Management Today

What on Earth Has Happened to WHSmith?

Article excerpt

Once a much-respected brand, the newsagent and bookseller is now better known for its shabby shops and rip-off prices. How long can it keep squeezing profits out of falling sales and disgruntled customers? Matthew Lynn reports.

Torn and frayed carpets, either grey or faded blue.Bits of half-eaten sausage perched among the bottles of water. Leaking roofs and flooded basements. Trolleys stacked across the aisles. Exposed electric wires threatening to take out your toddler. Christmas magazines prominently displayed in mid-June. And yet more torn carpets.

There are many ways that businesses can use social media to build their brands, but there are also ways that social media can bite back, and there is no account with sharper teeth than the @WHS_Carpet Twitter feed. To follow it is to be transported into a world of disorganised, tatty stores, filled with stuff that either you do need but don't want to pay rip-off prices for, or bizarre objects that appear to have been ordered in out of pure malice, all laced with the exasperated sarcasm that comes naturally to anyone unfortunate enough to wander into a branch of WHSmith. 'Who would be driving up the M1 and decide: 'Oh I had better pull into the services and buy a wooden duck,' complains one tweet.

It is a good question. WHSmith is one of the UK's oldest retail brands, and was once one of its most respected. It was a much-loved part of every British high street, a place where you went to buy your new pencil case before the start of a school year, where you might get the latest bestseller, or a record or DVD. But in the last few years it has gone through a terrible transformation: it has become the poster child for short-term penny-pinching management, destroying its brand to keep the shareholders happy and the executive bonuses rolling, while sacrificing its medium-term chances of staying in business. Can WHSmith defy gravity forever, and keep its profits relentlessly rising even as its sales decline? Or is it about to get found out, and suffer the same grisly fate that has overtaken many other high-street names?

Only John Lewis and M&S ever had the same kind of trusted brand as WHSmith. The company dates back all the way to 1792, when Henry Walton Smith opened up as a news vendor in Little Grosvenor Street in London But it was his son William Henry who added the WH and turned it into a national force. It was the world's first chain of shops, riding the mid 19th-century railway boom to sell books and newspapers to the new class of travellers - its first station outlet was opened at Euston in 1848, and it very quickly rolled out the format across the whole country.

The Smiths were classic Victorian entrepreneurs: smart, ambitious and upwardly socially mobile. The second William Henry drove the business relentlessly, and then became a Conservative politician, ending up as First Lord of the Admiralty. On his death, his widow became Viscountess Hambledon, a title that has remained in the family ever since. The Smiths carried on running the family business until the 1940s, when death duties forced them to gradually sell shares, although there was at least one family member on the board until the mid-1990s.

They were tycoons who could work out how to take advantage of rapid social and economic change: railways, mass-market books and newspapers were the internet of their age. Over much of the last century, it was a powerfully innovative retailer. It pioneered the ISBN system for labelling books, moved into do-it-yourself, acquired Waterstone's when it was still expanding, launched one of the first cable TV stations as well as owning a stake in Yorkshire TV, and owned the publishing company Hodder Headline. Not all its diversifications worked out. But it was constantly expanding and experimenting with new ventures.

But in the last decade, it has abandoned that heritage, becoming a defensive business, more interested in squeezing the last profits out of what it has inherited than anything else. …

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