WHSmith and Post Office a perfect match
The solution to the dire state of the UK’s town centre Post Offices is to fully merge them into WHSmith. The idea of switching 70 Crown Office branches to the high street chain, but leaving 373 to fend for themselves makes no sense.
Without a clearer strategy and better management, the money spent refurbishing these outlets will be wasted.
Transferring 15 outlets to different retail partners makes no sense. It will confuse customers and erode the natural synergies that exist. It is like finding your natural partner in life and then playing away when their back is turned.
When an ugly man marries a plain woman, the result is rarely a beautiful child. That said, WHSmith has been performing better of late. While I am still never quite sure what merchandise mix to expect when I go into a store, there is a sense that it is getting there under chief executive Kate Swann.
Unfortunately, I know exactly what to expect when I go into a high street Post Office. What upsets me most is the huge wasted retail opportunity; bare walls, unkempt ambience and demotivated staff. What most upsets customers are the lengthy, snake-like queues.
Someone once told me that the Post Office is headed by a renowned and capable retailer. They were mistaken. With one of the richest asset bases and strongest brands in the UK, the counters business lost GBP 111 million last year on sales down 14 per cent to GBP 838 million. Management whinge that they would have been profitable had it not been for the cost of carrying the uneconomic part of the rural network.
My question is how profitable? I have read that the 443 Crown Post Offices lose GBP 70 million a year. Is that before or after paying a market rent on all that wasted prime retail space? And does it include a proper pension provision?
And what is the asset base we are discussing? The entire Royal Mail Holdings claims a property holding of GBP 1.6 billion and a pension deficit of GBP 5.6 billion. My guess is that, in reality, the former number is higher than the latter.
Both WHSmith and Post Office counters are two businesses in natural decline. Both have been hit by changing habits, superior competition and the internet. Market share decline is unavoidable, but it can be managed. Strong brands, a high street presence to die for and high regular footfall would all be massive assets to a fully merged business. The merchandise ranges are natural bedfellows.
The scope for cost savings is enormous. The 70 Post Office branches being transferred to WHSmith alone employ 1,300 staff. And just think of all the prime retail space in 443 towns that could be sold onto the market.
There will be more glamorous weddings this summer, but few where the partners are so ideally suited. A successful six-store trial should have been enough of a courtship. There is no need for a further 70-store pilot and definitely no need for the Post Office to test different partners. Just get on with it. – Keith Wills, Retail consultant.
