Railway Stations Management in the UK - Essay Example

New Retail Geography A NEW RETAIL GEOGRAPHY A new Retail Geography: Railway Stations as platforms for convenience retail growth. Subhajit Som Academia Research The London Rail network is one of the most advanced rail network in the world but comparatively less developed than the other rail networks of Western Europe. It is managed by Transport for London or TFL. The National Rail headed by CEO John Armitt manages rail services moving out of London. With the growth in traffic and more demanding customers the pressure, on the operating companies managing the rail network, also increases. The London Transport department report of 2005 says that on an average day in 2004 there were 27 million journeys in London out of which 5% journeys were done by rail. There is also an interesting data from the same source which says that in 2004, on an average day, 251,000 entered Central London by rail during the morning peak. Like all counties the United Kingdom also has many small rail stations around the country. These railway stations are very small stations compared to large mainline stations such as King’s Cross or Liverpool Street. Retailing the railway is now a focus and the railway companies have become more customer-centric. (“London Travel Report” 2005) Taking UK into consideration, Network Rail owns and manages about 17 major railway stations, which caters to about 800 million visitors in a year. Apart from these select few railway stations Network Rail owns about 2500 other railways stations. These stations are being managed by New Retail Geography 2 third-party operating companies. Network Rail has been investing billions to provide modern facilities to the commuters and to encourage investment from the retail and service sector. It is trying to provide both customer satisfaction and commercial opportunity. Rail retailing has also been given an extra thrust by the information technology industry as well. The advent of software designed specifically for the railway network by companies like Fujitsu, has provided an edge to retail railway in a competitive and aggressive way. It is not only IT and marketing the railway that has been given priority, but retailing in railway stations is now the key for customer delight. (Fujitsu, UK, 2004) However, the competitive retail environment throughout the world is giving every retailer a nightmare. The retailers in London are also facing the same dilemma. The retailers are looking towards customer centric strategy, which will enhance and develop the customer experience and maintain their loyalty to the brand. It is more of a human dimension that is used in the retail business of today. The key is to identify, understand and serve your customers. Thinking “out of the box” is the buzzword now. But, against all odds the London retail scenario is all booming up with the retailers now looking at multiple point of sale (POS), more so with great opportunity in the franchising business. (How and Why Limited, 2003) In a study done by Venn Research Inc. on March 1, 2006 on UK Franchising Industry—2009™ “identifies the market as one of the significant component to UK’s economic line valuing £9.82billion, particularly a strong foothold with retailing and B2B services.” Though the majority thrust is given to the internet based retailing, but retailers are also giving emphasis on New Retail Geography 3 retailing through mobile phones and vending machines. But nothing can beat the effectiveness of the physical retail stores. The customers can feel the products and buy it at their own convenience. (Venn Research, Inc. 1 March 2006) In this context it is also important to understand the size of a shop. Some feel that the shop sizes must grow along with the expansion of their retails network. But as a matter of fact the optimum size is decided on the product range, the store concept and the value offered to the customers. "Small or big, doesnt matter—owners want the best of new and innovative retailers," said Thierry Lacaze, director of mall management company, Société des Centres Commerciaux, Paris. This is especially true when new retail networks are developed in the most unorthodox locations. Throughout Europe, retailers are adapting to the schedules of time-crunched shoppers by providing stores in convenient locations, such as train stations and airports. "By exploring new types of locations, we are well positioned to be able to serve the 21st Century customer—one who has less time for shopping," said Jean-Christophe Quiot, manager of Pause Cafe S.A., a chain of coffee shops based in Fribourg, Switzerland. (Barbara Hogan Galvin, January 2001) This can be also be vouched by Marks & Spencer, which did a great job by opening their Simply Food outlets in 3 major railway stations. It has plans to expand the network to 40 more stations. Their claim is that since the country’s top 14 railway stations attract 650 million passengers in a year the potential is huge in the retail outlets of the railway stations. A few more names in the which have revolutionized the shopping experience in the railway stations are Sainsburys, Superdrug, W H Smith, Starbucks and Accessorize.(“M&S find railway success - Food Retailing - Brief Article” 21 Nov 2002.) New Retail Geography 4 The retail experience should be more about want based shopping, not a need based one. No-one would like to travel to the main railway stations located at central London to buy a pound of cheese or a knife. Show the people a great time through an exciting shopping environment and they will willingly spend more time and money. Customers are now looking at a train ride not only to reach their destination but also look for a good café where they can have a bite before moving to work or a place where they can shop after office. There are certain stations in London which offer such facilities to the traveler. Kings Cross is one such station where one can find outlets of Burger King, Coopers Bar, Swatch and others. Another station which deserves mention is the Liverpool Street Station where we have retail outlets of WH Smith’s, Burger King, McDonalds, Costas Coffee and Helter Skelter. (How and Why Limited 2003) This brings us to the question if Retailers in London can have such success retailing in mainline stations can we replicate this in smaller stations? As we have discussed earlier that the mainline stations have large and small retail outlets of brands such as Burger King, W.H Smith’s etc. Now let us take the example of a small station Saunderton on the Chiltern Main Line that runs between London Marylebone and Birmingham Snow Hill Stations. It is a picturesque rural station between High Wycombe and Princes Risborough stations. (Paul Makepeace, 2007) Saunderton station has an annual passenger entry and exit number of 0.49 million based on the 2004-2005 ticket sales. Consider this with the New Retail Geography 5 millions of people who enter and exit any of the stations of Central London every day. (“London Travel Report” 2005) The success of retailing is prevalent in the economics of both the developed and developing nations. Be it the west at the America’s or at the far-east in the mainland of China. With globalization, international brands in retail have crossed continents to be part of the booming world economy. Brands apart, the local marketers and retailers are also not left behind to capture the ever expanding market of their home country. The advent of modern retailing has expanse the length and breadth of the countries and the local retailers have taken full advantage of this opportunity. They have stationed themselves in the most prominent and convenient places to attract more dedicated customers. The locations also include the railway networks of the country. These retail outlets are not only present in the major railway junctions or stations, but also in the small towns and cities. The retail industry has grown throughout major economies. It has become a major growth factor for a country’s economy. The USA can not be seen nor can be felt at 30,000 feet and nor in the confines of a Greyhound. The best way to enjoy it is through its excellent rail network. The trans-continental and inter-city trains in the USA are operated by Amtrak. With extensive railway network the retail scenario in USA is also forever growing and the most of the railway stations feature in the map of the major retailers like Best Buy, Staples, GAP, Toys “R” Us and Office Depot. And all these big league retailers have seen a growth of about 10% in their sales. If one goes back a few years in the year 1886, one would see that the success of Sears, Roebuck and Co. began in one of the small New Retail Geography 6 railway stations of rural Minnesota, USA, when Richard Sears started selling watches to the station agents. As a matter of fact once Richard Sears wrote: "We do comparatively very little business in cities, and we assume the cities are not our field—maybe they are—but I think it is our duty to prove they are not." (Beth Martens, April 2000) The scenario is no different for countries like India, where the retail boom has changed the face of the country’s economy. Beside the national retail chains, the multi national brands have also arrived. Marks & Spencer, Wal-Mart have opened their shops. KFC, Pizza Hut, Subway had already made their foothold. The packaged water market does the major chunk of its business from the railway stations and there are about 1,250 brands of packaged water including Kinley, Aquafina and PureLife. (Renuka Methil, 14 May 2001) And before long we can also see the French giant Davnone marketing its world renowned bottled water Evian. Café Ritazza, the brand owned by the £1.08 billion company Select Service Partner (SSP), has already landed in India and has plans to open outlets in the railway stations and airports. (India Retail Biz, 4 November 2006) France is a leading example for a very successful retail growth through railway stations. There are about 1,000 train stations in France and all of them have retail shops and in the year 2006 the shops grossed a turnover of 985 million euros. The SNCF French railway company has earned a fee of 78 million euros last year and is encouraging more investment in the railway stations. The Gare Saint-Lazare railway station, which caters to about 450,000 passengers daily, is getting a New Retail Geography 7 facelift with 8,000 sq. m of retail space. The leading brands like Virgin, Sephora, Relay, Hédiard and Monoprix have outlets in most of the railway stations with outlets ranging from 50 to 100 sq. m. (“Market Review – The French retail market” by the Research Department of CB Richard Ellis, July 2006 >) Japan is also not left behind in this retailing concept. As always the retailing in Japan is more into technology. NTT DoCoMo Inc. and East Japan Railway Company (JR East) has tied up together to jointly promote the JR East’s Suica ® e-money service, which will expand the acceptance of Suica e-money across multiple retail outlets through DoCoMo’s mobile phones using contact less IC cards. (East Japan Railway Company, 2005, ) Another feather in the cap was done by the construction of Vina Lake, a large retail and entertainment complex. This was opened in the year 2002 at the exit of Ebina station. Vina Lake caters to about 130,000 passengers daily with its 36,000 sq. m area. Not a small achievement for a suburban town located between Tokyo and Yokohama. It has variety of 130 business units to suit all needs from fashion and clothing stores to restaurants and Virgin Cinemas Ebina theatres. They have also created a 14 storied building near the suburban Kaisei station and have other projects in the pipeline. For them it is the way ahead to increase the value of the area along their railway lines and help to improve and solidify a stable income base. (Odakyu Annual Report, 2002 ) Now, let us get into our debate whether a retail chain selling burgers would be able to successfully run a retail outlet at a station such as Saunderton. If we consider the geography of this place, it is located 2 ½ miles from the villages of Bledlow Ridge and Bradenham and the New Retail Geography 8 settlement immediately around the station is known as Saunderton. Considering the number of people who enter and exit the station everyday which is around 1700, we can say that a burger outlet would have a decent business from a station such as Saunderton. Definitely a Swatch outlet in Saunderton would not make business sense, but a Burger King outlet would definitely make sense. (Wikimedia Foundation, Inc. 2007) Piccadilly is again one of the stations of Manchester and handles around 55000 passengers and 1000 train movements everyday. The new Manchester Piccadilly station opened on 9th December 2002. The concourse at the Manchester Piccadilly railway station has approximately 2000 square meters of retail space. The station is managed by National Rail, has a total of 14 platforms and numerous retail outlets available across the station. The XV11 Commonwealth games which brought in 5000 athletes and a million visitors into Manchester acted as a major catalyst for developing the Manchester Piccadilly station. (BDP, 2002) The more famous of the retail outlets at the Manchester Piccadilly station are Sainsburys, HmV, W.H. Smith, Orange mobile phone shop, BT Openzone Wireless Broadband outlet where you can access Internet. The food outlets at the Manchester Piccadilly station are KFC, Yates’s, Burger King and Sports Bar. (Wikimedia Foundation, Inc. 2007) The success of retail venture is a showcase for Government’s and Railway authorities globally that retailing at railway stations is a feasible option for retailers and the Government to generate revenue. If such huge success is possible in Manchester let us understand if retailing is possible in a station which handles around 1/10th of the traffic of Manchester Piccadilly. The High New Retail Geography 9 Wycombe Railway station managed by the Chiltern Railways on the London Marylebone and Birmingham Snow Hill Line can be a good example. High Wycombe has a daily passenger entry and exit of 5150 approximately, based on the 2002-2003 ticket sales figures. Taking into account visitors which may be another 500~ the total number of people visiting this station is around 6000. Taking this figures we can understand that a small outlet of WH Smith, KFC, Burger King, or even an Orange phone shop would do good business in this station. A Mark & Spencer is definitely not suggested in High Wycombe. (“London Travel Report” 2005) Moreover, one needs to understand that retailing in small railway stations is for mutual benefit for all the three parties. First, the commuters have the convenience of buying their everyday needs while returning home. And as a recent study shows that the working women are spending more hours than men. Hence, it is of great benefit to the commuters. Secondly, the retailers can cater to a large cross section of customers and do not have the disadvantage of time, place and money. They can cater to the customers at multiple locations, which save time for the customers. And since the retailers will purchase the products in bulk, they have the benefit of economies to scale. Last, but not the least the railway companies of these small stations can earn handsome fees by renting retail space to the vendors. This will help the railway companies earn a better turnover and modernize the rail stations and provide better facilities to the commuters. The lack of passenger volume in these small railway stations will be compensated by the retail outlets. New Retail Geography 10 This said we need to analyze that the majority of the commuters (about 50%) are between the age group of 35-45 and above. The female commuters actually average more than the mail passengers; it is more than 50%. About 40% of the passengers are also mostly commuting for business purpose and only about 28% travel for leisure. (“London Travel Report” 2005) As per Network Rail, which manages about 17 major stations, 50% of all passenger journeys start or finish at a station managed by Network Rail. They are the hub of the rail network where the needs of hundreds of thousands of people are met every day. (http://www.networkrail.co.uk) Just a few examples are: Victoria Station – about 12 million people each year use this station only for eating and drinking purpose. Liverpool Street station – McDonalds operates its busiest restaurant in UK in this station and for Burger King it is the Waterloo station has its busiest outlet. (Open Guides, 2007) To understand the economic feasibility of retail shops in the smaller railway stations, one needs to understand the passenger volume in those stations. The passenger volume may not be much as compared to the bigger stations, but since the retail outlets in these small stations will use smaller floor area the economies of scale will be justified. A few like Banbury along the Chiltern Mainline caters to more than 1 million commuters in year. For West Ruislip it is about 96,000 commuters and for Princes Risborough it handles about half a million passengers in a year. The average volume of passengers across Chiltern Mainline ranges from 0.122 million to about 1.5 million. (Wikimedia Foundation, Inc. 2007) New Retail Geography 11 So far we have cited examples of successful in the retailing in the railway stations. In all of them it has been strongly proved that the retail shops are successfully doing business not only in the major railway stations but also in the suburban stations. We could debate that the infrastructure in the smaller railway stations is not adequate to handle the retail shops. But we need to keep in mind that change is the only constant. We need to change the way we look at the smaller towns. The convenience should be available to all. We need to understand their need and also how to cater to them profitably so that the economy is given a positive thrust. Hence retailing in small stations across United Kingdom is a feasible business proposition. New Retail Geography 12 REFERENCES 1. Barbara Hogan Galvin, January 2001. “Ward to ICSC/MAPIC: Adapt to survive.” ICSC News, viewed on 17 January 2007. 2. BDP. “Manchester Piccadilly Station Opened” December 2002. 3. Beth Martens, April 2000. “Sears, Roebuck and Co. and its Effect on Retailing in America” 4. Fujitsu, UK. “South West Trains to improve customer service in station ticket offices with help from Fujitsu” 8 December 2004. 5. “If London was a Mall” and “The Future of Retailing in London” 28 October 2003, Cavendish Conference Centre, London. How and Why Limited 2003. 6. India Retail Biz, 4 November 2006 “Cafe Ritazza lands in India; plans to expand at airports and railway stations” 7. “London Travel Report” 2005 8. Melody Vargas, SRORES, July 2004“2004s Retailers Maintain Diverse Identities to Succeed” viewed on 18 January 2007 New Retail Geography 12 9. “M&S find railway success - Food Retailing - Brief Article” 21 Nov 2002. Find Articles 2007. 10. Open Guides (version 0.57) by Paul Makepeace @ Real Programmers. “Liverpool Street Station” viewed on 19 January 2007 11. Renuka Methil, 14 May 2001. India Today Group Online, viewed on 18 January 2007 12. Venn Research, Inc. 1 March 2006 “UK Franchising Industry - 2009™” < http://www.marketresearch.com/browse.asp?categoryid=968&xs=r&SID=77233685-373500948-316232193> 13. Wikimedia Foundation, Inc. 2007 “Chiltern Main Line”, viewed on 18 January 2007 14. Wikimedia Foundation, Inc. 2007 “Manchester Piccadilly”, viewed on 19 January 2007 15. Wikimedia Foundation, Inc. 2007 “Saunderton railway station”, viewed on 18 January 2007 Read More