The Rise of Messaging Services Will Be the Death of Call Centers Sponsored This content is created collaboratively with one of our sponsors.
Transportation hubs from airports to train stations are realizing the untapped revenue source awaiting in retail, giving their businesses a new shot at profitability.
Mount the steps in a discreet corner of London’s King’s Cross station and you find yourself in a light, airy bar-restaurant with distressed wooden floors and comfy vintage leather sofas reminiscent of a hipster hangout.
Once the station’s parcel sorting office, in plans for the £500m rejuvenation of the station that was completed last year the space had originally been earmarked for staff locker rooms. Instead it has become part of Network Rail’s mission to take overlooked or underused parts of their stations and turn them into money-making enterprises.
Nearby tourists queue for a picture by the wall marking the fictional platform 9¾ used by Harry Potter, but floods of commuters now shop, eat and drink in the once hidden spaces between and around busy train platforms all over the country.
“We’ve tried to fill pretty much dead space with something that really draws people in,” said David Biggs, director of property for Network Rail.
In only two years Network Rail, which runs 19 of the UK’s biggest stations, has increased its retail space by more than 20% to 600,000sq ft. By 2019 it plans to have 850,000sq ft – not counting the 450,000sq ft Grand Central shopping centre and John Lewis department store being tacked on to Birmingham’s New Street station and due to open next year.
As well as the complete reconstruction in Birmingham, there are big projects to redevelop Edinburgh Waverley, London Bridge – where retail space will increase sevenfold to a space the size of Wembley Stadium – and Euston, which will get several new shops and a balcony area filled with restaurants by next year.
Network Rail collected £700m in retail income over the five years from 2009 to 2014, but as a result of all these developments that is forecast to rise to £1.2bn in the next five years.
Meanwhile, St Pancras International, which is owned by High Speed 1, the company behind the Channel Tunnel rail link, is now a leisure and shopping destination in its own right, with a champagne bar, several restaurants and a miniature version of foodie department store Fortnum & Mason alongside the usual takeaway food providers.While the high street is suffering, these commuter honeypots are achieving underlying sales growth of between 4.5% and 6.5%, according to Network Rail. More and more people are travelling by train, with passenger numbers rising by about 4% a year so that by 2020 2bn journeys a year are expected. At Network Rail’s busiest station, Liverpool Street, 140m passengers a year pass through every year, more than twice the UK’s population.
Rental values at the big London hubs are on a par with Oxford Street. The vast Boots store at Liverpool Street is said to be the group’s second busiest next to Oxford Street, while some retailers at London’s busiest stations can take as much as £3,000 a square foot in sales.
It is such a healthy market that helped the station and airport food outlet specialist SSP launch on the London stock market this month with a valuation of almost £1bn.
The ready and relatively captive source of custom provided by passengers is attracting a growing number of well-known names wanting a share of a rare source of retail growth during tough economic times.
The Italian restaurant chain Carluccio’s will be opening at Manchester Piccadilly this year, to be joined by TGI Friday’s first travel outlet. Fortnum & Mason’s store at St Pancras was its first new outlet in Britain in 300 years, and the department store John Lewis is to open its first station shop a few doors down. Its sister brand Waitrose, meanwhile, is to open its first station outlet in King’s Cross later this summer.
Nigel Keen, Waitrose’s director of development, said the supermarket had received many letters from shoppers asking the company to set up stores in stations. “The convenience sector will be integral to our growth and opening in King’s Cross station feels like a natural step for our business,” he said.
Where once the eating and drinking experience at stations was limited to sticky-carpeted pubs and curling sandwiches that only the very hungry and pressed-for-time would favour, now food sellers such as Yo! Sushi, Carluccio’s and all the main coffee chains are increasingly joining more female-friendly bars such as King’s Cross’s Parcel Yard.
Euston has two craft breweries, the Euston Tap and the Cider Tap, in its former gatehouses. Tiny specialist retailers such as the now defunct Tie Rack and Sock Shop have been replaced by larger stores for high street chains such as Oliver Bonas, Paperchase and Marks & Spencer’s Simply Food outlets.
There are, of course, limits to the kind of store that can work in a station. “Passengers are time scarce, very convenience-orientated and extremely busy. If we had a shopping centre like Westfield there that wouldn’t be appropriate,” said Biggs. Between 30% and 50% of a station’s trading space will be taken up by food and drink outlets.
Meanwhile, specialists such as traditional cobblers and key cutters have been edged out by increasing competition and higher rents, according to Martin Morgan, director of travel retail at the property advisory firm Harper Dennis Hobbs. “There are other retailers who would be interested in being on a station but they can’t get the space they want and supply is limited,” he said.
Different stations attract varied types of passenger so that the same kinds of stores and eateries do not work equally well in every location. The Champagne bar in St Pancras is popular but a similar idea flopped in Paddington.
The rapid rise of online retailing and particularly click-and-collect services is broadening the prospects for rail retail further.
Network Rail recently announced a joint venture to open 300 click-and-collect pickup stores, under the name Doddle, while John Lewis in St Pancras will be based on the idea that many shoppers will be picking up and returning goods bought online. Marks & Spencer is looking at revamping one of its London Waterloo stores to add more click-and-collect services, something Boots is already offering at Liverpool Street.
“It’s all about convenience. People don’t have a lot of time to spend on shopping,” said Maureen Hinton, an analyst at the retail consultancy Conlumino. “People can pick up their shopping on their way home and in big cities they have everything, coffee shops and restaurants, all in one place.”
Biggs sees click-and-collect services as a possible avenue of development for smaller local stations, many of which have handy carparks, potentially making them convenient pickup hubs for their surrounding communities.
At Euston, a fifth of the people using the station’s facilities are not travelling by train at all and Hinton believes shoppers in rural areas would also be willing to drive to a station to pick up goods.
There is an argument that station shopping centres are yet another stick beating down local high streets already suffering from the rise of out-of-town shopping centres. Many of the London hubs draw in shoppers and diners from nearby offices who might previously have headed to independent outlets on local shopping streets.
Hamish Kiernan, commercial director at Network Rail, said: “We are not taking away from the high street, we are adding to it. Consumers are shopping more online and all we are offering is a top-up. We are taking advantage of a modern trend and nothing we have done will mean the failure of the high street.”