Retailer must go back to the future

THE market had been well-primed to expect grim trading figures from High Street retailer WH Smith, and it was not disappointed.

But the real question is whether chief executive Kate Swann, having been at the helm for less than a year, has cracked the question of what WH Smith is for.

When shoppers go to Virgin or HMV for their music, DVDs and computer games, to Waterstone's for their books, to Clintons for their cards and to PC World for their computer stationery, what will Smiths do to be special?

Perhaps it is not the goods but its entire retailing concept that is past its sell-by date.

Swann obviously does not think so. She says a lot of Smiths' troubles are self-inflicted. It was never going to win with price-cutting against the supermarkets but, says Swann, it can win by focusing on the things it has done well in the past and doing them once again with authority.

The trick is to make sure that in those areas where it does specialise, Smith is seen to be credible. Thus in cards, computer stationery, DVDs and mainstream books, she thinks Smiths can do something special by having the biggest choice in its market niches and by displaying it well so the customer can see what he or she wants.

The group is heavy on footfall but people don't buy at all or spend too little. The positive side, however, is that the potential is there if the plan can be properly executed.

The group could claw its way back against the High Street competition - leaving it only internet shopping to worry about. Smiths may be at the beginning of a long climb back, but equally it could simply be stuck on a tree halfway down the cliff.

Savings solution

JOHN McFall, chairman of the Treasury Select Committee, was in good form at a breakfast yesterday organised by the Centre for the Study of Financial Innovation. The recovery in markets would not restore the savings industry's reputation, he said.

His report, Restoring Confidence in Long-Term Savings, threw the industry a lifeline and gave it a last chance to adapt to the modern low-inflation world.

Echoing Adair Turner's report this week on pensions, he said savings products were too complicated, there was a deficit of consumer confidence and there had been too much mis-selling. It was, he said - though this was challenged - an industry without a duty of care to its customers.

Products, too, often failed to provide competitive returns. Companies need significantly to reduce costs and improve returns with better asset allocation. The insurance industry was, McFall said, like the American motor industry, which produced gas-guzzlers when petrol was a few cents a gallon but which had to change fundamentally when petrol prices rose.

The savings industry's gas-guzzling age was the era of high inflation, which concealed from the customers the high costs and mediocre returns of its products. Now, thanks to low inflation and interest rates, these are visible and it has to change.

Coincidentally, the Treasury today published its response to his report, which was predictably broadly supportive of everything the Committee said.

The Financial Services Authority was slightly more guarded. It tried to emphasise how much it was already doing. It talked about capable consumers and stressed its education initiatives.

It talked about reliable information and emphasised its work on a key facts document for financial products and its proposed menu of fees and commissions. It talked about responsible firms and discussed how its rules on treating customers fairly are designed to get top management to think through the implications for, and impacts on, consumers of the products they sell.

The problem with all this, well-meaning though it is, is that it is unlikely to encourage anyone to save more, and the mass market for low-cost savings is not sufficiently attractive to encourage companies to go after it.

We live in a world where it is much easier to borrow £20,000 than it is to save £10 a month. There are already 29,000 different medium to long-term savings products, 32 different forms of tax-incentivised saving and almost 50,000 IFAs waiting to sell them. The more warnings there are, the less likely anyone is to buy.

Perhaps it would be better to stop chasing an impossible dream and accept that savings products without a capital guarantee are unsuitable for the majority of the population. Life would be much simpler if the mass market was directed instead towards building society deposit accounts and National Savings.

And if the Government really wanted to be bold, it could bring back Tessas - savings accounts with tax relief. Then affluent people can carry on losing money in the stock market - as they always have.