Motorway service areas are dismal places, generally associated with toilet breaks and overpriced sandwiches. Their poor reputation hasn’t been helped by the retail offer, either. As independent consultant Richard Hyman says: “It’s generally been extremely poor – very formulaic and very uninspiring.”
But things are changing. Increasing numbers of retailers are setting up shop next to some of the UK’s busiest roads. Could these traditionally drab and uninspiring locations become the next big thing in travel retail?
Marks & Spencer’s Simply Food outlets, for instance, has cheered up many a hungry driver since the retailer launched the first of 22 motorway franchise operations in 2003. And last month, WHSmith announced it is to bolster its travel division by opening franchised shops in all 29 Roadchef services areas following a successful pilot – it has a presence at Moto sites already.
In the same month, it emerged that HMV was to become the first music specialist to grace a UK motorway service area, with a 1,000 sq ft (90 sq m) store on the M20, near Dover. The store opened last month and if it meets expectations HMV has said it will consider opening more in the future.
Moto retail director Tim Gittins says: “There has been significant investment into the MSA [motorway service area] network and brands are an attraction for customers.” For food retailers, trading by a motorway is logical. Somerfield has one site near Blackburn and Somerfield head of formats Steve Tremlett believes there is “scope to grow the business organically and through acquisition”. He says: “Irrespective of quality and convenience, prices at motorway services are often at insult level and must represent a barrier to growth, especially as fuel costs escalate.”
Tremlett says that Marks & Spencer’s success “illustrates how a premium brand can attract customers to locations that would have been thought unworkable 10 years ago”. However, it is the generalist retailers’ interest in motorway service areas that is particularly interesting. WHSmith and HMV’s presence in this market are in addition to a handful of Body Shop, Birthdays and Thorntons stores that trade on some Moto sites. But what is the scope for other retailers that want to join this minority? And, more importantly, is there real money to be made?
In general, the travel business works for retailers because there is direct competition and customers who are a captive audience. First, though, it’s important to recognise that certain types of government restrictions prevent retailers descending on motorway service areas en masse (see box). It doesn’t want them becoming mini shopping centres.
Secondly, history has proved that this form of retailing is not straightforward. Roadchef chief executive Simon Turl says that when he worked for Granada about 10 years ago, the business experimented with the introduction of five separate, small, mall-type retail spaces that housed Bhs, Halfords and Sock Shop among others. “It struggled quite badly,” he admits. “It wasn’t what customers were expecting. We tested it, but it was too much of an airport-style operating model.”
But that’s not to say it can’t be done. “Given the right offers, people are willing to buy,” says Turl. For instance, he acknowledges that while sites selling phone accessories exist already, complete mobile phone shops could be a lucrative market. Gittins agrees there is scope for others. “There are always opportunities for niche retailers that are not competing in the same space as the brands that are already there,” he explains.
Turl adds that Roadchef has also had significant success in selling products you might not expect to be able to pick up at a service station – folding chairs and wetsuits to name but two. “The public are always on the lookout for a bargain, but the range has to be right and you have to keep changing things,” he says.
One of the reasons why retailing in motorway service areas can struggle if the retail offer is not carefully planned is its transient customer base. It’s never going to be the same as an airport departure lounge, because people waiting for a flight have a set amount of time to while away and will often spend money simply because it fills the void. Gittins points out that what motorway services offer instead is “very much a grab-and-go activity”.
This customer mentality works for WHSmith and similar stores. As Investec analyst David Jeary says: “Motorway services are a natural choice. A lot of their range is a very appropriate product market.”
So what about HMV? Hyman believes it has potential. Despite motorway services being a stopgap, he says visitors require a certain amount of rest and will be willing to spend short lengths of time in such a store. However, he adds that it will be “very much a Top-40-type impulse buy. You’re not going to start browsing every Bob Dylan album ever produced”.
Music to shoppers’ ears?
Visual Thinking brand director Karl McKeever agrees. He says: “I think it’s a smart move. If you’re sick of the radio or bored with your CDs, this is an opportunity to stock up. For the majority of people who hop into cars for a short journey or a day out, the idea that you can come across a great-priced music deal will probably be very attractive.” And, of course, it’s not just music that’s on offer. “Now that more and more cars are fitted with TVs in the back, buying DVDs to play is a great way to keep the kids quiet,” he adds.
However, not everyone is so sure about HMV’s prospects. Turl says: “I hope it does well because it will provide an opportunity for us too, but I think it might struggle.” He believes the fact that many people now play iPods through their car sound systems may affect music sales in the long-term. Gittins adds: “We wouldn’t rush to get specialist retailers [in Moto sites].”
What is clear is that the range and design of motorway service stores needs to be carefully thought out if retailers are to maximise this opportunity. McKeever says the layout needs to encourage visibility throughout the store, which means using eye-level fixtures, gondolas that are set out in short runs and forward-facing displays that are “geared to ease speed of selection”. Offers and promotions are important because customers will often succumb to distress purchases. And the product offer needs to be catered for the grab-and-go mindset. But even though the range will be substantially reduced compared with high street stores, retailers still need to ensure they provide a credible brand experience, or risk the brand being undermined.
In terms of the practicalities of setting up shop, in many cases franchise arrangements are often the preferred route for both parties. Turl says that in the mini-mall trial at Granada several years ago, it preferred to have a management team running the service area that was responsible for everything. “If it’s a small unit that’s run independently, there can be problems. For instance, we had a couple of cases where staff went home early,” he says.
M&S agrees that a franchise deal works better. A spokeswoman says: “It’s a very different type of retailing and, for us, it’s better to go with those who have expertise in that environment,” she says.
There are also logistical challenges. Because motorway service sites are usually some distance from big conurbations, finding the right staff can prove difficult. There are also slightly longer trading hours than some retailers might be used to – they won’t open 24 hours as the entire site might, but they will often be required to trade from 8am until 7pm.
What’s more, footfall is also less constant than some might assume. The winter period can be much tougher than the summer months when traffic floods onto the roads from Easter until the beginning of September.
Motorway services certainly provide potential opportunities for retailers. As Hyman says: “More and more, we’re moving into an era where you have to take the game to the customer.” But unlike in other parts of Europe, it is not possible in the UK to set up mini shopping centres similar to those that appear by the sides of major roads on the continent, because the Department of Transport has ruled they must not become shopping destinations in their own right.
So don’t get carried away with the notion that serving the millions of people who travel on motorways could be the answer to the troubles on the high street. The UK’s motorways are not paved with gold.
Motorway service retailing: dos and don’ts
The Government is committed to the principle of discouraging motorway service areas from becoming destinations in their own right. A modest degree of retail development is permitted, so that motorway services can serve the needs of road users, but not so that they attract customers from the local area.
The maximum retail sales floorspace permitted at a motorway service area is 5,380 sq ft (500 sq m). Additional areas may be used for retail storage, but there can be no public access and these areas cannot be used to generate sales. Where a service area’s amenities are split between two distinct sites on either side of the motorway, it is permitted to have up to 5,380 sq ft of retail space at each site, provided customers are not required to cross the motorway to reach essential facilities.
Source: Department for Transport’s road facilities policy