Rail station outlets face clampdown on rip-off prices

[The exile]

I was thinking of a station in Germany, it had a 'Kamps' bakery which is a local chain, big open fronted store with a great selection of fresh breads, sandwiches, pretzels all on display as you walked past and you didn't just see it, you could smell the freshly baked bread as you walked past, the selection and display was better than a lot of supermarkets and the prices were surprisingly low. There was a 'Nordsee' fish restaurant with fresh fish on display, along with a McDonalds and a lot a number of other food outlets and some small metro type stores.

Granted it was a reasonable, 500k pop, sized city station but you don't see anything in the same league in a comparable British railway station. But even a smaller station, with fewer units could have something like a good quality bakery outlet, with freshly prepared food.

German laws on shop opening hours have long made it advantageous to be in a railway station as the restrictions on opening hours there are much less onerous.

 

[geoffk]

Similarly at motorway service stations and at airports.

Invariably more expensive prices than the "High Street".

Captive markets - but only up to a point. Airports certainly.

 

[Bald Rick]

Isn't it usual for leases at airports and I assume stations to specify a % of revenue on top of the basic rent?

yes

 

[yorksrob]

If you were to talk to the ORR, they would vehemently object to being known as part of Government.

(apart from the civil service pensions).

I'm sure they would !

 

[crablab]

apart from the civil service pensions

That's a generally a function of the parent ministry running the payroll along with various other administrative areas. Undoubtedly outsourced to SSCL...

They'd be crown servants if it's a NDPB (Non-Departmental Public Body).

 

[Wolfie]

That's a generally a function of the parent ministry running the payroll along with various other administrative areas. Undoubtedly outsourced to SSCL...

They'd be crown servants if it's a NDPB.

SSCL for some, not all, Departments and their associated bodies. My current Department uses SSCL. My previous one certainly did not (but had a very similar body performing the role)... Spot the CS lol....

SSCL - Shared Services Centre Ltd
NDPB - Non-Departmental Public Body
CS - Civil Servant/Service

 

[tomuk]

That's a generally a function of the parent ministry running the payroll along with various other administrative areas. Undoubtedly outsourced to SSCL...

They'd be crown servants if it's a NDPB.

ORR is a Non-ministerial government department (NMGD)

 

[crablab]

It's just NMD - non-ministerial department

(And since the ORR is one, which I wasn't sure about without checking, then the employees will be 'actual' civil servants, rather than crown servants)

 

[61653 HTAFC]

I still don’t get how WHSmiths is still in business. I’m partial to a Red Bull and I don’t mind paying an extra 10/20p here and there in a station scenario. But Smiths are over £3. Exactly the same with the water someone mentioned above me. Now I have a subscription to Total Guitar, I don’t even need to go there for that.

What's far more egregious from WHSmiths is their hospital shops. Similar price hikes to the station ones there, but far more of a captive market and far more exploitative.

As for them somehow still being in business, I think it's been mentioned on here (possibly in the "companies you expect to disappear soon" thread) that it's the outlets they have in places with a captive market that keep the retail side of the operation afloat.

 

[jon0844]

That's generally true but it doesn't encourage people to use the railways when the experience is expensive and the quality of the station experience is poor. It doesn't have to be like that, we don't have to have such low standards.

Ironically, when I was in Paris it was the vending machines on the platforms providing the cheapest (relatively speaking - obviously seeking out a supermarket was cheaper, but a bit much for a single bottle of water) water or soft drinks, compared to anything at street level near a tourist attraction.

We all understand the concept of convenience fees, but many places are far too greedy when they have a captive market, and if the same company runs multiple 'brands' then of course they're going to price fix to a degree, if not blatantly. Yes they have higher rents, but they also have a much higher turnover. They shouldn't be having to pay much more than anywhere else for stock, and staff wages aren't going to be much different, if different at all.

== Doublepost prevention - post automatically merged: 17 Jun 2023 ==

I still don’t get how WHSmiths is still in business. I’m partial to a Red Bull and I don’t mind paying an extra 10/20p here and there in a station scenario. But Smiths are over £3. Exactly the same with the water someone mentioned above me. Now I have a subscription to Total Guitar, I don’t even need to go there for that.

WH Smith made its money from distribution of newspaper and magazines, and from the higher prices at their travel locations (railway, airports, motorway services). With the ever decreasing sales of newspapers and magazines, I do wonder how profitable they are going to be in years to come. At locations that offer free water refills, and the removal of liquid restrictions at airports, that cash cow could be coming to an end too.

Maybe their only sales will be selling sweets to children in the future! High street stores are already near dead, and many surviving only because of reduced rent (such as being an anchor store for a shopping centre) or having a post office.

== Doublepost prevention - post automatically merged: 17 Jun 2023 ==

McDonalds is the odd one out at Leeds station, as a result it is often by far the busiest outlet in the entire station! (Sainsburys is also welcome at both Leeds and York although they do chuck a 10 - 20p price increase on quite a lot of items as a bit of a convenience charge!)

McDonald's only allows a variation of +/- 10p or so, and I remember them being normal price at motorway services years ago. It's probably why you don't see many now, as Burger King or KFC will gladly take the space and charge double!

Going back to the defence of 'well, they have huge rents to pay', how does McDonald's manage to make a profit without profiteering?

== Doublepost prevention - post automatically merged: 17 Jun 2023 ==

What's far more egregious from WHSmiths is their hospital shops. Similar price hikes to the station ones there, but far more of a captive market and far more exploitative.

I forgot about them. They're on a totally different level and legal action should have been taken years ago. The prices for toothpaste and other essentials someone might need when staying at the hospital were insane when I last visited (pre Covid). On top of eye-watering car parking prices, you begin to wonder if it might be cheaper to go private. (Okay, obvious exaggeration, but they are taking the **** because they can).

 

[skyhigh]

(Sainsburys is also welcome at both Leeds and York although they do chuck a 10 - 20p price increase on quite a lot of items as a bit of a convenience charge!)

Though I think the prices are the usual 'Local' ones that you'd find at any Sainsbury's Local outlet, rather than a premium compared to a nearby Local?

 

[Richardr]

For those who want to see the full details of what is happening - the current consultation is on the Statement of Scope - see:

ORR Statement of Scope

The issues to investigate are paragraphs 2.7 to 2.11.

Rather than purely the headlines, the draft scope includes looking at the difficulties of new firms entering the market, especially given the types of lease typically in place:

If station operators are unable to get better terms from their tenancy agreements with catering companies or injecting more competition within their stations by contracting with new station catering tenants, this will challenge their ability to maximise commercial revenues from catering operation in their stations. Stations are directly or indirectly subsidised by public funding. Under the current financial framework, Network Rail’s net funding requirement is based on the gross funding requirement, minus the commercial revenues, of which the catering operation represents a significant part. Simply put, and all things being equal, the higher the commercial income for Network Rail, the lower the public funding contribution. Similarly, TOCs benefit from higher commercial income, which directly reduces their reliance on public funding (the precise timing of this depends on the details of their contract with government).

 

[dosxuk]

So it's actually them looking into increasing the rents and wanting an element of competition between suppliers to justify the increase?

 

[scrapy]

McDonald's only allows a variation of +/- 10p or so, and I remember them being normal price at motorway services years ago.

Going back 20 years the majority of McDonald's in the UK were company owned and had a standardised price across the board. They advertised a standard price of £2.88 for meals with the 'participating stores only clause' as legally any franchise can set their own prices without input from the company and choose to charge a different price. However it would have been commercially unwise to charge more when prices are so heavily advertised.

Nowadays majority of McDonald's in the UK are now franchises, there are as a result greater price differences between outlets, however due to the previous history of standardised prices the price differences are generally less than for example burger king, and franchisees are generally experienced McDonald's managers who see the benefit of having fairly standard pricing rather than multi nationals like SSP. However it is totally false to say they only allow a variation of +/- 10p as that would be price fixing and illegal.

 

[xotGD]

The time-cost-quality triangle. If you want something right here, right now, expect to pay more. If you are especially cost conscious, fill a flask and make a piece before you set off. If quality is your thing, leave enough time to call in to a premium retail outlet on your way to the station.

 

[island]

It's partially rent-seeking by NR (or whatever subsidiary it is controls station lets these days) and partially retailers exploiting a captive audience. They don't have to, and several examples such as Boots and Waitrose have been cited upthread, but most of them choose to.

About time! Gormet Kitchen at Newbury are charging anywhere between an extra 10 - 30p to "eat in". The eat in facilities being the station waiting room managed by Great Western Railway.

That might be a tax thing. Many high street stores (e.g. Greggs) have differential pricing according to whether you eat in or take away for exactly this reason.

Yes, that's right. VAT is chargeable on hot food and on food consumed "on the premises" whether hot or cold. You will therefore see Greggs charge extra to cover the VAT on items that are not deemed "hot food" when you eat in. (For reasons out of scope of this post, their pasties, sausage rolls, and similar are not deemed "hot food" and therefore attract this surcharge.)

VAT is also chargeable on "luxury food" such as confectionery, chocolate-coated biscuits (but not chocolate chip cookies), ice cream, and crisps.

I'd refuse to pay; the waiting room is an area open to the public where anyone can consume food. It would be interesting to hear from a legal expert whether this is likely to be lawful or not.

Who do they think they are, GTR?

It is clear from VAT Notice 709/1, paragraph 3.2, that seating areas provided for the general public at railway stations do not constitute part of a catering premises, as long as they are not restricted to customers of one or more catering businesses. Cold food served to consume in such a location should not have VAT charged, unless it is one of the "luxury" food types as mentioned earlier. I'm not familiar with the location so cannot say with certainty whether this rule applies or not.

Isn't it usual for leases at airports and I assume stations to specify a % of revenue on top of the basic rent?

Yes.

 

[Iskra]

Re

It's partially rent-seeking by NR (or whatever subsidiary it is controls station lets these days) and partially retailers exploiting a captive audience. They don't have to, and several examples such as Boots and Waitrose have been cited upthread, but most of them choose to.




Yes, that's right. VAT is chargeable on hot food and on food consumed "on the premises" whether hot or cold. You will therefore see Greggs charge extra to cover the VAT on items that are not deemed "hot food" when you eat in. (For reasons out of scope of this post, their pasties, sausage rolls, and similar are not deemed "hot food" and therefore attract this surcharge.)

VAT is also chargeable on "luxury food" such as confectionery, chocolate-coated biscuits (but not chocolate chip cookies), ice cream, and crisps.

It is clear from VAT Notice 709/1, paragraph 3.2, that seating areas provided for the general public at railway stations do not constitute part of a catering premises, as long as they are not restricted to customers of one or more catering businesses. Cold food served to consume in such a location should not have VAT charged, unless it is one of the "luxury" food types as mentioned earlier. I'm not familiar with the location so cannot say with certainty whether this rule applies or not.

Yes.

Retailers also need to charge a little extra for the unreliability of the trade at railway locations. Engineering works, bustitution, cancellations, strike days, weather incidents, police incidents, service breakdown for any other reason can all reduce trade to virtually zero at anytime, but the bills and staff still need paying.

It does seem odd however that we need an inquiry by those who encourage and profit from inflated rents at stations, in to why prices are inflated compared to the high street.

 

[jon0844]

However it is totally false to say they only allow a variation of +/- 10p as that would be price fixing and illegal.

Yet that's what you'll find is the case. I'm certain it's in their franchise agreement that there's an upper and lower limit, and wouldn't be surprised if that variance avoids any issue with resale price maintenance rules.

Off topic:

I've personally been at a training session in the past, pre smartphone with cameras or audio recording, for a mobile network that literally closed the doors of the conference room and proceeded to tell us how to price things, and that of course we were free to sell for whatever price we wanted - but that we'd never get stock again. They openly said they wouldn't ban us, just tell us they were out of stock and any other excuse. In other words, do as we say or you won't sell anything.

If anyone cares, almost every dealer stuck to the RRP so it clearly worked. I sold phones for another network instead, which gave me the freedom to discount for the most part. Their distributor did try once to get me to stop but failed because by then I was a substantial customer of theirs.

 

[185]

Lol... could SSP be transferred to the Cappuchino of Last Resort?

About time someone ended their price fixing cartel, high rents should be addressed by a dynamic, adaptive business, not having empty shops charging £3.50 for a brew.

 

[RJ]

McDonalds is the odd one out at Leeds station, as a result it is often by far the busiest outlet in the entire station! (Sainsburys is also welcome at both Leeds and York although they do chuck a 10 - 20p price increase on quite a lot of items as a bit of a convenience charge!)

I actually can't think of any other railway stations with a McDonalds, obviously excluding the likes of King's Cross which has one virtually next door and London Victoria which has one in the weird 'shopping centre attached to transport hub' thing that London seems to like! Manchester Arena used to have one which you could access via Manchester Victoria station from memory

London Bridge has one in the station premises though access is from the street. There’s one at Waterloo, one by platform 2 in Victoria and one upstairs at Liverpool Street. Paddington had one but it’s gone now.

 

[Adrian1980uk]

I'm very free market thinking on this, particularly at stations, no one makes me buy a coffee in the station but I chose to for convenience equally my wife, much more sensitive to this type of thing would bring a flask.

The way I see it is that the high rents are bringing in money to the railway that would have to be found from elsewhere if there was a clamp down.

Having said all that, I was surprised looking back at my bank statement the difference (insert coffee brand here) charged.

 

[Howardh]

Cup of tea (large) at Greggs on Bolton interchange (bus station) £1.15.

Same on the platform from the station shop = appx £2

Smaller cup @ Oxenholme station £2.70.

On an Avanti train I've no choice but to buy a larger cup and pay more for it, by the time I'm half-way down the tea/coffee it's going cold, so a waste. Smaller cups (and discount) would be appreciated!!

At least with rail stations you sometimes have the option of a cheaper shop nearby (I take the cuppa from Greggs onto the station!) which annoyingly you can't at airports and also the amount of liquids you can take through is strictly limited.

 

[yorkie]

On an Avanti train I've no choice but to buy a larger cup and pay more for it, by the time I'm half-way down the tea/coffee it's going cold, so a waste. Smaller cups (and discount) would be appreciated!!

The marginal cost of providing a larger amount is likely to be very small.

At least with rail stations you sometimes have the option of a cheaper shop nearby (I take the cuppa from Greggs onto the station!) which annoyingly you can't at airports and also the amount of liquids you can take through is strictly limited.

That's changing, see: https://www.railforums.co.uk/threads/the-beginning-of-the-end-for-the-100ml-rule.229235/ although at such airports you couldn't take an open cup of coffee, having it in a flask should be OK as far as I know (any further debate on that can go in the relevant thread).

 

[NoRoute]

I'm very free market thinking on this, particularly at stations, no one makes me buy a coffee in the station but I chose to for convenience equally my wife, much more sensitive to this type of thing would bring a flask.

The way I see it is that the high rents are bringing in money to the railway that would have to be found from elsewhere if there was a clamp down.

That is not 'free market' thinking. Free markets are open to competition, so would allow other companies to set-up in the station opening shops, locate vending machines, build kiosks, all competing and selling their products, driving prices down and quality up. Free markets would compete away much of the premium pricing, returning that to the customer.

The situation is the opposite of a free market, one party controls access to the market and restricts the number of companies which can trade, it charges high rents to access the market which the traders recoup from the customers and the restrictions on competition allow the traders to charge higher prices and provide worse quality/service due to either reduced or absence of competition within the station.

 

[Alfie1014]

Whilst I agree that every little helps in regards to making rail more attractive with the myriad of more pressing issues the industry has this does somewhat smack of rearranging the deck chairs on Titanic!

And why not motorway services and petrol stations they all tend to price higher than large supermarkets. I do wonder if the time, energy and money could be put to better use elsewhere or is it just another example of the Govt pulling strings from behind the curtain?

 

[43066]

About time! Gormet Kitchen at Newbury are charging anywhere between an extra 10 - 30p to "eat in". The eat in facilities being the station waiting room managed by Great Western Railway.

I'd refuse to pay; the waiting room is an area open to the public where anyone can consume food. It would be interesting to hear from a legal expert whether this is likely to be lawful or not.

It is clear from VAT Notice 709/1, paragraph 3.2, that seating areas provided for the general public at railway stations do not constitute part of a catering premises, as long as they are not restricted to customers of one or more catering businesses. Cold food served to consume in such a location should not have VAT charged, unless it is one of the "luxury" food types as mentioned earlier. I'm not familiar with the location so cannot say with certainty whether this rule applies or not.

Yes, that sounds like a case of VAT being added in the usual way for eating in.

Presumably the “waiting room” in this case actually constitutes part of the restaurant - it can be quite hard to tell what is restaurant specific and what is general public seating at some locations.

 

[ExRes]

I've yet to find a railway station that matches a motorway service station for outright thievery

 

[richard_S]

Many years ago I looked into opening a small kiosk at a station site but when I saw what they wanted for rent idea went straight into the bin.

 

[185143]

I've yet to find a railway station that matches a motorway service station for outright thievery

An SSP outlet at York wanted £2.45 for a bottle of diet coke when I passed through last week.

In fairness, another of SSP's outlets on York Station were very happy to sell me a metre long fast charge compatible USB-C cable for under a tenner. Which was significantly cheaper than what WHSmith wanted, and given it was a distress purchase, I didn't feel was particularly unreasonable at all.

 

[Bishopstone]

I’m interested to know the salaries of the team in ORR who will be conducting this research into the obvious. Reminds me of the big investigation the CMA ran, a decade or so ago, into the real conundrum of why there weren’t loads of bus operators in Eastbourne.

Bottom line: no, I don’t want to pay a slightly higher train fare, or slightly more tax, for the occasional benefit of a slightly cheaper drink/sandwich on railway premises. Unless ORR find a way to abolish economics, no ‘other’ is going to make the price premium disappear.