Written evidence submitted by Independent Rail Retailers (RRB0032)

  1. Introduction: putting passengers first?

Millions of rail passengers every year buy their tickets from independent retailers. Every year, nearly 50% of rail revenue, over £4BN, is efficiently handled by these retailers. 90% of online sales are made this way. This sector has seen impressive growth. Passengers are showing they like the ease of purchase, customer care and value for money that independent retailers can offer.

Independent Rail Retailers (IRR) is the membership body representing most of Britain’s independent train ticket retailers. We’re a pioneering, innovative, competitive force that’s encouraging more people to choose rail by transforming the online ticket buying experience.

IRR is helping to create a rail industry fit for the future by keeping costs low, boosting revenue and putting the customer at the heart of decisions. Members sell direct to the passenger and/or provide travel services to organisations facilitating staff travel. Members provide many of the retail services branded by train companies. A list of members can be found at Independent Rail Retailers

Passengers, both current and future, benefit from a vibrant, competitive market for retailing train travel. Competition spurs innovation, investment, cost control and attracts talented people to work in the sector. As well as creating competition third party retailers also ensure that consumers have a choice of which site to use, allowing passengers to find the one that best suits them. Choice gives consumers the ability to shop around and go elsewhere if they don’t like the service received, thus encouraging a greater focus on customer satisfaction.

Every day, many seats go unfilled on Britain’s trains. If a level playing field and boosted partnerships existed between independent retailers and the rail industry, we firmly believe that, through effective marketing and high-quality delivery, many more passengers could be attracted to rail.  More seats would be filled, costs of retailing would be kept firmly under control, more revenue would be generated, and cars would be taken off roads. Everyone wins. Plus, there is very little cost risk to Government, releasing investment for other purposes.

The draft Rail Reform Bill contains much to welcome. However, there is a need to encourage private sector involvement more actively in the provision of rail services. Bringing about a level playing field in retail services could unleash huge benefits for passengers, the rail industry and the taxpayer. Such a revolution would allow consumers to make truly informed choices about rail travel.

The IRB is mandated, in the draft Bill, to have ‘regard to the effect’, on the private sector in relation to its business planning and then report on such involvement. These somewhat passive provisions are less likely to unleash the benefits that passengers clearly want. Hence this submission. A huge prize is at stake – the mooted Independent Rail Body (‘IRB’) has a potential key role in facilitating profound change in the way passengers buy their tickets.

A new partnership between the rail industry and independent retailers can really deliver for passengers and governments. The huge store of data and information that independent retailers currently have on passenger habits could be more effectively shared to benefit passengers and the IRB. More sophisticated marketing with more effective targeting could result in more, new and repeat sales.

 

  1. The draft Bill: promoting positive change?

IRR welcomes the progress made towards the implementation of much-needed rail reform that the Bill represents, although, as with any Bill, much of the detail will only come when a Secretary of States publishes guidance about how the IRB will exercise its functions. Then we will need to see how the IRB goes about carrying out its duties and functions.

However, there are encouraging signs in the draft Bill. The scope of the Bill seems adequate, but stronger references to private sector involvement would help encourage certainty, investment and more passenger benefits, both in the meantime and when the Bill becomes law.

The Government has already made some positive statements regarding the governance arrangements for the IRB and, among other sectors, independent rail retailing. The Department for Transport, in its February 2024 ‘The Plan for Rail A Consultation on Legislation to Implement Rail Transformation: Government Response’, clearly set out its intention to require the IRB to have robust governance arrangements in place that will facilitate independent retailing:

“We agree that independent retailers add significant value and innovation to the retail marketplace, and Great British Railways should seek to lower barriers to market entry and further encourage competition where possible in future. This could include changes to systems to make it easier for new retailers to enter the market. Train operators will continue to retail to passengers alongside existing third-party retailers, as today, while measures are developed to spur further competition in the online rail ticket retail market.”

“Our intention is that Great British Railways' governance framework will be structured to ensure that Great British Railways acts fairly when overseeing the specification of the customer offer and managing decision-making about retail strategy, including retail licensing. This, together with existing competition law, enforced by the Office of Rail and Road and the Competition and Markets Authority, will help ensure a high degree of legal protection for independent retailers.”

These and other welcome statements now need to find a clearer and more forceful expression in the draft Bill.

 

  1. A ‘guiding mind’?

IRR members feel that the Bill has the potential to create an effective guiding mind for the rail industry. However, much will depend on the manner and attitudes the IRB displays when it is set up and running.

Greater efficiency, one of the stated aims of the rail reform process, will only come about with challenge, competition, benchmarking, investment and innovation. While an effective guiding mind can ensure better co-ordination of the passenger and taxpayer funding of the industry it can only succeed if there is a determined will to bring about change.

Ensuring an open mind to private sector involvement will be key. So, having a statutory provision for adequate private sector experience on the Board of the IRB seems important and should be mandated by the Bill.

 

 

  1. The report on private sector involvement (clause 4C (1))?

This provision is welcome. Tracking and monitoring private sector involvement through an annual IRB report will bring about some transparency. Combined with the need to have ‘regard to the effect’ the exercise of its functions will have on the private sector will provoke some dialogue at the IRB business planning stage.

However, this provision seems too passive. To bring about the retailing revolution passengers are warming to now more active attention will be needed to the potential role of the private sector.

The IRB could be required to consider, in relation to all major business decisions if adequate regard has been given to the potential for increased private sector involvement.

A provision should also be inserted that requires (possibly via its license of the Secretary of States directions or guidance) the IRB to structure itself along the lines of clearly identifiable business units – retailing, station operations, rolling stock etc. Costs and revenues then can be seen alongside each other, and decisions made on a more informed basis. Ownership is not the key issue – an effective, business oriented and responsive structure is needed to drive passenger benefits, revenue and cost control.

The Department for Transport specifically talk about this in relation to independent retailing in the 2024 consultation response:

“Our intention is that Great British Railways' governance framework will be structured to ensure that Great British Railways acts fairly when overseeing the specification of the customer offer and managing decision-making about retail strategy, including retail licensing. This... will help ensure a high degree of legal protection for independent retailers.”

Legislation could include an actual commitment on how this will be achieved or that it will be in the directions and/or guidance. As it stands it is a sentence in a consultation response. The Bill gives the opportunity to turn this comment into something more solid. And having something more solid would send a positive signal to the sector. This would generate more confidence and possibly even encourage new businesses to enter the market.

 

  1. Are the interests of passengers sufficiently promoted by the draft Bill?

It will be key to incentivise IRB behaviours through this legislation to ensure the benefits to passengers of creating a retailing level playing field (and other initiatives) can really be unlocked. This can be achieved by more specification of what should be included in the IRB licence or in the Bill itself.

The activities of independent rail retailers have brought passengers many benefits:

These are just a few examples of the retailing and information revolution that the new IRB and independent retailers could unlock. More passengers, more revenue and better cost control would result – and hundreds of millions in extra revenue could be generated.

 

  1. Helping passengers get the right ticket for them

The provisions outlined above would help create the conditions that could correct some of the anomalies that are preventing passengers at present accessing a full range of products and therefore better value for money. These anomalies also block investment and inhibit more people from choosing rail.

At present several factors are preventing full, dynamic competition in retailing that could help more passengers choose rail:

 

  1. The Great British Rail Sale: the case for more informed choice for passengers

The recent, welcome, 2024 sale of rail tickets provides ample evidence of what benefits independent retailing can bring.

It is estimated that independent retailers accounted for some 400,000 of the tickets sold in the sale. This represents 66% of the 600,000 tickets reportedly sold in the sale – and far outweighs independent retailers’ underlying market share. The ease of purchase, clarity of information presented, and overall customer experience offered by these retailers was clearly attractive to many.

However, just under half of passengers who accessed the rail sale bought full price tickets – they did not find the discounts they were looking for. Presumably more went away without buying anything as they did not find the ticket they wanted. Many discounted seats went unsold. The sale could have been even more successful if more passengers could have found discounted fares – IRR estimates some 400,000 tickets went unsold.

Passengers were potentially hampered by the way that enquiries about potential travel times and prices are currently displayed. Rail has been slow to catch up with how other travel modes display the availability and price of their products.

Passengers currently searching for availability and prices online are generally met with the type of limited response shown below, where a maximum of five services are displayed, driven by the constraints of the system. These examples are static representations of dynamic systems but serve to illustrate the potential for change.

The first example is for trains from London to Edinburgh. Passengers cannot see at a glance that a much better value for money ticket could be available if they change their journey time and date:

A screenshot of a computer Description automatically generated

Investment in the reservation system and the way enquiries are handled could result in a much more user-friendly display. This mocked up example set out below shows what could be possible. This would provide passengers with a far more intelligent and useful presentation of ticket availability across a period, enabling them to make choices based on a much more refined assessment of value for money.

Using the scroll feature on the left of the screen would allow passengers to easily search, seeing a much wider range of options. Being able to easily scan a broader period of time allows a better understanding of what is on offer when looking at prices from London to Paris on Eurostar:

A screenshot of a computer Description automatically generated

Extra investment by governments and the train companies in the Availability Data Service (‘ADS’) used by retailers has not been forthcoming. IRR members have offered to fund the changes needed to the reservation system to allow these types of enquiries to take place. More fruitful discussions are now taking place between the Rail Delivery Group – the owners and controllers of the reservation system - and the IRR. However, these discussions are only now warming up after years of little progress.

 

  1. Conclusion

A vigorous, passenger focused IRB could help ensure that the key business functions of the industry, such as retailing, are as competitive and cost conscious as possible. To ensure this, the IRB must be orientated towards private sector involvement and the IRR’s proposed changes to the legislation would go some way towards achieving that.

Independent retailers have much to offer. Within the current framework, they are constrained in what they can achieve for passengers. The new institutional arrangements for the railway must have statutory form that helps ensure all retailers can compete on a level playing field.

 

 

March 2024