Woolies and The Way Of The Mammoth
Woolworth’s were a part of everyone’s childhood. Whether it was buying sweets, toys, the odd tupperware box, or a bit of stuff that you couldn’t find anywhere else, Woolies was the place to find it.
That was its charm, and its downfall. Woolies had probably one of the prime locations in the centre of the town I come from – Bolton. And the same location pretty much everywhere else – in every town & city they had a presence.
It got some things right, and some things terribly wrong. The things it got right were its newest innovations – the dvd/cd distribution business built on the years of logistics expertise, the website – which admittedly though it looked and functioned well didn’t fit in with the rest of the business and its customer base, and didn’t compete well with other aggregator sites such as pixmania.
It’s downfall ultimately was set in its decisions of the 80s & 90s – if not before. Trying to compete with the supermarkets in areas in which it used to have a major share – household goods, was the mistake that led to its extinction. Out of town shopping centres, specialist stores, and the move of supermarkets from food to everything-under-one-roof was something Woolies had only one shot at competing with – and they got it wrong. Trying to be all things to all people in the modern commercial world is a lesson that they just didn’t accept and learn from.
Hindsight is a wonderful thing, and even with eagle-eyed hindsight maybe the end was still inevitable. Town-centre shopping has been declining for 20 years. A process accelerated by the move to online shopping. Keeping the stores they had, and in the locations they had was not enough, and probably a mistake. Hoping that they could live on the name they fostered for the post-war decades was a bad policy.
Image is ALL, but even that is not enough. Walking round Woolies last year showed a tired and aimless store with an unfocussed range of goods and products, little innovation, and even less thought into what they were actually trying to sell.
It’s sad to see it go, but like an relative lingering on their deathbed ultimately its a release. It’s a sobering thought – who’s next? Look out for the key indicators:
- No niche market expertise within multiple vertical markets
- Multiple town-centre shops with little or no OOT or mall presence
- Little or no stratgic online presence – including additional online only sectors such as financial services
- Luxury and/or highly seasonal goods – especially late season
- Bad long-term strategy
- Bad long-term debt position – especially as a result of take-over & buy-outs in the last 5 years at an over-estimated valuation
Commerce doesn’t live in a vacuum either. There’s a heirarchy and supply-chain that can and does lead to other companies going into administration in a domino effect. Zavvi bore the brunt of the Woolies extinction due to their whole DVD/CD supply being reliant on Woolworth’s distribution chain business. It’s not a unique situation, and one that will be repeated in the coming months.
2008 Q4 will be the make or break for a lot of companies upto the end of the financial year in April. The highest cash : long-term debt ratio after the winter trading will result in a higher incidence of administration, especially when considering the statistically quietest part of the trading year. Many of the troubled companies will have drawn out sales periods with high discounts in a vain attempt to stave off the grim-reaper. Ultimately heavy discounts mean lower margins – and that may bring about a speedy end in February & March which I predict will see the highest administrative period of the year… we’ll see.
