The Fall Of Woolworths
No we know things are serious. Forget Lehman Brothers, Woolies has bitten the dust. Most people saw it coming: Woolworths has been struggling for years – decades in fact. It finally hit a brick wall, in what should have been one of the busiest weeks of the year, when suppliers abruptly refused to deliver stock even as creditors demanded immediate payment.
Even so, many Britons will mourn its passing. Woolies has been operating in Britain ever since 1909 when the US nickel and dime king, Frank Winfield Woolworth, spotted an opportunity to introduce a budget store. Its vinyl singles and pick’n'mix counter are the stuff of everyone’s fond childhood memory. Sadly, however, nostalgia does not fill the tills.
Woolies isn’t dead yet. The administrators, Deloitte, claim there has been interest from ten serious buyers – including Theo Paphitis, the high street turnaround expert of Dragon’s Den fame. Moreover, parts of the business, including its distribution arm, EUK, and a joint venture with the BBC are still going strong. Even so, it will take a miracle to resurrect a store group deserted by even its core sink-estate customers, and the matter of some £385m in debt cannot be dismissed lightly either.
The writing was on the wall for Woolies in 2001 when the group was de-merged from its Kingfisher parent by Geoff Mulcahy, who flogged off its freeholds and saddled it with ruinously expensive long-term leases.
This collapse was as much about financial fads as retail fads. It’s a prime example of what happens when shopkeepers start viewing financial engineering as the best means of maximising returns. And that bodes ominously for the many other retailers enmeshed in an equally terrible tangle of lending. Corporate undertakers say they are already swamped: it will be a good deal worse after Christmas.
But the demise of Woolworths isn’t a tragedy – unless you work there. On the contrary, the essence of retailing, and of brands, is chop and change. One of the reasons for boom and bust, however distressing, is the need for a simple cull. Unless the merchants of plastic tat feel pain, there is never a spur to go one better with something fresh and innovative.
The decline and fall of Woolworths, then, is a cause for modest celebration – as well as gloom.