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The business failure of Woolworths

As more dirt is thrown around the press and with the administrators of BHS having retaliated after it emerged that one of the high street retailer's biggest creditors is attempting to force them to put the company into liquidation, there seems to be no end in sight to on-going saga for this appallingly managed business. However, when speaking to the “man on the high street” the question that still remains is; how can a business with lineage dating back to 1928, fail?

The reason for BHS’ business failure was discussed in a previous Blog by Portland Client Director Sandie Williams, but it still seems shocking that this can happen to a household brand within a matter of years. Sadly BHS has not been the only shock casualty in recent years. Since the 2008 “credit crunch” many giants of the retail world have fallen, facing liquidation and administration. Now with our upcoming divorce from the European Union, it seems that Brexit has stirred up the same emotion and worries amongst businesses and consumers.

Woolworths

Starting with one of the prime examples, Woolworths should never have failed. Historically Woolworths always made money and was without a doubt one of the most iconic and well-loved high street retailors in the UK. I am sure many of you can remember being dragged to ‘Woollies’ by your parents to buy clothing, usually school uniform. Okay, so these “threads” were not cool in the slightest, but the one consolation was that you may be able to dip into the treasure trove known as Pick N Mix near the exit.

The first nail in the coffin for 800 store strong Woolworths was the demerger from Kingfisher in August 2001. Many believe that this set off a chain of events which eventually led to the collapse. Kingfisher sold 182 leases for a total of £614 million and returned the cash to its shareholders. With increasing rent, Woolworths were left in a position where they had 700 landlords which made it near impossible to negotiate better lease terms. Also, when life got tough Woolworths simply had no fixed assets.

Diversify your business or die

Over the next few years Woolworths refreshed its stores and widened its product range to suit the modern and, with the popularity of the internet and sites such as Amazon, the informed consumer who demanded a wide choice and quality but at the right price. What Woolworths did not expect is that it would have to compete with the budget stores such as Wilkinson and Poundland, as well the traditional big grocers such as Tesco and Asda who expanded into Woolworths core products such as children’s clothing and household items.

Another popular product range which took a hit was CD, DVD and video game sales due to the consumers switching over to download sites such as ITunes and opting to use more convenient on demand services such as Sky and Netflix, which saw a burst in sales and revenue due to faster broadband speeds.

A sad end

The seeds were well and truly planted, as the market and bank stocks started crashing, led by GMAC who decided that there were too many uncertainties. Eventually the board voted for administration for the high street chain and its CD and DVD wholesale arm Entertainment UK.

Not only did 30,000 people lose their jobs, but the high street forever lost a retailer which was part of the fabric of UK life.

In my upcoming Blogs I will be discussing the home video rental corporation Blockbuster Video, technology retailer Comet and flatpack furniture giant MFI.

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