Brand Failures_ The Truth About the 100 Biggest Branding Mistakes of All Time - Matt Haig [100]
From then on, however, it was downhill all the way. The difficult financial climate of the 1970s saw the company decline, eventually being sold in 1982 to Paternoster Stores, later to be known as the Kingfisher group. Under Kingfisher, Woolworths tried several concept stores throughout the 1990s, with no conspicuous success. When Kingfisher was outbid by Wal-Mart for Asda, it decided to spin Woolworth off, refloating it as an independent company in 2001. A period of modest achievement effectively ended in April 2005 when the company had to issue the first in a series of profit warnings and by 2008 it was losing money fast. It tried to raise money to keep going through the crucial Christmas period when traditionally it made 80 per cent of its annual profits. But the financial world was in meltdown with bankers not even sure if they would be in business themselves in a month yet alone if they should support a risky venture such as Woolworth. The end came quickly and despite a number of increasingly desperate rescue bids, the only serious buyers were the queues of bargain hunters which formed before the doors opened in each store for the final time.
Lessons from Woolworth
Markets move, and the brand must at least keep pace. Consumers got used to a higher and higher standard every year and Woolworth was left behind. First off, Tesco, Asda and other large supermarkets started selling non-foods and then Woolworth’s music retailing, a major part of its product offering, was hugely undermined by Amazon and similar clicks operations.
Brands are for winners. Going into IKEA, TK Maxx or Primark for example, although the whole atmosphere says ‘this is cheap’ you feel good about yourself and sense you are getting a bargain. Going into Woolworths you felt a cheapskate at best or worse still a loser.
Brands need identity. Woolworth’s annual report claimed the company’s strength lay in the chain’s focus on ‘the home, family and entertainment’. But customer research indicated that there were no items to associate with Woolworth. It had no unique qualities, just an incoherent layout with sun lotion next to the sweet counter, which in turn was next to the schoolbags, calendars, tools and clothes pegs. Customers tended to go there mostly as a last resort when the shops they usually used had run out. A year after Woolworth closed, Poundland, a competitor with a clear offer and brand, reported profits up 130 per cent on sales, nearly a third higher. Much of its growth came from snapping up recently closed Woolworth sites!
Brands need business focus as well as customer focus. Woolworth was two quite different businesses. The high street retailer everyone knew loved and bought very little from. And, through Entertainment UK (EUK), a major supplier of CDs and DVDs to Asda, Marks & Spencer and Zavvi, though in March 2006 EUK had lost the majority of a lucrative contract to supply Tesco. The two businesses had very different cash flow profiles. The stores took credit from suppliers and cash from customers. The more they sold the more cash they generated. EUK’s business mode was the opposite, paying suppliers in 30 days but getting paid itself in 60 day or longer as the giant retailers used their buying muscle to take extended credit. The more EUK sold the worse Woolworth’s cash position became. The deteriorating state of the economy meant that over the summer of 2008, most of Woolworth’s 20 credit insurers stopped insuring its suppliers. This meant Woolworth had to pay suppliers proforma (up front) before the goods had been sold consuming an additional £200 million and in effect wiping out cash flow reserves.
NOTE: The UK Woolworth’s is not to be confused with the Australian retailer Woolworths Limited, which has never been affiliated with any incarnation of F. W. Woolworth Company. It employed more than 191,000 people in 2010, is one of the