Saturday, June 21, 2008

Of Woolworth's and Sears

The last Woolworth's stores disappeared from the US more than a decade ago and had become irrelevant long before that, though the company goes on (it's called Foot Locker today). Woolworth's has gone on being a powerful retail name around the world, however. Spin-offs of the US company continue to operate under the original name in the UK, Germany, Mexico, and South Africa. (The biggest retailer in Australia is named Woolworth's, but has no connection to the US company).

If this item is correct, Woolworth's UK may be on course to follow its American parent into oblivion:
Going, going, not quite gone, but most definitely in the departure lounge of life: Woolworths is suffering a long, slow death. For those, like me, who were children in the Fifties and early Sixties, it's painful to watch. An old friend, with whom too many of us have lost touch, awaits the coup de grĂ¢ce.

This week, the company finally ditched its genial but ineffective chief executive, Trevor Bish-Jones. His six-year reign was largely a story of mitigating failure: much promised, little delivered. In the City, where sentimental attachment counts for zero, Woolies is an unfunny joke.

The company has 800 outlets, with annual sales of about £1.7 billion, but barely makes a profit. At 9p each, Woolworths' shares cost less than a handful of goodies from the pick'n'mix counter. Its stock market worth is down to £130 million, a tiny fraction of Tesco's £30 billion. Woolies' investors have lost nearly 85 per cent of their value in three miserable years.
The former king of British retailing is now worth 1/200th the value of the current monarch. That's gotta hurt.

Read the full article, if only for the delightfully nasty comments the author throws in, such as: "... Woolies lumbers along like a corporate stegosaurus, a beast the size of a bus, with a brain no bigger than a walnut."

When I read it, though, it kept reminding me of the long, slow, and on-going death of America's former retail leader, Sears. It's hard to believe that up until about twenty years ago, Sears was the biggest retailer in the world (I'm going by memory here, I couldn't find the exact figures and dates). In the late 80s, Sears, Wal-Mart, and Kmart were virtually tied for the top spot -- today, Sears and Kmart combined are about 1/7th of Wal-Mart in sales.

The reasons for the decline of Woolworth and Sears are similar, but can be summarized as a failure to adapt to changing conditions, abetted by flailing, inconsistent attempts to adapt (frequent strategy changes, management upheavals, etc). Much of the article about Wolworth's could have been cribbed from a history of Sears:
  • "In the accelerating evolution of Britain's high street, fleet-footed rivals have adapted far more readily to changes in consumer behaviour; in some cases they have led them."
  • "Most successful retailers stand for something distinct, whether it's price, quality, value, range or convenience. By contrast, Woolies has, in the jargon of professional marketeers, no unique selling point (USP)."
  • "'Woolies' brand is an empty shell,' says Rita Clifton, chairman of Interbrand, a brand consultancy. 'There are lots of memories but nothing current, clear and vibrant. The stores are a shabby, disorganised nightmare.'"
  • "On its bags, Woolies boasts: "Over 500,000 products to choose from with easy ways to shop." Inside the store, however, were rows of empty shelves."
  • "It was a similar story throughout. On the shelf for light switches and bulbs, there were 18 price tags without corresponding items. In the Price Crash box for DVDs and CDs, there were 21 display units, but only four had anything in them. The confectionary rack at the main till appeared to have been supplied by militant weight watchers: no Twix or Galaxy bars."
  • "The main headache for Woolies, however, apart from its self-inflicted wounds, was just around the corner: Tesco, the nemesis of many weak retailers. I could have hurled a bowling ball down Woolworth's aisles and hit no one. In Tesco, such action would have scattered shoppers like skittles. They were queuing eight deep at six checkouts with baskets fully loaded."
Sound like any of your recent experiences at Sears (assuming you've recently been in a Sears, which is unlikely)?

The real lesson to be drawn from this is that no one stays on top forever. Wal-Mart has made a number of missteps in recent years (mostly in their international operations), and the long-term effects of internet retailing are still not known. The stegosaurus, Woolworth's, and Sears were unable to adapt. Will Wal-Mart do better?

2 comments:

eweldridge said...

Hi Bob,
Over the years I have watched a number of the biggies slowly disintegrate into meaningless entities if not entirely disappear. One thing to watch for is the outsourcing of various functions. I may be entirely off base here but when retailers outsource their logistics, transportation etc they lose control of the expenditures regardless of what they think. When they outsource their purchasing they are really on the downward path. The old bit about concentrating on the strength's such as retailing/merchandising do not do much for you if you cannot control your basic expenses.
Earl

Bob Houk said...

Earl: I mostly agree. Having made my living in outsourcing for much of my life, I think it can be a good move for a company, but only if it's not a core function.

I'm not so sure about logistics, but a retailer who outsources purchasing is surrendering its identity.