Thursday, November 27, 2008

Death of a Giant

Woolworths, that old, intransigent retail behemoth, has gone to the high street in the sky. Obviously bad news for the employees – if no buyer for Woolies is found, then their plight has an almost Dickensian air to it: losing their jobs just before Christmas. But for everyone else, the demise of Woolworths probably won’t be noticed that much, at least not directly.

Because, if we are brutally honest, what purpose did Woolworths serve? If you were feeling charitable, you could describe their range of products as eclectic. A more realistic assessment would point out that they had an utterly random collection of limited ranges of products that could be found elsewhere, often at cheaper prices. Whatever purpose Woolworths once served disappeared years ago, around the time when it became cheaper and easier to shop online, and about the time that Tesco started offering just about everything other than actual house purchases under one roof in their hideous superstores. Woolworths were offering a service that just has no real relevance in the UK of today. Businesses should aspire to have a unique selling point; Woolies failed to have any selling points whatsoever, unique or otherwise.

Peston’s take on Woolies is quite illuminating for two reasons. Firstly, he points out that the demise of a (one-time) high street giant is going to have a wider impact than it first appears. But the crucial point is the second one – that Woolies was propped up by the credit boom. Woolworths would have gone under years ago if people did not have the credit and excess cash to fritter in their stores. As soon as the economy changes, dog companies like Woolworths were always going to suffer. As people tighten their belts, they will choose where they shop, and factors such as price become more important than ever. Given that, Woolies could never win.

In the final analysis, the collapse of Woolworths was not a surprise. The fact that it took so long to go under was.

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