Thursday, 11 December 2008

The Demise of Woolworths

There are some companies in the British high street that seem to have been there forever. If you got swept up in a kind of 'Life on Mars' style experience and found yourself back in 1973 they would be there just as they are today. The damage caused to the British economy in the 1980s purged many established stores from British shopping centres and the fact that the average British company will last no longer than 40 years means there are very few of these companies, but some do remain. The ones that are still there are Boots the Chemists, WH Smith and Marks & Spencer. The supermarket chains Co-op, Tesco and Sainsbury also remain though they have become very different from what they were before, Asda, Morrisons, Somerfield, Waitrose, Lidl, Aldi are all relative or actual newcomers. The one that will be missing from so many streets in the UK after today is Woolworths stores ('Woolies' as it was often affectionately called). To some degree this is unsurprising.

When people are asked to define what it sells they end up giving quite an eclectic mix. WH Smith has faced a very similar difficulty. The average branch of Woolworths in the UK (it was a US company started in 1879; the first branch in the UK opened in 1909 in Liverpool) sells small electrical goods, DVDs, CDs, garden items, some decorating goods, books, children's toys, children's clothes, haberdashery and sweets. The key problem for them is now that supermarkets sell all this kind of stuff whereas once they were much more restricted to food and cleaning items. France never had places like Woolworths because all the things they sold would be available in hypermarkets. Now that British supermarkets often resemble hypermarkets it is unsurprising that the ground has been cut from beneath them.

The other key problem for Woolworths despite their efforts over the years is that despite their efforts over the years, they seem terribly old fashioned. However much they tried to make it look dynamic, the layouts and the products sold never changed radically. In those days of my youth when electrical items were sold without plugs Woolworths was always the place to get a plug. They are the store that sold all those awkward but essential items, and perhaps these days that is insufficient basis for running a store. This reassuring continuity was welcome but it hardly made them appear dynamic.

Woolworths longevity was also partly a problem because they have been around so long and all of us remember them as they were in our youth and all the baggage that brings with us. In contrast there is minimal similarity between the first tiny Tescos I went into and a modern day branch whether a Tesco Extra hypermarket or a Tesco Local convenience store. In contrast there are no out-of-town super-Woolworths. Even WH Smiths has managed to pull this off in some locations having cafes in them and hitching themselves to the kind of lounge-around style common in bookshops these days, though with the advantage of a slightly wider range of products which make them more family- rather than young professional-, friendly. Woolworths are still in the high street and predominantly in working and lower middle class districts, naturally supplying those people who lack the time, money or vehicles to reach out-of-town facilities. In this age when everyone in the UK is supposed to be middle class, that is a difficult demographic to be addressing.

The immediate issue is that 800 stores employing 25,000 will close in the UK. There will be suddenly a boarded-up space in many high streets and a sudden injection into the unemployment figures just before Christmas. In the long-run, I think people will severely miss Woolworths. I thought back over how many items I had bought from my local branch this year and it added up to a whole slew of lego, probably a dozen garden plants and an assortment of garden equipment, a clock, about five DVDs. Now many of these things I could probably buy elsewhere but it will be far harder to get them without getting in a car. For older and poorer people than me it is going to be even harder. Pound shops with their ever changing stock are not going to replace the consistency of Woolworths and many children are going to miss out on being able to buy their first watch or just get some lego to cheer up a dull Saturday now Woolworths is gone.

I mourn the loss of yet more jobs in the UK, but I also acknowledge I mourn too, the passing of something that has been there all my life and a company which I have interacted with on countless occasions. Woolworths is not like the departure of Peter Lord or Freeman Hardy & Willis as there were always other shoe shops, there is nothing else like Woolworths, which is part of its problem, but also means it is irreplaceable and a characteristic of all the towns I have ever lived in will be gone forever.

P.P. 29/12/2008 - I have to confess that I am not a person who regularly reads the financial pages of the newspapers, though perhaps we all need to these days to see how big business is playing with our lives. Over the Christmas period someone pointed out to me that the UK Woolworths did not collapse because of poor sales and in fact in April 2005 when it was taken over it was returning a profit of £109 million. What killed it was the control that was taken by Elliott Associates a hedge fund (one of the oldest, being in existence since 1977) though due to its behaviour known as a 'vulture fund'. Basically it is an asset stripping company that buys up companies or even economies of countries (as it did with Peru in 1996) when people do not want to chase after debt repayments, then sues the company or economy for full repayment, so making a profit. In 1996 it bought the debts of Peru for £6.1 million which were worth $20.7 million (so equivalent to £9.02 million, but the exchange rate has shifted back and forth loads since then) and almost bankrupted the whole company. After a failed takeover bid failed, which would have earned Elliott Associates millions, they tried to get Woolworths to break up and return money to shareholders like them. Woolworths has had various debts piled upon it, leaving it with £129 million debt earlier this year. It has been the plaything of wealthy people since at least 2005. Its largest shareholder Ardeshir Naghshineh, held 10.2% encouraged it to ignore takeover offers until it was too late. Like all of us Woolworths became a football in financiers' games. These are people who never go anywhere near a UK high street and have never had to buy lego from a branch of Woolworths. They do nothing except drain companies to death just to earn millions more as their carcasses are ripped up. They do not have to worry about their jobs or a disused shop in their districts. These people can be seen as evil, but it is not even that sophisticated, they cannot see any further than the vast sums of money they make and how they can achieve that not by making or selling anything but through ripping apart other people's businesses. It is people like this who have smashed the profitability that has been so prevalent over the past two decades and are now condemning millions of us to unemployment and loss of our homes, just to satiate their greed. Woolworths proved to be yet another of their victims. The seven year old in my house today asked when Boots and WH Smith were going to go from our high street and honestly I told him, probably very soon. Greed was never 'good' and its consequences are terrible.

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