Whatever Happened to Woolworths?

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With the loss of almost 30,000 UK jobs, the dramatic collapse of retail chain Woolworths in 2008 sent shock waves rippling through the high street. After 129 years’ trading, analysts wondered how the former global brand could have crashed so suddenly, with little warning.

The first Woolworths had opened in New York City in 1879 and the company had continually expanded throughout the 20th century, making record profits of £105.1 million in 1998. Yet 10 years later, the rise and fall of Woolworths was complete, as 800 UK stores closed their doors for the final time.

So, whatever happened to Woolworths, and how did such a massive brand fall victim to the challenging economic climate of the 21st century?

 

Origins

American entrepreneur Frank Winfield Woolworth was just 24 years old when he launched his first shop in Utica, New York, on 22nd February 1878. He called it Woolworth’s Great Five Cent Store, which was the equivalent of today’s discount stores, such as the £1 shop.

This was the beginning of the concept of the five-and-dime store, or the variety store, when a shop would sell a wide assortment of cheap items for household and personal use. Woolworths became known as the “cheap and cheerful” shop, where all the products cost five cents each.

In addition, the store introduced a new way of serving customers. Prior to this, it was normal to give the retailer a list of what you wanted, as a lot of goods were kept behind the counter, so the shopkeeper could personally serve the customer.

The new Woolworth shop was revolutionary, in that the merchandise was on open shelves that the public could access themselves. This enabled them to browse the products and choose what they wanted at their leisure, without the aid of a retail assistant.

Pioneering the modern methods of merchandising, direct purchasing, sales and customer services which are still in use today, this created a retail model which has been followed worldwide.

 

Expansion

On 18th July 1879, Frank Woolworth joined forces with his younger brother Charles Sumner Woolworth, who was 23, to open another store of the same name in Lancaster, Pennsylvania. The second store was an even bigger success than the first and the Woolworth brothers had invented a money-making formula with their five-and-dime chain.

They continued to open new stores during the late 19th century throughout the United States. By 1904, they had already built their own empire and had expanded into Canada too.

In November 1909, the first UK Woolworths opened on Church Street in Liverpool. The highest price of any item in the shop was 6d – the shop was a huge hit! It received a lot of favourable publicity in the newspapers, where it was described as stocking an “infinite” selection of wares.

The brothers had initially operated as the Woolworth Syndicate but their brand name changed to the FW Woolworth Company in 1912.

By the mid-1920s, they were opening one new shop every 17 days! In the UK, Woolworths’ familiar red fascia and brand name on the high street was welcomed, as it was a kind of seal of approval for their town centre.

 

20th-century success

The UK Woolworth business empire was being managed by William Stephenson by the 1940s. Frank Woolworth had trained the former freight clerk, who had become his protégé.

Stephenson had impressed Frank when he worked for a supplier of the five-cent stores in the early days. He had worked his way up through the company to a managerial role, although he remained a hands-on type of person. Following Frank’s death in 1919, Charles Woolworth managed the business with Stephenson.

By the 1940s, around 500 Woolworth stores had opened in Britain and it was the biggest high street chain of its era. The expansion continued throughout the next two decades. In 1958, the 1,000th store was opened in Britain in Hove and the chain reached its peak in the late 1960s, when there were 1,141 high street branches.

Woolworths was famous for its Christmas shopping campaigns. It became a winter wonderland of festive cheer, Christmas decorations, Santa’s grotto in the larger stores and every toy imaginable.

It was also famous for its pick and mix sweets, loved by kids and adults alike as they would fill their paper bag with a selection of chocolates and candies of their choice.

 

Seeds of failure

In the 1970s, Woolworth began closing down an average of 15 stores per year but stated this was to fund more modern stores and insisted the brand wasn’t downsizing. By the start of the 1980s, there were still around 1,000 UK shops on the high street.

The 1980s proved a challenging decade for the retailer. The US parent company sold out in 1982 and the UK arm became independent, forming Woolworths Group plc. However, for the first time, high street stores were closing, without any new ones opening.

Woolworths’ foray into the large out-of-town hypermarket format (which had begun in the 1960s) wasn’t a success and most had been sold by the early 1980s. The management reorganised the merchandise into specific categories, including home, entertainment, kids’ toys, clothing and confectionery, but the brand went into a decline and many branches were downsized. The older branches in cities often occupied premises that were as large as a department store and some of these were downsized, or closed altogether.

 

Where did it go wrong?

There appeared to be no clearly-defined reason for Woolworths’ gradual decline, although business analysts at the BBC described it as having become “something of a lame duck retailer” and claimed it had been losing significant market share against intense competition from newcomers on the high street.

Consumers and business leaders were left wondering where it had all gone wrong in 2008 when Woolworths came to a sad end. There were accusations that it hadn’t kept pace with the times and had relied too much on its traditional, tried and trusted formula.

The US arm of Woolworths (owned by a rival US retail company) had closed down in 1997, after 118 years’ trading, but no-one had foreseen the scale of problems that the UK company was suffering. The British chain still appeared to be in relatively good shape, after becoming part of the retail giant Kingfisher, owner of B&Q. In 1998, Woolworths had announced record profits and all seemed to be well.

Woolworths and Kingfisher went their separate ways in 2001, after the recession and the credit crunch were said to have impacted negatively on Woolworths. In addition, it was said to be struggling, as rent bills for its UK shops had more than doubled from a manageable £70 million to a staggering £160 million.

The brand was also in competition with well-established rivals, such as Argos, plus the new kids on the block, such as the discount chain Poundland and Wilkinson, both of which had entered the non-food market and were attracting Woolworths’ customers with their cheap prices.

It was also reported that Woolworths had suffered stock shortages and that its stores were perceived to be “unfashionable” in the 21st century, failing to attract the new generation of shoppers.

The credit crunch finally succeeded in wiping Woolworths out and it went into administration in 2008. It was described by business analysts as the “bleakest day in retail history”, when the chain went into the control of receivers. Its remaining 800 stores closed down and almost 30,000 jobs were lost.

There were calls for the government to bail Woolworths out, but the plea fell on deaf ears. A report by the BBC said Woolworths’ generally weak position was the reason why the government hadn’t intervened. The company reportedly had debts of £385 million and there appeared to be no way back.

The company had tried to sell itself for the token sum of £1, with the new buyer taking over the debt and restructuring the business, but eventually, the board simply ran out of time and Woolworths closed down, signalling the end of an era.

In April 2017, the company’s former director, Tony Page, reportedly expressed an interest in acquiring the Woolworths’ brand name, leading to rumours that the store may be resurrected, but to date, there has been no confirmation of whether this is the case.

 

First impressions count

It’s no secret that today’s economic climate presents challenges for even the most successful retailers. In particular, competition from online stores is taking consumers from the high street.

First impressions count, so make sure your store’s exterior is welcoming and appealing – the kind of shopfront that stops people in their tracks and makes them want to step inside.

Commercial Aluminium Shopfronts (CAS) supplies and installs high-quality shopfront windows that will give your retail premises the edge. Please contact us for details of our products and services, we’d love to talk to you!

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