(Almost) 100 years of Woolworths

A series of posts

1. Woolworths: The curiously British US-based company
2. Woolworths as it was known and loved, and neglected
3. Woolworths: Childhood memories and adult gripes
4. It wasn’t just the credit crunch
5. The blunder of Woolworths
6. Identity crisis
7. The beginning of the end
8. The nasty side of human nature
9. Woolworths: Final thoughts and wrapping up
10. Woolworths rises from the ashes

One question that many of my friends have asked me over the past couple of months is, did I see it coming? For many, it was a shock that an institution like Woolworths could even be in mild difficulty, never mind on the brink of going out of business. But the honest answer to their question was: yes, I did see it coming. And I wasn’t the only one.

What was shocking was the speed with which it did happen. I thought everyone involved would at least give Woolworths a chance over Christmas. But the depth of the trouble to hit the High Street was even greater than I had imagined, and Woolworths was essentially given its last chance in mid-November.

I was first aware of the possibility of Woolworths getting into financial difficulty being raised in early 2007. Everyone was paid to come in for an hour to attend a meeting. If memory serves, we were basically told to ensure that standards were kept high and that displays were set up how they should be. During this talk the possibility that Woolworths might go out of business was brought up.

Back then, it seemed like a distant possibility. Nonetheless, it didn’t take me long after I started working for Woolworths in July 2006 to wonder if the company might be in a spot of bother. For the entire time I worked there, our shop never had working air conditioning — and I know that ours wasn’t the only one. Apparently they couldn’t afford to fix it. Temperatures were almost unbearably high during the summer, and I frequently overheard customers mentioning the terrible heat inside the shop. That seems to me at least one possible reason why footfall may have decreased.

Meanwhile, the fact that it took six weeks for my name badge to arrive, and the fact that I never received a uniform was a sign of, if not financial problems, at least incompetence somewhere or other in the chain. (I did have a uniform, but my Woolworths polo shirt was the one given to me on the first day which I believe was my manager’s old one. I didn’t kick up a fuss because it did the job just fine. I never got a fleece though!)

Meanwhile, we ran out of basic supplies, in my view, alarmingly often. It wouldn’t surprise me if other shops ran out of stuff from time to time. But we completely ran out of carrier bags at least once and had to resort to using bin liners (a scenario which was repeated when things unravelled in December 2008). Perennially we lacked tissue paper with which to wrap fragile goods. We also often ran out of the paper we needed to make temporary price labels.

When I started I am sure we had five (or maybe even six) Piccolink “guns” — the hand held stock management devices. These reduced in number over time until at the end we had just two — and they were both broken. These devices were almost essential to do our job, and the shortage was the source of much frustration.

For a couple of months after the Christmas 2006 period, supplies of stock seemed to completely dry up. The stockroom looked pretty empty and certainly in my department we started selling the dregs of the inventory in the stockroom. At first I thought maybe it was normal for just after Christmas. But when more experienced colleagues told me they had never seen the stockroom so empty, the signs pointed to the fact that the company was facing difficulties.

After a relatively benign 2007, sales fell off a cliff throughout 2008. My workload was noticeably lower in 2008 than it was in 2007. When the credit crunch worsened that summer, I began to think it was more likely than not that Woolworths would fall victim. Things were bad for the company anyway, but if things became bad for the economy as a whole as well it was difficult to see a way out.

Any notion that top management stuck its head in the sand should be dispelled. Even though on the surface Woolworths didn’t change much, there is no doubt that they were looking for a solution. Unfortunately, they came across the wrong solutions.

It is too easy to blame the demise of Woolworths on the credit crunch. Although High Street retailers are undoubtedly feeling the effects of the current economic situation, a good business can still survive with little problem. Sure, in a more benign time when credit was more available, Woolworths would have found it easier to borrow more money to survive another year.

But unmanageable debt — all £385 million of it in Woolworths’s case — will come back to bite when times are tough. In a way, Woolworths was lucky that the past decade or so was so benign. It was given the benefit of the doubt by the favourable economic environment.

Obviously things unravelled quickly in November. It became clear that Woolworths was in talks with Hilco, a company that specialises in turning around distressed retailers, to sell the retail arm of the business for £1 and offload a significant chunk of the debt. That was a sign of extreme desperation. Woolworths was looking to get rid of its core retail business by any means, in the hope of salvaging the more profitable businesses Entertainment UK and 2 entertain.

In the end, the banks refused to back such a deal, opting instead to recover their money. The retail arm and Entertainment UK both went into administration on 26 November 2008. From a business point of view, it was a shame that a profitable, successful business like EUK had to be brought down along with the shops. That had a more-or-less direct consequence on another major retailer, Zavvi, which relied on EUK for all of its supplies.

The disappearance of Woolworths also means the disappearance of other well-loved brands. Children’s clothing brand Ladybird has a history and involvement with Woolworths stretching back to 1934. It became exclusive to Woolworths in the 1980s and was bought outright by the company in 2001.

Meanwhile, the historic toy brand Chad Valley has also fallen victim. Like Ladybird, Chad Valley has a long history going back to 1860. Chad Valley withered on the vine in the 1980s, but Woolworths bought the name in 1991 and it became the store’s own brand toy make. Administrators are hoping to sell both brand names, and I would have thought the chances of these brands surviving in some form in the future are high.

Another Woolworths brand might not be so sorely missed. The WorthIt! value range was a recent addition, only launching properly in 2007 after a trial period. I think it made a good name for itself, particularly in affordable electronic goods. The likes of WorthIt! kettles and WorthIt! microwaves flew off the shelves.

A lot of WorthIt! products were cheap and nasty though. It was difficult to suppress the giggles when WorthIt! toilet seats were returned because they cracked under the weight of enormous bahookies. I would have thought a sale of the WorthIt! brand is less likely, given that it was pretty much intrinsically tied to Woolworths, right down to the punning name.

Firstly, the universities say they are disappointed in the amount of funding they will get. The universities asked for £168 million extra and said that a minimum of £40 million extra was required for levels of funding to remain the same in real terms. What they actually got was £30 million — a real terms cut.

I have never been to any universities except for Edinburgh, so I couldn’t say how it compares to other institutions around the world. But I can’t help but wonder if the continued public funding of universities in this manner is unsustainable.

There is already a perception that Edinburgh University is increasing the number of international students it enrols. International students are the only students they can make money out of, so Scottish students will begin to be squeezed out.

It already disadvantages us in at least one high-profile way. The move to semesterisation has been seen as an attempt to attract international students who want to be back home for Christmas — but had a range of negative consequences for other students (additionally, that document doesn’t mention the fact that sometimes there can be just a few days between your last lecture and your first exam in December).

If it is true that Scottish universities are facing a real terms cut in funding, then this trend will continue. Then Scottish students will be worse off.

The other place where the SNP is feeling the heat is over their ditched plans to “dump student debt”. If you were a student, it was difficult to avoid the SNP’s ‘debt monster’ character. A number of blogs were even decorated with graphics of the creature. It was clearly a key policy in attracting student votes. So it’s hardly a surprise that a lot of students feel a bit miffed now.

I can hardly blame the SNP for not implementing this policy, which in my view (speaking as someone with £7,000 and counting to pay back to the Student Loans Company) was stark raving bonkers. They shouldn’t have promised it in the first place.

Both of these areas link into the fact that students have it far too easy. Proponents of free higher education miss the point of higher education. A degree is supposed to be a signal to employers that you are talented. For this signal to work, a degree has to be costly to attain.

After all, if it was easy to get a degree, any old fool could get one. This would lead to the ‘devaluation’ of degrees that people so often talk about. The point of making a degree costly is to separate the wheat from the chaff, as it were. If getting a degree pays off for someone who is not so smart, then degrees are no longer a useful indicator to employers and everyone is worse off as a result.

Of course, degrees are costly anyway. Not in a monetary sense, but in a time sense. Theoretically, examinations are (hopefully) hard enough to deter the not-so-smart from spending four years of their life studying, and the opportunity costs that entails (i.e. four years spent unable to work full time).

However, it doesn’t quite work like that. When people are growing up, nobody is told the truth about university. Parents always push you into going into university due to pride. They don’t want their several years and piles of money invested in a life to come to nothing. Schools are the same — if a lot of a school’s pupils go to university, it reflects well on a school’s reputation. Meanwhile, governments like to encourage people to go to university because it reflects well on their reputation and it helps keep a lid on unemployment figures.

For this reason, there are many students who are walking around like headless chickens, not knowing what to do next (I would include myself in this group). So many people are forced by societal pressure into going into university. A lot of people grow up knowing having been told by parents, schools and governments that they will go into university. These people simply don’t consider any other alternative. Then when they are about to graduate they are stumped.

The obsession with persuading young people to go to university has also led to the fetishisation of “student culture”. Thanks to this, those four years are not seen as a cost at all. They are seen as the best four years of your life. Four years spent getting drunk. The degree is seen as a nice bonus. Fair enough if people want to enjoy themselves — but this is at the expense of taxpayers’ money.

How do we know that degrees are not costly enough? Because some graduates — mostly male arts students (who? me?!) — end up earning less than people who do not go to university. (This is part of the reason why this issue angers me a bit. If I knew I had to pay, I would have been forced to think through my choices a bit more, and would probably have made a better decision.)

Before statists and socialists start moaning, let me point this out. If degrees are costly, this need not preclude poor people from getting one. For one thing, poor people are the very people who benefit the most from university education, so they have the biggest incentive to invest in it.

Also, I still think it would be unfair to make poor people pay upfront. I would not be averse to the introduction of university tuition fees as long as they did not involve up-front monetary costs. Instead, the money ought to be paid after graduation (or drop-out) in line with your ability to pay. This is how student loans work, so I don’t see how it couldn’t work with tuition fees.

Besides, any pretence that free higher education helps poor people would soon be shattered if you spent five minutes on a university campus. Students are overwhelmingly middle class anyway. Instead of helping the poor, public funding of university education hinders the poor. It takes working people’s tax money and ploughs it into the pockets of middle class Tarquin and his Classics degree.

This is not necessarily to say that I am completely opposed to any state involvement in higher education. I would understand if there were a clear need to provide an incentive for people to attend university (although surely the prospect of a highly-paid job ought to be enough incentive). But today, 52% of 18–30 year olds either have a higher education qualification or are currently studying for one. There is hardly a shortage of graduates, or people wanting to graduate.