doctorvee

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.