The demise of Woolworths

Tony Woodley, joint general secretary of the UK’s biggest trade union, Unite, has warned of apocalyptic consequences if the government doesn’t pump some money into the UK car industry. ‘Our industry is on the ropes because of market collapse, particularly for the sort of high-value vehicles produced by Jaguar and Land Rover.’ The car business needs help, right now. ‘Anything else means that the demand will be met from other countries and at least 70,000 manufacturing jobs will be gone for good.’

Grim stuff – though when the car industry is held up as a barometer of economic well-being, a voice inside my head always wishes that someone was making the counter-argument against a thriving car industry. Thomas Friedman recently said in the New York Times that the Detroit bail-out was ‘the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay’. There’s something in that; when I hear that new car sales are down – a fact which is always announced in sepulchral tones – part of me wants to cheer.

That figure of 70,000 jobs is worth returning to. It throws into relief the scale of the disaster represented by the closure of Woolworths. The firm had 800 shops and employed 30,000 people. It is one of several once great British firms that lost the plot of modernity and went broke as a result of the credit crunch – other examples being Wedgwood and Viyella. Even Zavvi, not a household word, has a famous name behind it: it was formed in September 2007 as the management buy-out of Virgin Megastores. The company was pulled down by the collapse of its biggest supplier, Entertainment UK, owned by Woolworths: suddenly, at the busiest time of the year, they could no longer get hold of new stock, or return unsold items. In the DVD and music business, that double blow spells bye-bye. E.UK was also a big player in the book world. The firm supplied 15 per cent of the country’s book market, thanks to its contracts with the big supermarkets, including Tesco, who sell more books than anyone else in the UK. In addition, Woolworths owns Bertram’s, the country’s biggest book wholesalers. In the words of its own press statement, Bertram’s ‘has always sat outside of the Woolworths Group financing facilities’. Just as well, because if Bertram’s had gone under, so would a significant fraction of our remaining independent bookshops.

The fact that Woolworths had lost its way was not a well-kept secret. The company had morphed from being a cheap and not especially cheerful chain of general stores into a shop focusing on selling things for children. This emphasis was reflected in the way that it – to quote its last chief executive, Steve Johnson – sold ‘54 different types of pencil cases but not women’s tights’. There was a Woolworths near where I live, and as a parent with young children I was a regular customer, usually visiting to buy some piece of plastic junk on the way to a birthday party. I happened to be in the shop doing exactly that in the late November week when the company was put up for sale, for the non-regal price of £1. As I was approaching the till it hit me that the toy I was buying for £8.99, called something like a Ninja Destructobot Legotron, was £7.99 more expensive than the entire chain of 800 shops. It was tempting to save a few quid by buying the company instead of the toy – ‘and please hold the £385 million of accumulated debt’.

As a reluctant Woolworths regular, I’m not so sure that a lack of women’s tights was the problem. Pricing and competition from the internet have been blamed too – but again, I’m not so sure that was the crux of the matter. When children want/need something, the net often isn’t an immediate solution. The problem was more that the shops were so chaotic, so prone to not having the stuff you’d expect them to have, to selling out of precisely the things everybody wanted, and above all to having chronically demotivated, deskilled staff. The staff were hard to find in the first place, and if you did find someone, they never knew anything – where it was, what it was, who might want it, where it might be if it wasn’t right on the shelf where it was supposed to be, and why any of this was supposed to be of interest to them. I gather, anecdotally, that this wasn’t true of every Woolworths, but I suspect it was true of enough of them to be a big issue.

There’s a lot of this on the high street. Many of Britain’s biggest retail companies treat employees as a commodity. They are paid as little as possible, trained as little as possible, and employed in the lowest possible numbers. It sometimes seems as if managements employ a formula: work out the minimum levels of staffing for the shop to function, then subtract 20 per cent. There are exceptions: Marks and Spencer is one, and McDonalds, amazingly, has begun to offer an apprenticeship programme offering employees a qualification in ‘multi-skills hospitality’ equivalent to five GCSEs. It’s a great shame that it’s necessary, but there we are. The high street in general, though, is a desert of deskilling. DSG International, selling computers and electronics (owners of Dixons and Currys and PC World), sometimes seems to go out of its way not to employ anyone who knows anything about the products they sell. It has been mentioned as a potential victim of the credit crunch, and if it does go under, this will surely be a reason. If everything is cheaper on the net, the only reason for going to a shop is to talk to someone who actually knows something about whatever the product is – whether it’s a kid’s toy, a digital camera, a book, or that famous pair of tights.

There will be more corporate implosions to come this year, for sure. The retailers are just the start of it, and that’s for a reason. Imagine for a moment that you are the main creditor of a struggling retailer which you think likely to go under. When would you prefer that your debtor go into administration? What would be the optimum moment to pull the plug? The moment when your debtor has the largest amount of cash and the smallest amount of stock. There’s a name for that time of year: it’s called January. Expect more bad news.