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DEMISE OF WOOLWORTHS AT 99


Woolworths never quite got its telegram from the Queen. In November 2008 the administrators were called in on the 99-year-old company and eventually all 807 stores were closed with the loss of 27,000 jobs. Its demise sent shock waves rippling across the high street. Woolworths’ stores were saddled with


a rent bill of £150m a year and its more onerous leases were rising by 2.5% every year. Even to stand still sales had to rise by 4% every year. But sales were falling. Despite this the chain had spent £100m renovating its stores. The parlous state of the economy was


also worrying its credit insurers. In the summer of 2008 many of its 20 credit insurers stopped insuring Woolworths’ suppliers over concerns they would not be paid. As a result, the retailer had to pay suppliers up front, which decimated critical cash flow reserves. The company also owned


Entertainment UK, which supplied wholesale DVDs and CDs. The business model required large amounts of cash in order to function. Some of the firm’s suppliers were paid within 30 days but it was paid in 60 days and had to fund this working capital itself. Inevitably, the position became unsustainable. Out of the ashes of Woolworths’ collapse arose several imitations,


By stripping back the business and playing on these strengths, there is an opportunity for it to be saved.” Game, another retailer that has


struggled, scaled back its offering and tailored its stores to meet the demands of its individual catchments. As such, it has been able to establish a future for its business. There are suggestions that the


new owners of Blockbuster plan to offer in-store concessions, such as booths selling related electronic equipment like DVD players, games consoles and mobile phones. But there is also recognition that the “new” Blockbuster has a limited life, given that films are increasingly being sourced online or from operations such as Netflix, where for a small monthly charge users can stream a wide variety of programming. Clearly there is no practical “one case


Alworths founder Andy Latham


including Alworths and Wellworths. Alworths was founded in 2009 by


former Woolworths’ head of store and concession development, Andy Latham. With 18 stores and over 200 staff, Latham believed Alworths could thrive with far lower costs by using Woolworths’ variety retail model and the goodwill of the name. However, keeping rents down was


critical. A spat with a landlord led to the closure of one Alworths’ store and the


A case in point is clothing retailer Ethel


Austin. Founded in 1934 by Ethel Austin in the front room of her terraced house in Liverpool, it had 300 stores across the north at its height. After going into administration for the fourth time in January this year, the company finally succumbed. Keenan adds: “Some businesses have purely had their day, with an offer that is out of kilter with the wants of the modern consumer.”


bailiffs were called in at another. The business struggled following a


rapid plunge in consumer confidence fuelled by the credit crunch and, eventually, poor sales led to its closure too. Wellworths, a former Woolworths


store in Dorchester, Dorset, was reopened on 11 March 2009 under the name Wellworths. Later renamed Wellchester, the store ceased trading in August last year.


is certainly growth in click and collect, where a customer buys online and collects from the store. “Best-in-class channels are going


to win the day, but online sales don’t apply to every retailer. Fashion, for example, is an area where people want to touch and feel. But in the mid-market with the likes of H&M and Top Shop, the competition is intense and inevitably there will be more collapses.” In terms of


It’s interesting to note that stores with a strong online channel, such as John Lewis and Next, have not suffered


Online sales have obviously made a


fits all solution” for every ailing retailer. Recent history has shown that most rescued companies do not have unlimited life spans.


dent in many retailer revenues. But it’s interesting to note that stores with a strong online channel, such as John Lewis and Next, have not suffered. A case in point is John Lewis, whose online sales have broken through the £1bn barrier. It recently spent £40m on revamping its web platform. Devine adds: “The internet is going


to have a greater impact. It’s another dynamic in the retail landscape and there


surviving the economic storm, Mark Bourgeois, managing director of The Mall Fund,


mirrors Devine’s earlier point: “From a landlord’s point of view, when a tenant goes into administration, it impacts on void rates, the shopping centre and the market as a whole. Landlords recognise that retailers need their support to ensure survival – but it is a two-way street. Both landlords and retailers need to be flexible and ensure that arrangements are mutually beneficial.” If they are not, expect to see more well-known brands driven to the wall.


Summer 2013 www.estatesgazette.com 13


JIM VARNEY


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