With sales falling, Woolworths is hoping revamped stores, an ordering service and Christmas will bring brighter times. By Ian McCawley
Woolworths may be “in the land of the living dead” according to one City analyst, but its marketers say it is not heading for the graveyard just yet.
The retailer posted a “worse than expected” trading statement last week – like-for-like sales fell by 6.7% in the 19 weeks to June 10 – but publishing venture 2entertain and wholesale business Entertainment UK performed encouragingly. With World Cup sales expected to peak this week, the retailer is already pinning its hopes on a bumper Christmas. Nevertheless, bosses are bullish that a store revamp strategy and new multi-channel order and collection service will boost footfall.
The marketing department has been galvanised in recent times. Tony Holdway joined from Mothercare as head of marketing to oversee day-to-day responsibility for above- and below-the-line activity (MW November 10, 2005). In September, Asda’s non-food director, Tony Page, will take up board-level responsibility for marketing in the newly created role of managing director, commercial and marketing. Meanwhile, marketing director Stephen Robertson is two years into his tenure (MW July 1, 2004).
Holdway claims there are no plans to review Woolworths’ advertising, handled by Bartle Bogle Hegarty. BBH has created a string of campaigns featuring brand characters Wooly the sheep and Worth the sheepdog, which are expected to return in another “Woolworths News” execution as part of a back-to-school campaign in August. Zenith Optimedia handles media, while Dare oversees digital activity.
Woolworths’ pick-and-mix retail offering is coming under pressure from specialists, such as Virgin Megastores and HMV in music, and Habitat in homeware and furnishings. Supermarkets are also able to offer more space for similar goods and negotiate better deals with suppliers.
Observers believe there will be an emphasis on digital marketing as Woolworths seeks to modernise and back the in-store “kiosk” ordering service it is rolling out. Customers will be able to order or buy online, in store or over the phone, and choose between home delivery and collection at certain stores. This year it teamed up with Comet to offer a range of white goods under the Comet@Woolworths brand.
It is refurbishing stores, overhauling smaller community outlets, known as “5/5” formats, and bigger high street shops dubbed “10/10”, to widen aisles, stock more products and generally refresh its proposition. Holdway explains: “If you stand in a 10/10 or 5/5, any negative perception of the Woolworths brand would change. People’s view of retail brands is akin to their in-store experience. We’re trying to convert stores rapidly as there is a sales benefit, but it also ups the ante for the brand.”
Woolworths, which comprises 826 stores, was demerged from Kingfisher in 2001. It was viewed as a potential takeover target this year when Icelandic investment group Baugur built a stake, and BHS and Arcadia owner Sir Philip Green has reportedly been following the share price with interest.
But Nick Bubb, an analyst at Evolution Securities, is doubtful about the chain’s short-term strategy and gloomy about its long-term prospects: “The trading statement was pretty grim. I don’t think there is a future for it in bigger towns.
“The ordering system is an interesting idea. There is scope to widen ranges, such as by adding appliances. But it will be difficult to take on Argos in that area. Two years ago, Woolworths was all about children and occasion celebrations, so this seems a bit off-strategy.”
Holdway asserts that Woolworths will continue to focus marketing on its four core categories: toys, clothing, confectionery and celebrations. Making the most of the Ladybird children’s clothing brand is one area the retailer may focus on. Holdway says: “Ladybird has been around since 1934 and is loved by customers.”
As Woolworths faces stiff competition from supermarket clothing brands such as George at Asda, Tesco’s Cherokee range and Sainsbury’s Tu, marketing consultant Nick Cloke believes playing to its strengths may be its best way of turning the corner.
“It’s always possible to turn something around if you have enough customers,” says Cloke, a director at Catalyst. “It could take a leaf out of WH Smith’s book by returning to its core strengths and slimming down its operation. Having only token representation in peripheral areas such as gardening could help it concentrate on strengths like Ladybird, and improve its music offer.”
Cloke even suggests Woolworths should boost its toy stock, including the Chad Valley range, around Christmas but pare it back at other times. “It needs to be a lot more flexible in areas where it knows it’s strong. It could jettison small stores, or make them single- or dual-offer only, like WH Smith has done with books and stationery.”
But he admits: “It’s quite a dramatic and brave idea for the existing management team to carry out.”
â¢ 1879 First store opens in New York
â¢ 1909 First UK store opens in Liverpool
â¢ 1960s Woolworths runs the first double-page press ads
â¢ 1981 Buys DIY business B&Q (51 stores). John Beckett and Geoff Mulcahy form new parent company Woolworth Holdings. UK-only retail chain becomes Woolworths plc
â¢ 1982 Woolworth Holdings changes name to Kingfisher plc
â¢ 1990s Develops out-of-town chain Big W and Woolworths General Stores. Kingfisher separates operating companies into DIY and electrical and general merchandise businesses
â¢ 2001 General merchandise businesses demerge from Kingfisher under guidance of new board, Woolworths Group plc
â¢ 2002 Woolworths general stores are absorbed back into main chain
â¢ 2005 Big W relaunched as Woolworths Out-Of-Town. Launch of in-store ordering