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Marketing Management
Q.3 Case study
The British Company, Woolworths is normally categorized as a variety store
dealing in retailing of a range of varying products. Historically it was established
as a subsidiary of an American Company F.W. Woolworth &Co, in 1879 by Frank
Winfield Woolworth It was incorporated in England on 23rd July, 1909 as
private limited company with initial capital of 50,250 pound sterling. It, first
time floated a new idea of selling all the products at a cost no more than five
cents. This idea gained popularity amongst the customers resulting in fast
growth of the subsidiary. Its first shop at Liverpool attracted about 60,000 people
in first two days because of attractive one penny, three penny and six penny
products put at sale. It continued to open new shops at various cities that
attracted heavy rush of customers and visitors. It was company’s policy to
purchase the products directly from manufacturers, who also were very happy
due to momentum in their business as well. Some of the manufacturers started
doing business solely with the Woolworths and labelled their products with the
company’s name. Company’s business grew day by day and it had 31 shops in
United Kingdom’s by the year, 1914. Due to inflationary trends after the World
War II, the company had to do away with its three pence and six pence price
limits. It introduced self service first time in its retail side in the year 1955.
Woolworth opened about 190 self-service stores by the year 1970. It created new
division in the stores by establishing Woolco departmental stores in the year
1966. These stores had full range of quality products like, clothes, groceries, car
service and restaurants etc. available at affordable prices.
The Company continued to flourish very fast because of its stated aim to remain
at the customer’s heart and best kid’s retailer till 1966. But thereafter its sales
as well as profits started falling because of its competitors, Marks & Spencer who
overtook its sales as well as profits. The results of the company were the worst in
the year 1969, because it failed to chalk out suitable strategies necessary to take
on its competitors in the market. Sales at Woolworth began to decline.

2. Consumers were reportedly not satisfied with the quality of customer services of
the company. Many of the business sites were not at prime locations. Its new
products could not attract the customers because of lack of well trained staff and
availability of ‘A class service’. The company tried to improve its services in the
year 1971 by introducing new system of centralized payments besides closing its
23 unprofitable shops, as an attempt to trade up. The profits of the company
increased to some extent as a result of these measures but it failed to boost up its
profits at the desired level. The competitors of Woolworth like Wal- Mart, Argos
and Next very soon became more prevalent in the market because of low prices,
better service and vast range of their products. The Management of the company
ultimately decided to sell out the Woolco stores in 1977. In the year 1981 it sold-
out some of its valuable prime located properties to cover-up the losses suffered
by the shops situated at these locations. Even then its profits went down in the
said year and the company was forced to cut the dividends first time since its
establishment. In the normal restructuring process during the year 1985, the
company decided to abandon the sale of food and adult clothing that was
contributing about 30% of its overall sales. The Management of the company sold
out its 200 unprofitable shops out of about 990, during the years 1982-1991.
During this decade company made a number of acquisitions in order to become
more diversified in retail business. It launched Music and Video Club that
specialized in CDs, videos and other entertainment products. The company
succeeded in boosting its sales and turnover during 1990s and gave impressive
results despite the fact that some of major chains like Wilkinson expanded their
business in the Woolworth areas.
Woolworth reviewed its entire business in the year 2002. It reconsidered its
further expansion and realignment and merger of its overall management
structure. It strengthened infrastructure and planned accurate management of
its stocks so as to maintain them at their optimum levels. It introduced new till
system in order to ensure its stock holding capacity besides provision of
improved and efficient services to the customers. The management decided to cut
the number of suppliers and enhance the use of their own branded products.
These improvements contributed a little in the sales as well as profits. One of
main money spinners of the company was its music business that collapsed. The
financial results for the year 2004 showed just 4.5% increase in the profits of the
company. It had to compete strongly with Argos in the sales of toys and gifts. In
the year 2006, the company introduced an in-store collection service for items
ordered through website. Company continued its business mainly in
entertainment and electronics till the year 2008. It expanded its chains and set
up out of town stores that were known as ‘Big W’. It announced considerable loss
in its half yearly statement of affairs as on 2nd August, 2008.

3. The management therefore decide to sell out about 120 stores, cut jobs and
reduce web operations. At this stage reportedly the company rejected an offer to
buy its 815 stores. From September onwards the entire World entered into worst
ever economic and financial crises that resulted in decrease in availability of
necessary credit from the banks and financial institutions besides decrease in
consumer spending. The lending banks of the company not only refused to give
further credits, they also demanded repayment of their existing loans towards
the company. As a result of this crisis the retail business badly suffered. Media
also reported possible price crashes, increased personal debts, unemployment,
pension shortfalls, stock market crashes and decrease in availability of
disposable income.
Under these circumstances as well as in wake of market saturations, coupled
with economic downturn, it was highly difficult for the Woolworth to maintain
competitive pricing. Woolworth’s financial results for the first half of the year
2008 showed 99.7 million pounds pretax loss. Decreased credit availability,
decreased public spending and pressure of creditors to pay off debts of about 385
million pounds, and forced the company to sell out its 120 shops that were going
in loss besides reducing the web operations, cutting the products and axing the
employees. These measures could not help the company to survive and
ultimately it suspended trading of its shares on the 26th 0f November, 2009 and
at last decided to close down its all 819 stores and axe its 27000 highly dedicated
employees. The parent company of Woolworth also announced its intention to go
into administration on the 19th of January, 2009.
Question:
(4 × 5 = 20)
1. Why Woolworths Failed as a Business?
2. What is the main focus or purpose of Woolworths?
3. What challenges are Woolworths facing now a day?
4. What are the advantages of Global Expansion in Retailing?
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ARAVIND – 09901366442 – 09902787224