I've been learning more about just how one of the largest and best-known retail companies in the UK was killed off. I'd like to share some of what I've found out--I suspect that many of these conditions are common to retail businesses these days, and they go a long way to explaining why so many firms in the UK are going under. Just this week, the second-largest children's clothing chain, Adams, went into administration, following many more.
Part of the problem was competition from slave and near-slave labour. Woolies' closest competitors were Wilkinson's, a general-merchandise chain that makes use of prison labour for its cheap own-brand products, and the "pound shops," which sell mostly Chinese-made merchandise so cheap that there's no way the people who made it can have been properly paid.
Another issue is that Woolworths had been bought out by Kingfisher PLC, which owns the B&Q chain of big box, edge of town home improvement superstores. It bought Woolies not as an addition to its portfolio, but as a real estate package. It leased the stores back to Woolworth's at usurious rates.
Woolworths contracted out many of its core business functions. Its cafes were run by Compass (Eurest), a huge international catering company. Is this really cheaper than preparing food on site, when everything is taken into account?
It purchased assets overvalued by private equity firms--most prominently its distribution company, Entertainment UK, which ultimately brought it down and is taking down other companies as well as we speak.
It also invited in predatory investors, like Iceland's Baugur.
The race to the bottom, outsourcing, and its predatory capital connections are ultimately what destroyed a previously successful business--what other retail, food and product companies are on the same path to destruction?