Seige and Fightback Among UK Shopkeepers

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Just shy of its 100th birthday, two main divisions of Woolworths are to go into administration, potentially putting 30,000 people out of work. With debts of £385m, the retailer will shut the doors on over 800 outlets, as well as its Entertainment UK division, a DVD and books wholesaler.

Woolies has had longstanding problems -- analysts reckon the rot began with its demerger from Kingfisher in 2001, when Woolworths somehow got saddled with an inflexible and expensive leasing deal and a poor succession plan. In the intervening years, it went from a £350m business to one that closed at £18m. How could a board comprised of experienced retailers from Asda, Littlewoods Shop Direct and a 50-year veteran of Woolworths itself get it so wrong?

It's been a similar story over at furniture chain MFI -- that is, the writing's been on the wall for a while, with chief executive Gary Favell's buy-out only buying the 44-year-old business a couple of months before its demise.

If the administrators decide to make a cash-grab by offloading stock, the immediate effect on other retailers -- already fighting tooth and nail for Christmas business -- could be detrimental, according to Dresdner Kleinwort retail analyst Sanjay Vidyarthi.

Leading Woolworths shareholder Ardeshir Naghshineh, founder of Norfolk-based Targetfollow, which owns London's Centrepoint, expressed anger at the government's failure to intervene.

Earlier in the day, it looked as if Peter Mandelson, the business secretary, might step in on the government's behalf. But how could a bail-out be justified? The UK can hardly afford to prop up failing stores -- even those as venerable as Woolworths.

The fightback

Call it desperation, if you like -- I prefer creativity. Here's a short list of how the nation's shopkeepers are fighting the downturn.
  • Seam-work: Arcadia and M&S's bosses, Sir Philip Green and Sir Stuart Rose, have put aside their differences to show solidarity, according to Retail Week. They are joining Next, New Look and Mosaic Fashions in implementing Chancellor Darling's VAT reduction, due to take effect on Monday, with 2.13 per cent coming off prices. It's believed they will save the cost of re-ticketing individual items by taking the discount off at the till.
  • VAT's off: Tesco's implementing the VAT cut early on its non-food products, so customers can take advantage of it from Friday. DSG International -- which owns PC World, Curry's and Dixons.co.uk -- has already passed on the savings.
  • Wheel deal: Colchester car-broker Broadspeed.com, perhaps seeing the writing on the wall, offloaded its stock of Dodge Avenger SXT 2.4i, in possibly the first BOGOF (buy one, get one free) ever to be undertaken by a UK car dealer. Initially offered at half price, the two-fer offer was all that was needed to draw 22,000 customers to the site, which temporarily crashed as a result of demand. Managing director Simon Empson is so impressed he plans to do more offers in future.
  • Banana breakfast: London's West End stores are fighting the Westfield effect by opening early and offering free gifts and breakfast. On Friday, West End outlets of Topshop, Brooks Brothers, Wallis, Boots, Jaeger and Mamas & Papas will offer discounts in an Early Bird event, while other retailers are offering other early morning incentives to spend. Grab breakfast at Banana Republic, pop over to Liberty for a glass of champagne and a free cosmetics gift, then pick up a sobering free coffee at M&S from 7am to 9.30am.
  • Big Mac attack: "With all the doom and gloom, we wanted to bring a little Christmas cheer," said Bragster.com founder Bertrand Bodson, explaining his £10,000 giveaway. Bodson projected a massive display of his credit card, with all details visible, onto the side of the Bank of England on Kensington High Street in London. It also provided his address and telephone number and a £10,000 float -- with a single shopper blowing £7,200 the Apple Store.
(Photo: TheTruthAbout, CC2.0)