Woolworths has delivered in spades to shareholders in the last 20 years, but the rot had set in a decade ago. The seeds of the rot were assisted in my view by a lack of credible competition, and management losing touch with the subtle changes happening in consumer attitudes and behaviour that added together began making a noticeable performance difference 5 or 6 of years ago.
Can it be reversed, we will know in another 3-5 years.
New CEO Brad Banducci appears to be making sweeping changes at Woolies, ditching his fancy CEO office for a workstation sends a string messages, stronger yet is the message to his troops that it is not just desired that they get into the stores, it is mandatory.
Getting the executive decision makers close to the retail action……..what a novel idea!
Former Executive chairman Paul Simons who pulled Woolies out of the gutter in the late 80’s after returning from a gig as MD of trail-blazer discounter Franklins, was famous for turning up unannounced in stores, checking the minor details of the way the store was operating and presented to consumers, talking to floor staff, and espousing frugality as a great virtue. He must have been dismayed at the way Woolies followed Coles into an extravagant head office, seeing it as a sign of executives isolating themselves from the interaction with customers in stores, where retail success is won or lost.
In the 80’s the Morrisons chain, then concentrated in the North of England before they expanded south, was a leader in produce merchandise. Their stores were the best I had seen to that point anywhere in the world. In a store one day near Leeds during a visit to the UK, complementing the manager on the display during a conversation where I was sucking his brains, he pointed to an elderly gent in a brown cargdigan carefully stacking apples on a shelf, ‘that is the reason’ he said, “Mr Morrison turns up in a different store every day, so everyone is on their best game‘. I introduced myself, complementing him on his stores, I recall he said ‘did not matter what happened elsewhere, it was the little things in the stores that made the difference’.
I never forgot that conversation, it reminded me at the time of the words of Paul Simons, and of Reg Clairs the real architect of “Fresh Food people” who I came to know very well after he retired from Woolworths.
It seems Brad Banducci heard it also.
You would think Woolies would have learnt from their experiences, plenty of opportunity to so.
They took over Dick Smith, and stuffed it up by ‘corporatising’ and in the process removing the things that made it successful. They watched the challenges and mistakes of BBC hardware in the early days of big box hardware, as Bunnings set the pace, then a decade later deciding to take on Bunnings with an inferior customer offer from a position of significant financial, branding and logistical weakness. Meanwhile, they had made a great start with Thomas Dux modelling Harris Farm, but again throwing out the things that delivered the early success in favour of more of the same from Woolies head office, arriving at the current place where Dux is being closed down.
Mass market retailing is a schizophrenic occupation.
On one hand, it is the advantages of scale that that deliver profitability, but at the retail selling face it remains a highly personal business. Get the balance wrong in either direction, and the financial results will follow. Allowing the financials to drive decision making inevitably results on the focus being taken off the customers, and they will react accordingly.
