Woolworth’s potential rebirth as an online-only operation reminds us of the fact that Dixons did the same thing about two years ago and the results of that move suggest Woolies is at last on the right track.
The DSG group, which owns Currys and PC World among others, turned Dixons into a pure etailer about two years ago (we interviewed them at Revolution at the time) and the scale of the gamble was arresting. The chief point analysts made then was that stores needed bricks and clicks to thrive. Dixons’ results suggest otherwise.
For DSG said last month that Dixons.co.uk was the only one of its brands to see an increase in sales in 2008. Its ‘clicks and mortar’ operations have suffered very badly in the downturn. PC World – which has a large online presence, as well as its stores – saw a 13% like-for-like drop in sales. Currys and Currys.digital (which is what the Dixons stores DSG kept hold of were rebranded as) saw a 12% drop. Dixons.co.uk, meanwhile, saw a 7% increase.
So, DSG’s problem appears to have been, not that it turned Dixons into an online-only operation, but that it didn’t do the same with its other brands.
Image Credit: Mrs Logic
Does this point to the end of the retail outlet? Well, pretty much. Retailers, like newspapers, are among those whose models have been most disrupted by the web. When we actually get to the end of any particular journey on the web, the destination is more often than not to read something or buy something. The cost implications of distribution via the web in retail (and publishing) are also mighty powerful, meaning that ‘traditional’ retailers are losing out on both sales and profitability compared with online-only rivals.
All is not lost for every retailer – just most of them. I personally think the mass market will move to online buying in most every sector, save things like fresh produce and ‘tourism’ shops – everything from tea and cakes to Hamleys – should survive, while others might find a slot as browsing houses – where we go to see, weigh up and ‘test drive’ things we might want to buy. But they’ll have to deliver a great experience with their products.
So well done to the Shop Direct Group – turning Woolies online-only is the only sensible path to choose. But, one other vital tip to succeed. Dixons, several months before it made its move, had bought and started to integrate French-based online photo service Pixmania. Pixmania had search and affiliates expertise built in to its operations that was transferred to Dixons as it moved online. For Woolies – or any online retailer to succeed – it needs the same disciplines to be at the heart of any decisions it makes.
And, I’m not very clear on how the pick ‘n mix might work.
Matt on 
February 3rd, 2009 at 6:13 pm
Nice post Phil. “All is not lost for the retailer – just most of them” On this point I think High Street retailers are and are going to be even more so kicked into shape into providing people with great expereinces once again.
At the moment such experiences on the high street are few and far between, perhaps a good leader and those that are in a better position to survive are the indpenedents who don’t try to compete on price but provide higher value in useful knowledge and trusted relationships resulting in better loyalty.
February 25th, 2009 at 3:33 pm
Hi Phil – interesting post, but I think you’re drawing a false parallel between the “online-ness” of two brands where the fundamentals are very different.
Dixons did and does buy things. It has a stock buying policy, some own-brands, warehouses and an offering to customers.
Woolworths will have none of this: no stock, no distinctive buying approach, no recognisable product offering. In short, the brand is unlikely to be anything other than a wrapper on the standard Littlewoods catalogue offerings, maybe with different terms/price-points to target specific customer demographics.
The mail order industry has a strong track record of this, and Littlewoods are past masters at wrapping the same big book into different covers.
My prediction is that without a distinctive offering the brand will lose any resonance and relevance.
That said, the real jewel is the Ladybird brand. I can see a major extension of this brand into children’s wear, and the Littlewoods buying and sourcing clout could make this an interesting addition to the childrenswear market – maybe even extending Littlewoods’ reach as a concession into other retailers’ stores. In fact, Woolworths were remiss in not exploiting this over the years.
IMHO Littlewoods were interested in the Ladybird brand, and got the Woolies brand thrown in free of charge.
So, while Littlewoods will I hope make a great success of Ladybird, Woolies is doomed to insignficance and then irrelevance.
February 25th, 2009 at 6:12 pm
Hi Ian,