Easter is Woolworths' second busiest trading period, and the retailer is pinning its hopes on its extensive egg offering luring shoppers into its stores. The slowdown in consumer spending and competition in the retail sector is hitting the high-street stalwart hard: its sales fell by 4.1% to 拢2.63bn last year.
The company has warned that its profits are unlikely to increase for at least two years as it struggles to fight its corner against cheaper out-of-town supermarkets and online merchants.
With a long history of trying to offer something for everyone, in its current format the retailer will never be the cheapest, as it lacks the buying power of its supermarket rivals, nor will it attract specialist customers, because its wide product range lacks depth.
U-turns in its advertising strategy have not helped. In 2003, Woolworths ended a 17-year relationship with Bates UK and moved its ad account into Bartle Bogle Hegarty. The move came after Woolworths chairman Gerald Corbett criticised the Christmas 2001 campaign for failing to drive sales by focusing too much on stars - but now it has returned to celebrity endorsements for this year's Easter campaign, which featured X-Factor winner Shayne Ward.
Since BBH took over its advertising, Woolworths has been through three straplines. 'Let's have some fun' replaced the long-running 'Well worth it' line in 2003 to focus on celebrations, then two years later, the retailer reverted to a value focus with 'Prices worth celebrating'. Within a year, it again changed tack with this month's introduction of 'More great news from Woolworths'.
Such strategic shifts suggest that Woolworths' management is keen but confused about how to progress.
The retailer hopes to boost revenue through additional sales streams, developing an 'order at home and collect in-store' service and planning to revamp 14 of its 800 stores by the end of the year to offer internet ordering points. But this may not be enough to dampen speculation that Woolworths is ripe for takeover. Icelandic group Baugur recently added fuel to these rumours when it boosted its stake in the retailer.
We asked Chris Herd, executive director of Branded and former managing director of Bates UK, and Mark Brandis, managing director of specialist retail ad agency RPM3, what Woolworths needs to do in order to boost its fortunes.
DIAGNOSIS 1 - CHRIS HERD EXECUTIVE DIRECTOR, BRANDED
What exactly is the wonder of Woolies? To find out, let's play a little game. First, write down, in three words or fewer, who Woolworths is for. Now (in up to three words) write what it sells. Struggling?
In any queue in any branch of Woolies it would be possible to find a young kid buying sweets and toys, a teenager buying DVDs or video games, mum buying some candles for the lounge, grandad buying a DIY product - even dad on his lunch-break grabbing a quick 'designer' sandwich. And while that might make for great people-watching, it doesn't add up to great focus.
Without a clear focus, Woolworths is left with just price and convenience to differentiate itself. But given the dual threat of the supermarkets and the internet, that is just about the most stressful and competitive market to be in right now.
Great brands are often defined as much by what they don't do as by what they do. Yet, somehow, Woolworths stumbles on year after year selling just about anything to just about anyone. That, surely, is the real wonder of Woolies.
REMEDY
- Focus. Encapsulate who Woolworths is for and what it sells - and by the way, kids and Celebrations isn't it.
- Bring back some of the emotional magic - but in doing so, remember that Woolies is for life and not just for Christmas.
- Keep using every single one of the Bish-Jones (high) street-fighting techniques - they're what's keeping Woolworths afloat.
- Don't shoot the messenger - it's not Bartle Bogle Hegarty's fault.
DIAGNOSIS 2 - MARK BRANDIS MANAGING DIRECTOR, RPM3
'Mature, generalist high-street brand with residual warm feeling, outrun by more focused rivals, seeks strategy to survive 21st-century retailing.' A familiar problem, and when you realise that the profit per store is similar to that of a well-run newsagent with a fraction of the floor space, it is clear why Baugur is circling.
Woolies is Pick'n'Mix and Ladybird, with the same ambience it had when I was little. It is the place where kids spend their pocket money and mum buys cheap Chad Valley. On the other hand, it is also a frenetic Aladdin's Cave of everything, but not enough of anything. Whatever the view, Woolworths has the look of a brand that isn't clear about what it stands for.
It is possible it dropped the 'Prices worth celebrating' strapline because it turned out they weren't. As a positioning, price is the easiest to counter, and to see through. The critical issue is that there is little it can sell that you can't buy at Asda or Tesco. It needs a stronger 'reason to choose' to protect itself against the supermarket onslaught, which in Woolies' case is as as big a threat as the internet.
REMEDY
- Create authority around a more specialist offering.
- Create stronger in-store delineation between departments, each with a clearly defined atmosphere.
- Replace the Ladybird children's brand with a more contemporary offering that will appeal to kids as much as parents.
- Work out what Woolworths stands for in a way that the staff, as well as customers, can buy in to.