Patrick O’Brien, the Global Retail Research Director at GlobalData, recently shared his insights during the Business and Trade Committee’s inquiry into the demise of this iconic retailer.
While former owner Lisa Wilkinson cited Covid and the cost-of-living crisis, O’Brien delved deeper, attributing Wilko’s downfall way back to 2012.
During the parliamentary hearing, O’Brien remarked, “Wilko’s problems can be traced back to a decade of management inertia, refusing to make difficult changes to its strategy.”
Wilko, the once-thriving family-owned household and garden products retailer, found itself at the centre of the largest retail bankruptcy since Woolworths in 2008.
With 12,500 job losses, £625m in debt, and a £50m pension shortfall, the collapse of Wilko sent shockwaves through the industry.
Wilko’s tragic stagnation amidst dynamic retail competition
O’Brien was critical of Wilko’s failure to adapt to evolving consumer habits. He pointed out that the chain’s reluctance to embrace necessary changes may have stemmed from the burden of running a family business with a rich 93-year history.
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Despite facing fierce competition from value-driven rivals like B&M and Home Bargains, Wilko clung to its traditional high street and shopping centre focus, neglecting a more aggressive pricing strategy essential for survival.
In O’Brien’s assessment, “Wilko was obviously being outflanked by value competitors who were opening in retail parks at a rapid pace and gaining market share.”
He emphasised that while competitors diversified with food offers and a high turnover of products to entice repeat visits, “Wilko was a dependable but boring retailer. You knew what was in there, because it was the same as what was in there the last time you visited.”
The financial spiral: ranking plunge, operational struggles, and risky ventures
The data presented by O’Brien shed light on Wilko’s gradual decline in the retail landscape. “Ten years ago, it was the 7th largest seller of home-related products in the UK; by last year, it had dropped to 16th,” he shared.
Despite a decade of austerity where consumers shifted to value retailers, Wilko failed to achieve any like-for-like sales growth. and the highest operating margin Wilko managed was a meagre 1.7%.
O’Brien also expressed curiosity about how Wilko lost almost £40m in forex derivatives in 2018 and when the ill-fated £60m warehouse project commitment was made.
These financial missteps contributed significantly to the company’s dire situation, further unravelling its financial stability.
While O’Brien acknowledged the unfortunate circumstances, he also commended former owner, Lisa Wilkinson, who he said, “answered the questions put to her in a direct manner, and you can’t say that about most subjects of select committee meetings.”
However, he couldn’t overlook the inherent risks associated with inheriting crucial positions based on birth rather than aptitude.
As investigations by the Insolvency Service and others continue, the collapse of Wilko serves as a cautionary tale for retailers navigating the ever-changing landscape.