View From City Road: No quick fixes for Woolworths - Business - News - The Independent

View From City Road: No quick fixes for Woolworths

Alan Smith, chief executive of Kingfisher, may be right to blame the City for misinterpreting its everyday low pricing strategy - but the mistake was not quite as he sees it. Rather, the City's error was to believe that such a strategy, which is, after all, one of the basic tools of retailing, would be a cure for much more deep- seated underlying problems.

Woolworths clearly needed the shake-up that accompanied Mair Barnes's departure as managing director in February; a fifth of its stock needed to be marked down to clear. There are, however, no quick fixes for Woolies, which has yet to find its niche for the 1990s. Woolworths can claim market leadership in areas as diverse as confectionery and potato mashers. With so many other places you can buy such products, however, that hardly gives it market dominance. The only real Wonder of Woolies is that it still exists at all.

That perception is strengthened by the group's admission that, outside the key spring and Christmas periods, which account for most of its profits, it has had to rely on special promotions to bring in the customers. The effect is at best unpredictable and at worst a direct cause of the stock problems that so badly affected the first-half results.

Adding ranges like basic clothing, newspapers and video rental may help establish a more consistent sales pattern. But the key to successful retailing in the 1990s is to do it better and more efficiently than anyone else. On this score Woolworths' ill-defined approach has much to prove.

Most big retailers already possess sophisticated electronic systems that tell exactly who is buying what from Scunthorpe to Stirling, as well as the margin being achieved. Automatic re- ordering is commonplace. Woolworths, by contrast, is only just getting round to introducing scanning. Its high-volume, low-price formula should make it one of the prime beneficiaries of technology but it is plainly lagging badly. A new round of redundancies suggests its cost base is also still too high. Its aim of offering excellent service is commendable enough but it is what the customer has come to expect anyway.

At Comet, Kingfisher is trying to import Darty's successful formula of offering the best value and service to customers. Darty has been doing that for 20 years. In Britain, customers are still not persuaded that Comet offers better value than the free televisions and food mixers on offer from competitors down the road. Nor is it good enough to blame a 50 per cent expansion in the amount of out-of-town electrical retailing space for Comet's problems; Comet has been responsible for much of it.

Still, there is one area where everyday low pricing really does seem to have captured the public's imagination - Kingfisher's share price. Over the past year it has slumped from a high of 778p to just 487p. At that level the shares might just about represent value for money again. But then again perhaps not, judging by the quality of most of what is on offer at Woolies.

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