Chain store massacre: Tim Walker bids a bittersweet farewell to Woolworths

On a lonely shelf at the back of an understocked store in a south-east London shopping centre, a big, blonde, half-price teddy bear sits staring glumly at his paws. "Is this what it's come to?," he seems to be asking himself. Just shy of its centenary year, in the last month before Christmas – when business ought to be booming –Woolworths, the poor bear's employer, is going out of business altogether.

Let's pause to consider the colossal significance of that. Despite its American roots, Woolworths managed, from the moment it arrived on our shores, to assume a quintessentially British identity. Unlike McDonald's incongruous golden arches or GAP's preppy khakis, "Woolies" seemed to be the perfect fit for the British high street. Its enduring contribution to our national consumer culture could be the pick'n'mix counter, which still dominates the front of every branch. To stand on the store's peeling linoleum beneath strip lighting and scoop jelly babies into a paper bag is to enjoy an experience familiar to every generation since 1945. The chain survived the austerity of the post-war years, the Winter of Discontent, the boom and bust of the Eighties and Nineties.

But the global financial crisis has finally brought the faltering retail giant to its knees. Last week, Woolworths put its 800-plus UK stores up for sale, in the hope of saving its other business interests from ruin. Close to £400m in debt, its share price down to 1p and locked in talks with dissenting shareholders, banks and potential benefactors, Woolies yesterday acknowledged that it was going into administration, and would soon have to tell its 25,000 employees whether they'll still be in work by the new year.

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The news will have come as a particular shock to millions of baby-boomer Brits, for whom Woolworths was a childhood paradise of sweets, Chad Valley toys and seven-inch singles. In 1965, for instance, as part of a modernisation programme for its inner-city stores, Woolworths became one of the first high-street chains to stock "Top 20" singles and chart albums. The year's annual report cheerily stated that the Leicester branch's "gay 'Record Corner' [was] fully-equipped to meet the demands of the most 'with-it' teenager."

According to the company's own figures, earlier this year the chain still attracted four million shoppers per week – and, despite its lack of profits, boasted annual sales of £1.7bn. The cherished Ladybird range of children's clothing was still ranked third overall in its market. Yet shopping in Woolworths of late has left a sickly taste in the mouth – and not just from the fizzy cola bottles. Instead of the sort of focused product range you might find in any of its high-street neighbours, Woolies stocks an unruly jumble of sweets, toys, clothes, entertainment and household goods. At this time of year, a good portion of the store is given over to seasonal tat, like three-for-two tins of Quality Street, Santa-socks ("Jingle my bell!") and furry reindeer antlers (see cover).

The Woolworths branch in Lewisham, south-east London, is typical. I find the place quiet but for a few pram-pushing young mothers and conscientious grandparents on an early hunt for children's gifts. The tired retro neon sign announces the store's presence. The layout is disorganised. Products lie strewn across the shelves, empty boxes stacked haphazardly. The CD chart is not so much Top 20 as "The five we have left", while the rack of Disney DVDs is near-empty. There's just one copy of Mary Poppins in stock – less than a month from Christmas.

A dwindling band of red-sweatered staff man the cash registers, while security men circle to prevent us taking photographs as I work my way through the uninspiring product selection. On the only working television set in the store, an advertising loop proclaims the merits of "Toaster Pockets" (cook anything from cheese sandwiches to salmon fillets – in your toaster!) and "Keep Fresh" freezer bags (cheap and eco-friendly!). The syrupy voiceover drifts across the store, mingling with background reggae.

Shoppers here aren't necessarily loyal to the store, but have an affection for the brand. Sally Barnard, a local office worker, says she rarely visits Woolworths; "I just came in to buy cheap Christmas decorations for work! But it's been around so long that I'd be sad to see it go. I used to come and buy pick'n'mix here as a kid." Marcia Facey and her sister Julie have been Christmas shopping for their children, and found themselves emerging with bargain household items, too. "It'd be sad to see it go," says Marcia. "It's always been a great one-stop shop."

But being a low-rent, high street Harrods is hardly enough in the modern shopping mall. In a market where even budget brands such as Primark have fashionistas queuing up to get their hands on cheap "Primani" fashions, where Marks & Spencer has its own "Per Una" quality Italian range, and where Argos and the internet offer a more easily negotiable discount shopping experience, Woolworths offers neither the illusion of glamour, nor the most attractive budget range of products. The most glamorous item in the store is a "Glamour Barbie" toy set. And it ain't cheap enough.

Next year will mark the somewhat melancholy centenary of the first British Woolworths opening in Liverpool. Yet the story of Woolworths began well over a century ago in Lancaster, Pennsylvania, where, in June 1879, Frank Winfield Woolworth opened his first successful five-and-dime store. Its great innovation was not only to sell general merchandise at a discount, but to allow shoppers to choose products for themselves, rather than handing their shopping list to a clerk behind a counter.

Woolworth, mindful of his Cambridgeshire ancestry, exported the brand to Great Britain personally in 1909, writing in his diary during a visit that "a good penny and sixpence store, run by a live Yankee, would be a sensation [in Britain]." During the ensuing decades, as Woolworths popped up on high streets and main streets on either side of the Atlantic, the chain found itself accused of driving local, independent stores out of business with its aggressive sales model; ironically, the same powerful consumer forces later saw Woolworths struggling against Walmart and Tesco.

During the 20th century, the Woolworth brand was a strand of the American cultural fabric. The Woolworth Building in New York was the tallest building in the world between 1913 and the construction of the Chrysler Building in 1930; a section of the lunch counter from a Woolworths branch in Greensboro, North Carolina, still resides in the Smithsonian Museum in Washington, DC, testament to the civil rights sit-in that took place there in 1960. In 1979, on the company's 100th anniversary, it was named the largest department store chain in the world by the Guinness Book of Records.

None of this could save Woolworths from a steady decline in popularity, and in 1997 the remaining US branches were closed in favour of speciality stores. By 2001, the company's name was changed to match that of its biggest selling retailer, Foot Locker – the same Foot Locker that now competes with its next-door neighbour, a British Woolworths, in Lewisham's shopping centre.

The British branch of Woolworths split from its American parent company in 1982 and has since experimented – unsuccessfully – with out-of-town shopping. In 2004, some of the chain's out-of-town superstore sites were sold off to sassier competitors such as Asda and Tesco. Business experts suggest that Woolies' woes might have been mitigated had it not been for its decision, some years ago, to sell off much of its property portfolio. While most major supermarkets own the majority of their freehold sites, Woolworths pays rents costing around 10 per cent of the company's sales.

But in the end, it's not necessarily poor business decisions that are responsible for Woolworths' demise. The store might be beloved by generations of consumers, yet most of them haven't shopped there for years, and would be shocked by its decline if they returned. Who wants a one-stop shop when there are so many well-stocked niche retailers? Who wants cheap clothes that look cheap, when you can buy cheap clothes that don't? Seriously, does any "with-it" teenager really give a monkey's what's in the Top 20 any more?

Sandwiched between TK Maxx and Foot Locker, the Lewisham Woolworths' profit margins face attacks on every flank from its specialist rivals. There's a greater range of clothes in TK Maxx, more sophisticated sweets across the courtyard in Sainsbury's, budget household goods in Poundstretcher, stationery in Clinton Cards and WH Smith, videogames in Game. Where once the variety of its product range was a strength, it is now Woolworths' curse. The store is stuck as an afterthought at the bottom of the shopping centre map key, under the redundant qualifier: "General".

Woolworths A history on the high street

1879 At the age of 27, Frank Winfield Woolworth, a former sales assistant, borrows $300 to open a "five cent" store in New York. The venture fails, but a second, "five-and-ten-cent store" in Lancaster, Pennsylvania is a hit.

1909 FW Woolworth opens its first British branch in Liverpool. Nothing is priced over sixpence and sweets sell out on day one.

1913 The Woolworth Building is completed in New York City, becoming the tallest building in the world.

1916 Winfield Hall, Frank Woolworth's Long Island mansion, is finished. It features a $2m pink marble staircase.

1919 FW Woolworth dies, aged 67, leaving behind more than 1,000 stores and a $65m corporation.

1925 A boom in Britain sees a new store opening every 17 days.

1929 Worldwide, the chain sells a million mousetraps, 90 million lunches and 33,000 miles of garter elastic.

1931 Woolworths floats its British arm on London's Stock Exchange.

1932 The store places an order with the Ladybird brand of children's clothes for "eight thousand dozen units of Directoire Knickers". (Woolworths buys the right to the Ladybird name in 1984.)

1939 Inflation during the Second World War forces the chain to drop its "Nix over Six" (nothing over sixpence) price pledge.

1944 In one of the worst bombings of the war, 168 people are killed when a German V2 rocket destroys the New Cross branch in south-east London

1953 The coronation range of gold foil crowns, flags, bunting and mugs makes Woolworths No 1 for budget memorabilia

1954 Embassy Records, Woolworths' label, releases its first cut-price compilation of British pop hits. The chain remains the UK's leading music retailer into the Nineties.

1955 The first self-service store (with aisles and tills) opens in Cobham, Surrey, heralding the age of the DIY pick 'n'mix.

1963 The Winfield premium brand is launched, but includes drain cleaner and ant killer alongside bras and perfume. It never takes off and disappears in the mid Eighties.

1970 During the Seventies, 15 UK stores are closed each year, in part to finance the 1980 purchase of the B&Q chain of home improvement stores.

1982 Paternoster Stores, later the Kingfisher Group, buys British Woolworths, cutting links with America.

1997 Woolworth America closes its last 700 stores and concentrates on its sports shoe arm, Foot Locker.

2001 After parting company with Kingfisher, Woolworths Group is floated on the London Stock Exchange. Shares are priced at 32p.

2005 Shares peak at 55p before falling to 15p by January 2008.

2008 In November, Woolworths goes into administration, putting 30,000 jobs in 815 stores under threat.

SIMON USBORNE

So, what was the last thing you bought from Woolies?

A C Grayling, philosopher: "I haven't been to Woolies for donkey's years – the last time might have been for a very cheap classical-music CD of some kind. I'd be quite sad to see it finally go. It's a high-street icon."

Piers Morgan, journalist: "I go in there most weeks with my children, so the last thing I bought would have been an unbelievably cheesy record for £2.99, probably an Al Green CD."

Andrew Marr, BBC broadcaster: "I do use Woolworths quite a lot, funnily enough. We've got one nearby and there's always a whole lot of funny little household things that nobody else seems to stock, certain kinds of odd light bulbs and picture hooks, and that sort of stuff. It's also excellent for cheap chocolate, things like, say, an Advent calendar, but not a posh one, one with chocolates in it, a proper Cadbury Advent calendar. Probably the last thing I bought there was a DVD – 'Atonement', I think it was. If you want to buy the latest DVDs at a reasonable price, it's always a good place to go. Woolworths is a fine institution."

Richard Dawkins, evolutionary biologist: "I don't recall ever having bought anything there – that's not to say I haven't, though..."

Hunter Davies, author and Beatles biographer: "I was in Woolies recently, and I was looking to buy a rather posh photo album for my dear wife for her Christmas present – but they hadn't got one, so I was very upset. The last time I bought something in there was probably a year ago, when I bought three tiny clip frames, probably at "three for £2". However, my favourite shop, Wilkinson's, has knocked Woolies for six, because it's so brilliant and cheerful, has a wider range, and isn't full of horrible sickly sweets. In Woolies, it was all sweets and DVDs of TV shows I've never heard of."

Jo Brand, comedian: "Pick'n'mix"

Robert Peston, BBC business editor: "The last thing I bought was probably a doormat. I love Woolworths actually, we've got one in Muswell Hill and I think it's absolutely fantastic. It's the last real shop in the area. Muswell Hill is filled with estate agents and coffee shops, but there's nowhere you can buy light bulbs or kids pyjamas or anything, so Woolworths is a godsend."

Amanda Craig, novelist: "It was probably sweets for Hallowe'en. I'll definitely miss Woolworths. It's absolutely brilliant if you've got young children, especially the sweets counter, and I get various bits of lighting and household stuff there. I think its demise is a real shame."

Sir Peter Blake, artist: "A Snow White doll on a white steed, from a branch in Chiswick, for a sculpture I'm doing. I used Woolworths a lot as a kid just after the war – you could buy hot nuts there, hot peanuts, and if you were rich you could buy cashew nuts, and you could buy a hot blackcurrant drink, too."

Nicky Haslam, interior decorator and socialite: "Spiral-bound notebooks, in red – they're wonderful"

Tyler Brûlé, style commentator and editor-in-chief, Monocle magazine: "I've never shopped there"

A L Kennedy, author: "Light bulbs. I suppose I must have a marginal affection for the smell of elderly ladies. Woolworths was my grandfather's favourite shop"

Brian Sewell, art critic: "Half an ounce of inch-long nails, about 25 years ago, good for hanging small pictures. They used to have quite a useful handiwork department, but I've never found anything useful there since then."

Matthew d'Ancona, editor of 'The Spectator': "Incredibles DVD for my sons"

Julie Burchill, journalist: "Pick'n'mix. And I'd be devastated if it closed."