Hands up those who were surprised to hear Woolworths and MFI were in trouble. The only real surprise is that they couldn’t hold out even until Christmas.
For those who lose their jobs, the collapse of the two retailers is tragic. And yet, cast your gaze into a half-full crystal ball, and ultimately it will be good news.
What does Woolworths specialize in, does anyone know? As for MFI… ahhhhh.
Sorry about that; the desk being leaned on to write this article collapsed just then.
It means, of course, a whole lot of cheap stock – the rush is on to sell it all as quickly as possible.
Someone may step in and buy the companies, but it is not obvious why they should. Potential suitors looking at Woolworths over the last year or so were put off by its massive debts – but at least they no longer have to worry about that. Even so, no real winning unique selling points relating to these stores leap out.
Though for the retailers who operate in similar fields, this is opportunity. Okay, the two cakes that represent the markets they operate in have been steadily contracting this year, but at least there are fewer slices to come out of it now.
So that means retailers that specialize in the area where Woolworths operates, that’s… ahhhh, well, Easter eggs, and… ahhh, well, there are probably other products, too, will benefit. In the case of Woolworths, the real opportunity these days relates to the likes of Tesco and Asda, in their non-food sections.
As for MFI, presumably all those other troubled furniture retailers will benefit – providing they can hold their breath long enough, that is.
Then again, as the housing market contracts so, too, does demand for furniture.
But ultimately, however, free space will emerge: in the case of Woolworths, on the High Street; in the case of MFI, in out of town shopping areas. Presumably this will lead to lower rents and, ultimately, other retailers will see an opportunity to move in where they left. One assumes these retailers will have a more robust business model, that they will have found a winning formula.
This is what happens in a downturn. The companies with bold new ideas, and plans that are right for the time, thrive. The boom can gather momentum, because it builds upon these successes.
It has been argued here before that the High Street’s real opportunity is in targeting overseas shoppers. It won’t happen immediately, of course. But as the global economy recovers, the UK will find the low value of the pound will afford real opportunity. All that wonderful retail infrastructure can then provide the foundation for a new export market. If Napoleon was right, that the UK is a country of shopkeepers, then maybe this expertise could become a source of overseas money.
It is hard to imagine anyone travelling far to shop at either Woolworths or MFI, however.
But that is the future. Regardless of whether the High Street sells itself abroad, it is clear that the collapse of these retailers will free up space for companies with winning strategies.
It is interesting to note that there has been no talk about government subsidies – no calls for the government to rush in and save jobs. The reason is clear enough, it would have made no sense. Everyone can see why this would be ludicrous.
And next year, when other retailers will surely fail, it seems likely the call for subsidies will remain muted.
Why is it, then, that when the businesses are much larger, GM in the US, for example, all politicians can think about is how the government can bail them out?
© Investment & Business News 2013