The Collapse and Lessons Learned

Hello and welcome to a new series of Toast, the show from BBC Radio four that celebrates amazing businesses, amazing brands that once offered a lot to customers but still ended up Toast I'm the BBC Business journalist Sean Farrington. Beside me is entrepreneur Sam White as ever. We keep Sam in the dark about what's coming up. Her conclusions at the end are based on what she's just heard. This time, we're examining a successful family business that expanded over decades to occupy a treasured place on over four hundred high streets and retail parks. So why couldn't it survive to celebrate its centenery Sam hello, welcome back to Tast. Good to see you. Good to see you too. Business busy. usual roller coaster that is the life of an entrepreneur. Now the business we're checking out today is one of those variety retailers, best known perhaps for its DIY, its pet care, gardening products, but you could find pretty much everything you might need for your home in a branch of Wilks M run a Wilkinson's on your local street Do you ever woer around a wheelcos? you know looking at which toilet cleaner should we go for? Toothpaste on off? I have frequented on occasion and probably bought some stuff that I didn't need. Yes. it all started way back In nineteen thirty when James Kemzy Wilkinson, who was known as JK, opened his first store in Leicester He was only twenty four years old By the end of that decade, he had six Wilkinson hardware shops and a small warehouse as well. And we are joined in the studio by Gordon Brown, who was Wilkinson's managing director in the nineteen nineties and actually remembers JK himself. Gordon, welcome to the To stududio. Thank you, Great to be here. And JK, what can you tell us about That man who started it in nineteen thirty Quite a character, I think is a pl way of putting it. He had a real passion for the business clearly a superb retail brain. which had developed over the fififty years that he was in charge of the business A master of the shop flloor really understood the shop floor, how product should be displayed How it should be priced, but he was a bit short tempered at times And managers and staff found that out. Any particular moments spring to mind Very much so. When I started, I spent a few days going around the stores in the Midlands with JK I remember picking up one particular I think it's a teapot with a lid, the separate lid titan that you said We shouldn't be selling this. And I said, why not There's no hole in the lid He said, If you put hot water on that and try and pour it, it'll splutter all over the place taken out of sale immediately. But he had that eye for detail, which was so important in retail So when you joined the business in nineteen ninety one, it was JK's son, Tony, who'd been chairman by that point for for almost twenty years. Yes Was he similar? Q quite different He had a really good understanding of people I think that's the key with Tony he visited all the stores every year talkalk to the staff in the shop floor, in the tea room, talkk to the manager and he could really gauge the people Tony was a gentleman, a real gentleman. So what was the role of JK around that time then? He was a president. He retired. Although he did attend all the board meetings and I attended the board meetings for the probably first four or five years that I was on the board. But I think what Tony did was also continue that best value concept that JK had. And I remember him writing to me Not long after I joined the company saying I want a maximum gross value and it gave me a value And what I don't want is profits to be more than typically around five percent return on sales And if you get to seven percent then we're taking too much money off our customers And so we had a bonus scheme that was targeted to that. And so we went for the five percent and we started drifting up, we dropped our prices so that we get more sales And we kept the five percent more sales, more profit Everyone was happy That's a lot of integrity That's one of the things I think about Wilkle. time, I think they're very in high level of honesty and a high level of integrity. I mean one of the things that we also did this was JK was he wanted the suppliers paid on time And that was absolutely critical because he went to that relationship with the suppliers. So Wilkinson had developed their own product ranges back in the seventies and that was where that Wilco name first appeared on their own brand. paints then gardening products as well. G around the time you became managing director fast forward into nineteen ninety two. I mean Wilkinson was opening ninety fifth store at this point What did the business sort of looked like back then. What did it feel like back then teeam members were the key. They were fantastic even then. They were well trained, great attitude particularly friendly towards customers and they worked really hard. So Janet Cochrane from Oldham started working for Wilkinson the year after you joined the business actually, Gordon. She stayed there for thirty one years. We can hear a little bit here about how she remembers it From the day I walked in it's right to the very end was amazing works every job in the shop every you know subsection around the store The train met the duty manager It was fantastic. I was one of these people. and my just started at ten o'clock I was on premises from half past State. at there having breakfast with Ey Badder. It felt like samw. We catered far Everybody, everybody wanted that bargain, that will car bargain and that's what we were good at doing. Eestthing was cheaper hours than anywhere else That feeling of family, you're nodding a little bit there, good and listening to that. Absolutely. There's a real family culture even members of the same family in the store as well. And I think the key was that the people were able to move up through the company. a lot of the senior management had started as Saturday jobs trained and developed and even board members ended up in that situation as well. When we talk about the reasons people were going to Will C, what was the best selling product during your time there. In terms of volume It was dog chews. I't not S H O E, but C H E W. chews, littleittle penny chews. Penny of time, we sold them individually and we sold about ten million of those a year. The other thing we'd sell would be a roll of it black bin bags. And we sold about five million of those a year You used to put those in a basket at the front of the shop At ten o'clock in the morning, almost all soon and you had to fill out another box, another box. Why were thirty nine pence. That's why And eventually we actually got A roll of ten for the same price for thirty nine p and this sold just as quickly and that was in the mid bleak nineties that was happening. Now, regular listeners to toast those that subscribe on BBC Sounds will know we've already spoken about what happened to both CNA's, UK stores, Woolworth's UK stores as well Gordon, what did the closures of those businesses mean for Wilkinson I think if you take CNA first of all CNA was a real boost to Oko It wass just in nearly two thousands And we'd were able to acquire a batch of stores in the south and west from CNA that gives a real impetus in that area The other thing that helped us at that time was the move by the grocers Grocers were moving out of town to the edge of town. they were shutting down the smaller stores, people Ada Sainsbury's Tesco. They wanted the edge of town stores, big superstore type arrangements those stores W this was a different situation and there deemmise came after my retirement But I know that Wilkinson did not take that many stores on compared to the other retailers like Pound land, ninetiney nine P stores, home bargains, etcetera And byy two thousand five, we've got to the point where Tony Wilkinson retired And we can have a look back at his chairman's report. It's quite interesting reading. He offered his opinions on why the business was so successful. So this is two thousand five. this is what he said. Fair dealing has been the key. Our customers have been able to trust us to deliver merchandise of the right quality at key prices in a welcoming environment Our suppliers have expected prompt payment and courtesy. Our team members have deserved respect and encouragement to do their jobs to the best possible standard. We have recognised that we trade in local communities and we would hope that we' remain sympathetic as a good corporate citizen Gordon. in many ways, that sums up a lot of what you've been talking about. But do you think customers Wilkinson to heart in the way staff necessarily did. I think they did. Yeahah, very much so I think they saw it as the peopleople store It wasn't pretentious It was very much a sort of grritty type place, you know, but just great value I just loved that,, particularly the market segment that we were aiming at. And I think the friendly staff made a difference. After Tony left his daughter, Lisa Wilkinson and her cousin, Karen Swan took over as family directors and joint chair as well. Now Gordon, you left your post as managing director a couple of years later in two thousand seven. to start a consultancy career When you started in the nineteen nineties, Wilkinson had three thousand employees By the time you left There were well over twenty two thousand I just wonder how the business was actually performing at that point after that growth old during that period, it grew profitably. had little wobbles, but the general trend was always upwards and By the time I retired, we were looking at one point five billion do in retail sales and an operational profit internally of about forty nine million Did you own the properties that the stores were in or did you lease them We had a proportion that we owned Jakeie He reckoned we should own about ten percent of the property So we always that to fall back on Yeah a very conservative found business, the distribution centers we owned We owned the land and we owned the buildings as well The business continued to grow. The number of employees got above twenty five thousand at one point. I mean, so I'm just putting that into perspective. this is a very major employer on our high street. That would be very important for so many towns around the country, wouldn't it Oh huge. I can't even imagine the economic value of that, but obviously people working in communities and then you also get the spill on effect that the staff they're buying r the area as well. So it isn't just the employees that that business has, it's the knock on effect for the communities as a whole, I think that people don't realise. By twenty ten, the business reported what was a record operating profit of over sixty two million pounds. So Wilkinson had three hundred and thirty seven stores at this point, celebrating eighty years of trading. And it was a little bit later the business changed its name on its website and all its shop frronts from Wilkinson to Wilo. I mean good and I know the name change was completed about seven years after you left The thinking was it made sense to adopt the Wilco nickname, which not just customers as we've been hearing staff They've been using it for decades as well. What did you think when they did that It was something which the board had discussed as far back as the nineteen seventies. But the family always objected to it. I recall a conversation board meeting with the family stated, is our name above the door and it should stay Wilkinson So we was, o fine, we're not going to argue over that. But I think it was clear that there was a sort of mismatch between Wilkle Jon Brandon Proucts and Wilkinson. Now even when Tony Wilkinson stepped down in two thousand five, he said, converting turnover into profit was very challenging. So is that making money out of what you're flogging It was very challenging. Why was that always such an issue for the business. I'm sure Sam will agree it's an issue for all businesses, and particularly in the business we were in, because we were affected by the impact of the minimum wage com in during that period of time We had inflation il two thousand seven, exchange rates. We're all over the place. Fuel costs were challenging Although I did look back and I noticed that Diesel was seventy five pence a liter then I wish there seventy five penceil litre today for some retailers. And while not every year saw an increase in profitability, that general trend was always upwards. So it was challenging, but it didn't move in the right direction, at least up until twenty ten Those challenges would only get worse and profit would eventually turn to loss. With the mass closure of over four hundred stores Given what we've heard What went wrong at Wilcoot? So from around the mid twenty ten s, Wilco, as we're going to be calling it now, found itself dealing with a level of competition it had never encountered before. For decades it had been known as the place to go on the high street for household goods at bargain prices, but that was starting to change a fair bit. We can bring in somebody else who can tell us all about this. Patrick O'Brien has followed the fortunes of the UK's biggest names on the high street for well over a decade. Rail analyst, research director at global Data. Patrick, welcome to Tast H, thank you Why did trading all of a sudden get harder for Wilco? Well, in the twenty ten s really, what we saw was shopper behavior changed comppetitive environment changed, W code didn't really change, or at least they didn't change rapidly enough. We're going through a period where real wages were stagnating People were looking to save money, were looking to trade down to cheaper brands cheaper retailers And then you had the emergence of some really strong competitors in the rights of B and M home bargains and the range And they were really, really aggressive on price. You had the supermarkets, which started to be a lot more competitive in non food areas because of the rise of algae and lidle that were coming onto their turf And you also had Amazon Prime, of course, which expanded rapidly where people would look to Amazon as their first bought of call to buy something rather than go to the high street. So what you had was a completely changing competitive and shopper behavior Did it make much difference, Patrick, that Wilcoco, although it had some stores on retail parks A lot of them were on high streets around the country. I think it did. they had quite large stores with what would have been high rents on the high streets where through the twenty ten s, footfall was diminishing year on year, aboutout one, two percent a year. So it was a real struggle to keep revenue increasing in the stores when you've got less people walking past. Th competitors that I mentioned, B andM, the range, home bargains, they were opening on retail parks predominantly. and those places were offering free and convenient parking, which has always been a problem on the high street. and they were having cheaper rents there as well. And We saw a lot of retailers fall away in this period because they were locked into long leases that they had no ability to renegotiate the price downwards. So that you're left with that position of whether you should stay and hope that things get better or effectively pay to get out of the lease completely. And that's something let's say Markx and Spencer started to do in about twenty sixteen where it ended up taking the hit and moving out of unprofitable stores ilinss they looked like to me they were hoping that things were going to get better and just plod on, but they actually increased their stores throughout the twenty ten s. you know they didn't hold back and decide not to grow further. They carried on expanding even though You know, life for light cals were falling. behind the scenes in the boardroom, Wilcoot remained a privately owned family business. Other family members were bought out, so that left only Lisa Wilkinson directly involved. The staff members we've spoken to told us that Wilco went a bit more up markarket. There were still bargains to be had. Different ranges were introduced with different price points. Let's hear a bit more from Janet Cochran, who saw it for herself on the shop floor They still have cheaper prices, but everything went up because they've gone for a better ion rather than get option. It's like you could buy just for instance a thraw give you war onsetti. Stide out fire that's what everybody wants here. Just to onetti, just what put throw over fire perfect, then all of a sudden we throws in the shelves The light forty nine ninety nine We've never sold the t People weren't willing to pay for in nineteen ninety nine for this post straw So things like that then hit the reduction line getting sold off our stupid prisices I mean when the staff aren't convinced, Sam It's not great, is it Patrick, it might not always have worked, but can you understand the thinking offering higher quality products that might have actually broadened Wilcoo's appeal Yeah, I can understand it. I don't think it was executed very well though. I mean, there's a number of retailers that would have like a good, better, best strategy where they'd have, you know multiple products of different qualities in the same category You know with Wilco, I don't think they were strong enough on value. It wasn't aggressive enough in terms of the pricing. So it wasn't the best value that you could get. They certainly didn't convince inerms of that price perception with their customers. But it's a controversial thing to do because of course At that time, shoppers were looking to trade down and looking to save money. and the mid market was really getting trashed And so they instead of deciding to go with the shopper decided to try to move upwards away from their target market really. Lisa Wilkinson, Wilco's former chair and family director, declined to take part in this programe, but a spokesperson for her told us Wilco was never a discount retailer. The business model throughout was value retailing. and that's the same as a traditional discount model. So Patrick, you know there some years growth appeared to rely on revenue from those extra stores that were still opening. Is that a fair way to grow a business? Oen more stores, you know, getting Closer to more customers out there I think it is if you've got stores in the right place in the right format But what you had was total sales was pretty much flat through that period, but they kept on adding stores. So You need to get the organic growth right. You need to get the offer growing before you should really be expanding elsewhere because then you know the format's working, but they went further into the high street all through that period So as the business headed into the twenty twenties Turnover was declining, those sales not doing so well, profitability. falling as well It was still making money overall, but it never came close to repeating that record operating profit of sixty two million pounds Patrick, as long as a company is profitable, does it matter if its operating profit is a very small portion of that total sales it's making Well I think it does because really that if you have low operating profits, it's very difficult then to invest in the business And you could be locked into a decline. They managed to get an operating margin. I think the highest they managed in the twenty ten s was one point seven percent. They never got above that BNM, for example, twenty nineteen They made an operating profit of two hundred seventy one million pounds with a ten percent operating margin Was that an ouch sound when you heard that one point seven percent? Just, you know, because they were turning over so much it's such a big cost base to then manage. notot a lot of things have to go wrong. for it to go disastrously wrong. Well Not long after this, COVID happened So Wilkow's accounts for the year up to the first of february twenty twenty showed this operating profit of around two million pounds. The business did continue to have stronger cash reserves over ninety three million pounds at that point. But as we well know, in those first few months of twenty twenty, when COVID occurred and changed the way we all live and how people ran businesses, Patrick, the pandemic a painful memory for many people. Wilcoo were classed, weren't they as an essential retailer So their stores were actually allowed to stay open Yeah, they were out as they open. Yeah, they could have shut up and and furloughed their staff, but they they didn't. They traded through And I think with hindsight, which is a wonderful thing, I think there's a decision that they came to regret. peoplee were doing very mission based shopping and they weren't going to the high streets, they were going to supermarkets or they were going out of town to DIY chains. and Wilco around that time were also having some real supply chain problems. so the availability wasn't great in their stores either. It was a really difficult time for them. So Wilcoo had proudly chosen not to furlough their staff. They emerged from the pandemic with an operating loss of over thirty seven million pounds. They raised money by selling their distribution center, then leasing it back and secured a forty million pound loan. They announced the closure of fifteen stores, brought in a new chief executive officer to turn things around, but it all proved late. So in august twenty twenty three Wilco went into administration Byer couldn't be found. All its four hundred or so stores were closed with the loss of over twelve thousand Janet Cochrane started working at the Ashton Underline store in Greater Manchester when it first opened was still there when it closed thirty one years later They open the shop with all the team members. claos it together as well So we've seen it right from the beginning Right to the very end. Ask us manager L said he' not in I he passed away last year But he suffered with Parkinson's. So on the day cllaos they We invited Mr. We Mck. Back down to Washton. he opened it. It was only right, He closed it And it was just a mayare's ge cried going in into the place and all cried coming in was awful. can I mean, we're still all so clost So al' will call browsal togetherether We've always said, look, you can take our jobs, but you'll never take our friendship We'll always ask that. That'll never ever leave us. But we were like Dar in headlights. We're all numb Gordon, you left your role as Wilco' Managing director fifteen years earlier, but having worked with staff like Janet. You must have been aware of the effect of the closure on them. Very much so. I feel Very sorry for them. I knew the staff in the local stores that I went to And they'd seen the writing on the wall for a number of years. They saw more out of stocks, which resulted in lower sales, resulted in a downward spiral. So they had a feeling that things weren't right It still came as a real shock to them though as you heard from Janet. You always know when a scale of collapses big and having a ripple effect across the country when the Business and Trade Committee of FMPs start to investigate this stuff and have a look at what went on and a few months later they did just that. They called witnesses to try and explain what caused Wilco's collapse. Here's some of what Nadine Horton from the GMB Union told them. GB doesn't believe that the collapse of Wilcoo was inevitable. We think that actually what resulted from what brought about the collapse was weak leadership and a failure of WillCode to adapt to a changing market. The consistent face on the leadership team was of course, Lisa Wilkinson, who you'll be speaking to later. So we do believe that she bears a significant amount of responsibility So Lisa Wilkinson faced criticism partly because of millions of pounds in dividends that have been paid to shareholders during her directorship. Now, her spokesperson told us Dividends were only ever paid when performance allowed and not at the expense of investment into the company. From twenty fourteen, they said Wilco invested more than two hundred seventy three million pounds into the company's operations, people and supply chain financed from the company's performance and profits, not through debt. and appearing before the select committee. Lisa Wilkinson said Wilow would run out of cash And there are a lot of contributory factors customers and you can see this in the figures over time have gradually reduced shopping with Wilcoco. Lots of people have their theories as to why someone mightist if you're interested are that we failed to grow and scale our online business The cost of living crisis clearly reduced our sales We had big internal challenges around product availability that was caused by many internal difficulties to do with things like lorry driver shortage DC distribution centers, sorry, infrastructure changes. lack of credit assurance and low supplier confidence We had moved to a position where we had an unclear customer proposition, and I've heard some of the statements people have made as against the discounters,'re a value retailer, but our proposition was unclear against the discnters We failed to satisfactorily address our category and product offer and move to something different and better So the chief executive, Mark Jackson, who was brought in too late to save Wilco from going bust just seven months later, he said, with hindsight, Wilco should not have stayed open during the pandemic. He said it should have protected the business by furloughing staff like many other retailers had done. Among other things, he pointed to the disastrous implementation of a warehouse management system which led to a shortage of available Stock. Patrick, you also gave evidence to MPs that day. Do you think Wilcoo should have been able to survive somehow Oh yes, no question. But I think the demise was written from well, well before COVID and it was to do with how they operated through the twenty ten s. But there's no question With shoppers looking to trade down and looking to save money, a value retailer like Wilco should have been the beneficiary, not the victim So Wilcoo's family business was But the brand, well, this is sometimes the way it lives on. Wilco branded products on sale in branches of the range after its owners bought the Wilco name for five million pounds. Wilco continues to trade online, and the brand's new owners have even opened a handful of Wilco branded stores and plan to open more So Sam Why do you think it ended up toast I think it's probably harsh to lay all of the blame at one family member, but it's tricky. Third generation is a common a circumstance. There's a bit of distance that occurs by third generation. but then you've got the retail market as a whole obviously changed massively during that period of time in terms of online marketing. and it just seems really clear that they did lose their way and nobody caught it I wonder some what you can learn from this one. What do you think is the lesson from kinson's story For this one, I would say, make sure you're really clear on your proposition because I think moving away from the low cost model that all of the customers understood, I think was probably the first nail in the coffin Samwi, as ever, thank you so much. Thanks also to our guests Gordon Brown and Patrick O'Brien Next time on toast, Stellios Hajianu. is known as the founder of EasyJet, but his business has expanded into all sorts of areas, including the movies. So why didn't Easy Cinema take off Tast was presented by me, Sean Farrington and produced by John Douglas. You can find all our previous episodes on the Sliced Bread Feed on BBC Sounds Hello, it is Danny Robins here for years now on Uncanny. We have explored real people's potentially paranormal experiences But one thing that listeners have often asked me is why don't we look at supernatural cases from the past You asked and we listened. our new series, Uncanny Cold Cases Let's dive into some of these stories from the most haunted House in England. the original UFO abduction case Can we make sense of these strange stories of haunted history Un'm Cannie Cold Kasers'. Listen on BBC Sound