The Decline of Woolworth...What Happened?

hey everyone patreon I have to mention it I started a couple weeks ago and it's been going great if you like these videos about declining companies and everything else I talked about maybe you'd be interested it helps the channel and you get stuff too the address is on the screen it's in the description it's easy to find it now Woolworth wool words most of the younger viewers probably don't know what this is which for the older viewers must be a strange concept because this used to be one of the largest retailers in the world in terms of popularity it was practically the Walmart of its time can you imagine a future where you're trying to explain to a younger generation what Walmart is heavy strange right and I don't want to act like I'm any better than the younger generation I'm part of it Woolworths is before my time at this point it's a thing of the past but it's an interesting case to study of course they've gone from being at the top of their industry to nothing they've completely failed and I'd like to take a look at what happened now I want to mention this is a complicated company I hate to just make a statement like this but it's way more complex than I could possibly ever cover in a short video like this for a long time it was practically two separate businesses operating in the United States and Great Britain which means there's two separate stories to tell here so I apologize to anyone who wanted to hear about the British Woolworths or Woolies as you call it but to simplify things the focus of this video will be on the United States maybe in the future I could make a similar video from the British perspective but today I chose to focus on the US because that's where it all started and it's just the more comprehensive story in 1878 there was a man named Frank Winfield Woolworth he worked in a retail store called Moore in Smith one day they found themselves with some excess inventory and wanted to quickly turn it into cash they set up a little clearance sale by laying out all the items on the counter and selling them for five cents each Woolworths noticed how well everything sold and thought hey that would be a great concept for a new store just everything for five cents all the time less than a year later his employer more agreed to loan him three hundred and fifteen dollars and he left to New York to open his own store following that model it was a complete failure and it only lasted a few months the failures typically blamed on having a poor store location and the customer seeing the concept is more of a novelty a novelty that more off after a few months but obviously he didn't give up there he walked away from the whole experience with a few hundred dollars he used it to pay off that initial loan and used the rest of it to start a new store this time in Pennsylvania and this store was much more successful in the same year he opened a second location and put his brother in charge as the manager in the future years he just started bringing in all his friends and family to open and operate new stores he brought in his cousin and some former co-workers even more his former employer with the loan does anyone have a friend that's always talking about this great business idea they have always big plans but maybe a little unrealistic and they never seem to do anything about it I bet Frank Woolworth was that guy here's my impression of an 1878 Frank Woolworth not an impression you hear often by the way all right here's my big idea you know how those clearance sales always do really well why not Center a whole store around them and think about it nothing over a nickel and once I get it off the ground I'll give you all stores to manage oh you'll see it'll be the next big thing by this time next year my boss is gonna be working for me all right I'm out of character but Woolworth actually made it happen maybe the lesson we can pull here is if you are that friend and you feel you have a revolutionary new idea maybe give it a try I'm not saying take out a second mortgage and start some get-rich-quick scheme be smart about it but we've seen here how it could lead to something big these initial stores were successful because they were different from anything else out there for one of course the prices were really good everything was 5 cents but that was a little limiting so they soon added $0.10 items as well if you're familiar with a five-and-dime store this is where it started also the entire store operated in an on conventional way at the time stores typically kept all their items behind the counter and you had to ask for what you wanted but wool words put everything on display like you would expect to see today in a typical store they would charge different prices to different people we're here everyone paid the same thing like you would expect to see today in a typical store it was considered rude to walk in and not buy anything we're at Woolworths they encouraged people to look around like you would expect to see today I think you've caught on to the fact that they started many things in the retail world that you expect to see today let me try to paint a picture of just how fast they were growing after about 20 years of business in the year 1900 they were up to 59 locations and had generated 5 million dollars in sales over the next five years they doubled in size 120 locations in 10 million dollars in sales and then seven years later everything exploded in a good way see here's what happened remember all of his friends and family that were running those original locations when they first opened those stores the deal was generally that they would operate them and actually have half ownership with Woolworths himself owning the other half well over the years they had each bought out that other half and started opening their own chains in 1912 the explosion happened when all of these separate chains decided to merge together the result was a new publicly traded company with 596 locations and 52 million dollars in sales the deal made everyone very rich and they spent over thirteen million dollars to build their new office building it was located in New York and at the time was the largest building in the world seven years later in 1919 Frank Woolworth died at age 66 it had to do with a tooth infection and by then and their business had doubled yet again to 1,200 locations I found this interesting Sebastian Kresge who ran a similar much smaller chain of stores that would later become Kmart he closed all of his stores for the day of the funeral as a sign of respect it just helps show how much of a pioneer and a legend in the industry this guy was now I think this is a good point to skip ahead and start talking about there decline in the early 1960s they were bigger than ever over 1 billion dollars in annual sales at this point yet they weren't doing particularly well it was a different time the industry of these five and dime stores that they helped start and ruled was shrinking the new attractive thing for the customers were these big department stores that sold everything in 1962 they saw the way of the future and started a chain of these stores called wool Co which sounds like a good move but I don't think it was see these wool co stores never did very well with their original Woolworths stores that it's such a good job at attracting customers and making themselves different from the competition but with wool Co I'm not so sure they did it there was some pretty tough competition to wool Co started the exact same year as Kmart Walmart and Target that's a competitive environment and they didn't have any kind of an edge or headstart like they had before in 1983 after years of mixed but generally poor results all of the wool collocations closed in the united states directors will go after 20 years in the u.s. is going out of business and a couple additional reasons for their closure when they started opening them 21 years earlier they financed their locations through 21 year mortgages where a large portion of it was dude toward the end of the term which in 1983 was very soon for many of them also in the early 1980s there was an economic recession which obviously had a negative impact on retailers in general it was all just becoming too much and they decided to pull the plug on wool co but they lost a lot of money from the whole thing investing everything in this new store model and sort of neglecting their traditional stores who already weren't doing well for many reasons changing industry and economic in the United States Woolworths stores were still around until the late 1990s but that whole period was just sort of a slow tragic decline they made some attempts to improve things but it was just too little too late now here's something that you're not expecting to hear Woolworths stores in the United States are all gone but company still exists it's footlocker so that's strange let me know in the comments what would you okay ok I'll explain that one a little bit more in the late 1960s they decided to buy a shoe store called Kinney they had over 500 shoe stores in the US but they also manufactured shoes the reason was so they'd have a good source of shoes and maybe other clothes for sale in their new wool co stores as well as their traditional stores really sort of a hidden gem in 1974 kenny opened their first footlocker stores which have always done very well it's a strange turn of events but footlocker is what exists from the company I told you this company was complex and I didn't even talk about the British end of things they actually survived the wool Co Fiasco and made a nice comeback but are also gone today they've been gone for about 10 years for real this time let me know in the comments what you think about all of this do you want me to talk more about bullies in the future or footlocker for that matter there's so much here I've hardly even scratched the surface when it comes to Woolworths in the United States but hopefully I've covered the most important parts concerning their rise and fall looking back at the situation it's hard to identify the ideal course of action I said it didn't seem like it was a good idea to enter the newly formed competitive market of large department stores but would it have been smart to cling on to their existing model that model hasn't really what stood the test of time and if they had stuck with it I'd probably be saying their mistake was failing to adjust so what's the answer should they have stuck with what they knew and accepted a smaller likely shrinking presence should they have gone ahead and opened wool co but found a way to make it more unique from the others which is easier said than done should they have started doing something completely different or maybe they were just destined to fail also have you ever been to one of these stores and if you have what's your impression good or bad I'm guessing if it was in the 80s or 90s it probably wasn't great but I'm curious like I said it's a little before my time so I've never been there I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 816,536

Rating: 4.8058004 out of 5

Keywords: Woolworth, Woolworths, Retail, Company Decline, Closed Stores

Id: iSEw4wmjuh4

Length: 11min 7sec (667 seconds)

Published: Wed Sep 12 2018