What can marketers learn from the failure of Wilko?
The Drum’s editor-in-chief and co-founder, Gordon Young, reacts to the news that retailer Wilko has collapsed into administration. Where did it all go wrong?
I’m sad to hear that famous UK discount retailer Wilko has called in the administrators. Some will say the potential failure is a textbook example of a broken Britain; inflation, Brexit and a cost of living squeeze. Without a doubt, these headwinds will not have helped. But I suspect the real reason for the Wilko woes was a broken marketing strategy.
The collapse of the business, which made a £36m loss on sales of £1.2bn in the year to January, will be a huge UK story, having employed 12,000 people across 400 stores.
But few in the retail industry will be surprised at this development as Wilko has been drifting toward the rocks for some time. The business was launched in the 1930s and is still owned (at that time of writing) by its founding family, the Wilkinsons. Its website proclaims: “Since we are not as PLC, we do not have shareholders to answer to, like many other high street giants.”
One retail expert told me: “This is a double-edged sword. Maybe if it had shareholders to answer to, it could have stopped the rot earlier.”
And Wilko’s marketing strategy was rotten.
That becomes obvious when you look at it from the perspective of the 4Ps of marketing…
Wilko had lost sight of its proposition. The Union GMB represents some Wilko staff. In January, its national organizer Nadine Houghton told The Grocer: “Wilko desperately needs a new direction. For a long time, GMB members at Wilko have made the case the company can be successful if it gets back to doing what it does best.“
To do this, Wilko must be genuinely affordable – a good value retailer for hardworking families with customers understanding what the brand represents.
”With a range that could be bought anywhere, Wilkos also lacked differentiation in the crowded discount space - meaning there was little reason for people to shop there.
Perhaps the primary challenge facing Wilko was that it had the wrong type of stores in the wrong places. Its estate was mainly in high streets and shopping centers (footfall in these locations is down 30% on pre-Covid levels.)
In stark contrast, the 701 B&M UK stories are primarily out of town. That also explains the contrasting financial performances – B&M is a retail star. Said our insider: “The B&M near us has loads of parking. More of a destination shop. All the Wilkos I can think of you have to walk to.”
In 2021, Wilko blamed its troubles on severe supply chain disruption as it struggled to mitigate the impact of Covid and even the Suez Canal closure. But again, rivals such as B&M were not as severely affected. In B&M’s case, it has built a highly diverse base of suppliers and developed strong relationships with some household brands that have developed sub-brand specifically for the discount sector.
As a result, Wilko has not been able to compete on either price or range. One retail professional posted on LinkedIn: “I went into a couple of stores over Christmas, and the stock levels were so low they didn’t have what I needed. It felt like they were closing down and has done for the last year.”
This is always the last item on the marketing list for a reason. Unless you have a clear strategy around the product, place and price, then promotion is unlikely to help. And these weaknesses came across in the commercials I looked at. It didn’t attempt to create any point of difference - but purely led on price with the line; lots of little wins.
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Unfortunately, all this strategy delivered was lots of little losses. It is all a real shame, as there is an excellent brand in there somewhere, and let’s hope it lives to fight another day. But in the meantime, the saga serves as a salutary reminder that although many marketing practices have changed, the principles remain the same. So mind your Ps!