Expert Comment: What can we learn from the collapse of Wilko?

Categories: Salford Business School

With MPs currently examining the collapse of Wilko earlier in the year, there are lessons that can be learned for the High Street, argues Dr Gordon Fletcher, School Lead for Research at Salford Business School.

Dr Gordon Fletcher portrait

There is a scattering of evidence for the beginning of the decline. The rebranding in 2012 to Wilko that echoed the own-brand offerings steered the chain away from its family-owned credentials, a move that placed price above any other aspects of the shopping experience in a Wilko store.

The family split two years later when one half of the family sold its share to the other half might be seen as another red flag. Reducing the diversity of opinion in the boardroom may have reinforced an echo chamber exactly at a time when high street retailing was being challenged by new ideas and, of course, the rise of ecommerce.

But the very heritage of that retail chain, founded in 1930, also points to another reason for the decline. The model of long-term leases by property owners to retailers was not challenged for the first eighty years of the company's history. But by 2023, as the demise of the company was becoming increasingly certain, negotiations were underway for a three-year rent-free period for some of its stores. As an example, the rent for one Wilko store in a major city centre was £370,000 p.a. This represents the scale of change and the key different between high street offerings and online retailers. Being tied to a long lease could even mean remaining in less desirable locations while newer and more exciting retailers move into the "up and coming" areas of a town centre.

As Wilkinson's became Wilko, the attention to experience took a back seat to the importance of price bringing the offer into direct competition with the online competitors. Without any added value of being in the physical store the customers departed. The companies that took up some of the Wilko properties take a clearer position on their offering - Poundland presents its offering upfront right in its name. If sending a small parcel through Royal Mail costs £2.88 then an item being sold for £1 is not a prime candidate for ecommerce. Without expectations for anything other than a price-driven experience, and items that are uneconomical to ship through ecommerce, the High Street reflects the current dynamics of these economics.

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