Company History Wilkinson Hardware Stores Ltd. is a family-owned general merchandiser in the UK founded by J. K. Wilkinson in 1930. From its humble beginning as a small hardware shop in Leicester, the company has grown into one of the leading retailers in the UK with ? 2 billion turnover, 22,000-employees, and about 350 stores across England, Wales and Scotland. The company’s growth over the years has been driven by the simple philosophy of selling quality goods at discount prices, and putting customers at the heart of everything they do.
To remain competitive, Wilkinson Hardware has been constantly developing strategies to respond to changing customers needs. The company has evolved from a small local hardware store to focus on DIY products, and then started selling groceries & supermarket goods, followed by the launching the Wilko brand, and eventually expanded its product range beyond its traditional hardware and DIY market to over 25,000 items. Wilkinson now sells a wide range of DIY, garden, homewares, office, pet, health and beauty products both in store and through WilkinsonPlus.
Current Strategies Wilkinson’s vision and strategies have been built on its core philosophy of giving people good quality goods for good price. To manage its competitive environment, the current strategy stems from its core ‘generic’ strategy of cost leadership (Porter), but with the combination of beyond-cost approaches. Alternatively, according to Bowman’s Strategy Clock, we can say that the company is deploying the hybrid strategy, which includes low cost base and reinvestment in low price and differentiation.
The company positioned itself as a ‘high street’ value retailer which is committed to provide customers with quality products, value for money, and friendly service. The company’s rapid growth over the last 10 years proves that the company has succeeded in delivering low prices for customers whilst building differentiation on the basis of its broad product range and good customer service. Value As part of its continued efforts keep costs low and remain a price leader, Wilkinson invests in its people, logistics, and information technology to reduce costs and improve efficiency.
It also develops its private label, ‘Wilko Everyday Value’ brand to create more value for its customers by providing quality products at everyday low prices. Wilkinson’s own branded goods are now an important source of revenue (? 640m) and account for as much as 35. 9% of its sales. Quality Wilkinson regularly reviews its quality management systems to ensure that customers are offered the best quality at the lowest price possible. This commitment to quality is also reflected in the Wilko Brand.
Customers can be assured that they are buying high quality products at a value for money price with the Wilko Brand quality seal on their products. Customer-centric approach and good service Wilkinson’s philosophy has remained the same over the years and its success has been attributed to its commitment of providing customers with an ultimate shopping experience. Apart from being conveniently located at the center-of-town, the company invests in its people and train its people to serve customers quickly, accurately, and with a smile. Community
To inspire loyalty and improve its image in the hearts of the community, the company stood firm to its five corporate values – Be passionate, Pull together, Build trust, Show we care, Shape the future. Apart from ‘putting customers at the heart of everything we do’, Wilkinson is also giving back to the communities via various programmes and local charitable causes. Strategies for 2010 and beyond In conjunction with Wilkinson’s 80th anniversary, the company rolled-out of a re-branding programme with new ‘Look and Feel’ in year 2010 to overhaul its identity.
Under this initiative, Wilkinson revamped its logo and changed the store formats to create a cleaner and more appealing visual identity. The rebranding of Wilkinson stores with the new theme is expected to refresh and modernized its image in this competitive environment. These new modernized store formats together with the introduction of the strapline “The home of family value” aims to reemphasize its hybrid strategy and also differentiate itself from competitors like Asda and Morrisons that Wilkinson is not just a value retailer, it also strives to provide quality products with broad range and good service.
Growth & Diversification Despite the tough economic conditions and intense competition from other low-price retailers, Wilkinson is still growing rapidly through the diversification strategy (Ansoff growth matrix) by entering new markets and continuously expanding its product range based on customer needs. The company continues to increase its market share by opening an average of 20 new stores each year and expanded its business into the Scottish market. Wilkinson’s growth in 2010 is further enhanced by Woolworths’ demise. It is also improving its sourcing by reaching out to the Far East through Wilkinson Asia in Hong Kong.
Wilkinson has also redesigned its website (wilkinsonplus. com) to enhance its user-friendliness and features more products to reach out to more online customers. WilkoPlus is growing rapidly and has over 15 million visits so far. ? Environmental Analysis and Impact on Wilkinson’s Strategy We will use the PESTEL framework to analyze how the macroeconomic, social, technological, and environmental factors that is affecting Wilkinson’s strategy. Porter’s Five Forces framework is used to identify industry-specific factors that have influenced its strategy. PESTEL Framework Economic
In 2010, the UK retail industry continues to struggle from the impact of the recession due to negative factors like rising unemployment, falling disposable incomes, rise in VAT, increasing savings ratio, and depressed housing market. The housing market is the key driver for hardware, household, DIY and garden products. Demand for new houses has dropped following the tightening of mortgage approval and this has resulted in the shrinking of the homewares & DIY industry. The tough economic conditions are also changing the way consumers spend. UK consumers are becoming much more cautious about their spending.
Rather than spending money on non-essential items, household incomes are diverted to payback debts and increase savings. At difficult times like this, consumers would appreciate more great deals and good value for money. Therefore, companies that offer broad range of products and put heavy emphasis on low prices like Wilkinson, Asda, and Tesco were still able to deliver sales growth and continue to increase their market share despite the gloomy economy climate. Another key strategy that has helped Wilkinson go through the tough times was the investment in Wilkinson’s own branded goods, ‘Wilko’.
Wilkinson worked hard to keep cost low and provide broader range of products at low prices to attract price sensitive customers. Apart from driving sales through various promotional activities to attract customers to choose Wilkinson, the company also introduced the strapline “The home of family value” that stresses its commitment to give customers value for money. Social The DIY sector has been declining for some time due to the change in consumer attitudes and spending priorities. Consumers’ interest in DIY has been waning and their willingness and ability to take on home improvement projects has diminished. Table 2) They would rather get someone in to undertake the work and therefore reducing the need for them to make DIY purchases. In response to this decline, Wilkinson is putting its priority on expanding its product range based on customers’ needs. For example, the company re-launched two key departments in 2009, Home and Health & Beauty. Nowadays, company’s corporate social responsibilities policies are particularly important to community stakeholders such as local communities, consumers, and pressure groups.
It is crucial for retailers to continuously improve its CSR performance and engage local community to improve its reputation. Wilkinson has done a lot in 2010 to improve its relationship with local communities who have helped the company to grow over the years. Several community schemes were introduced and the company will fundraise and support a major charity for a year annually. The company also taking many other initiatives to improve its CSR, such as invest in its team members; improve environmental performance and sustainability, and establishing unique relationship and being fair with suppliers and sourcing.
Technological Over the last decade, online retailing has been driven by the growth in internet penetration and website interactivity features. On top of that, new devices with online access such as Smartphones and the iPad is expected to boost online sales as they provide new and convenient avenues for online shopping. Therefore, online retailing growth rates are expected to continue to be higher than in-store rates. (Table 1) Wilkinson has responded to these technological advancements by re-launching its website in 2010 and includes more features to leverage multichannel capabilities and enhance online shopping experience.
The new website focuses on four areas – range, price, convenience, service. WilkinsonPlus. com website offers 80,000 products including big ticket items that are not available in Wilkinson stores. Customers can also use the interactive online catalogue to find out latest deals and exclusive offers online. Besides, Wilkinson’s new home design website creates more interactive experience to engage customers. In terms of leveraging multichannel capabilities, customers can order through the website or phone and collect in-store for free.
To keep up with the increased use of systems and technology along the supply chain, Wilkinson introduced a new replenishment system called Customer Pulled Replenishment (CPR) to improve product availability for customer, reduce stockholding and operating costs. Environmental As previously mentioned, environmental sustainability is one of the main aspects for company’s CSR. Consumers are increasingly aware about the impact of production activities on the environment and are now expecting companies to reduce their environmental footprint.
Many companies are going ‘green’ to differentiate themselves from their competitors and build their reputation as a ‘green’ company. Wilkinson has also made several efforts to minimise the impact of their activities on the environment. The company is committed to reducing, reusing, and recycling waste across all aspects of the business from sourcing, transporting, to selling of its products. ? Porter’s Five Forces Bargaining Power of Buyers (Customers) Wilkinson’s target market is mainly individual customers.
Due to the wide range of customers it caters to, the company face significant competition from many other retailers in the homewares, DIY and garden sector. As competition intensifies among retailers, customers have low switching costs and can switch easily between retailers. Online retailing is also increasing buyers’ power because price transparency on the internet enables consumers to compare prices between different retailers without even stepping into the stores. As mentioned earlier, consumers are more cautious with their spending due to the recession and would appreciate great deals with good value for money.
Therefore, retailers have to work harder to optimise their performance. Wilkinson managed to capture customers’ loyalty by striving in two main success factors – broad range and competitive price. Bargaining Power of Suppliers Wilkinson relies on numerous suppliers to produce Wilko brand products. Over the past years, Wilkinson’s success and growth has been achieved through a unique relationship with its suppliers and sourcing agents. Like many other major retailers and supermarket chains in the UK, Wilkinson has the power to adopt a more aggressive approach to negotiate trading terms with its small suppliers.
For example, some suppliers were asked for substantial cash contributions towards Wilkinson’s ambitious growth strategy. Globalisation has further reduced suppliers’ power because companies can source their products from new suppliers in other parts of the world, wherever is cheaper. Wilkinson set up Wilkinson Asia in Hong Kong to source for best value products from the Far East. Competitive Rivalry & New Entrants Competition is intensifying in the homewares, DIY and garden products sector because increasing numbers of competitors are turning to Superstores format and sell broader range of goods.
This has widened the scope and scale of the industry, resulting in overlapping of industries. Wilkinson diversified its product range beyond the hardware and DIY market. According to Verdict’s research, the company is categorized under two major sectors – Homewares, DIY & Garden. Wilkinson is competing with the Big 4 DIY specialists (B&Q, Focus, Homebase, Wickes), general merchandisers (Argos), grocers (Tesco, Asda), home furnishing retailers (IKEA), large homeware retailers (Dunelm Mill), and Poundland.
Low entry barriers for new entrants such as TK Maxx and the arrival of Swedish based chain Clas Ohlson are also increasing competitive pressures. Moreover, the industry is overcrowded resulting in shake out of weaker competitors such as Woolworths. Wilkinson’s is fending off threats from rivalry and possible substitutes by implementing strategies to revamp the look of its stores to shift consumers’ perceptions of its brand and value away from down-market to mainstream. It is also improving sourcing practice to counter the economy downturn. ? Balanced Scorecard (Figure 3)
Balanced scorecard is a multi-dimensional strategic management accounting system that translates an organization’s mission and strategy into a comprehensive set of performance measures that provides a framework for strategic measurement and management systems. (Kaplan & Norton 1996) The balanced scorecard translates the Wilkinson’s vision and strategy into a coherent and linked set of understandable, measurable, and balanced targets. It views the company from four perspectives – financial, customer, internal processes, learning and growth. We will use the strategy map to show a step-by-step connection between trategic objectives in the form of a cause-and-effect chain (Kaplan & Norton, 1996). Wilkinson’s vision is “to inspire loyalty beyond reason by confidently providing what people need, when they need it, through our people, delivering instinctive service and irresistible value, in the heart of the community”. We can translate the company’s objectives into four perspectives: •Financial: Maximise shareholders’ wealth •Customer: Inspire loyalty; providing what people need •Internal process: Deliver instinctive service & irresistible value in the heart of the community •Learning & growth: Through our people
By improving performance in the learning and growth perspective, Wilkinson will be able to improve its objectives in the internal process perspective. This will then enable the company to create desirable results in the customer and financial perspectives. Financial Perspective (How should we appear to our shareholders? ) The main objective of every business is to maximise shareholders’ wealth and increase profits. Shareholders are concerned with many aspects of the financial performance and Wilkinson should implement strategies that are in line with this goal.
Financial performance can be measured by using ROCE, economic value added, growth, etc. For instance, the increase of operating profit by 99% in 2010 reflects the success of Wilkinson’s cost reducing strategies undertaken last year. Wilkinson’s growth strategy can be measured by the number of new stores opening and increase in market share. Customer Perspective (How do customers perceive the firm? ) This perspective analyses the degree of customer satisfaction and the processes used to deliver products and services to customers. Wilkinson’s vision is to inspire customer loyalty by providing what people need, when they need it.
Customer loyalty in the homewares and DIY & garden sector are driven by several key factors – quality, range, price, convenience, and service. Wilkinson will need to keep its customers satisfied to gain their loyalty. When customers are satisfied, they will keep coming back to shop. Therefore, Wilkinson can measure the success of the new ‘Look and Feel’ rebranding programme in attracting more customers by looking at the number of visitors to its stores, repeat purchases, UK Consumer Satisfaction Index, and customer loyalty index.
Market share can also be used to measure the growth that Wilkinson has achieved from the continued increase in store numbers and how the company has benefited from the demise of Woolworths. As for online customers, customer loyalty will depend on the reliability, timely delivery, and convenience of using WilkinsonPlus. com. Wilkinson can measure these by looking at number of online visitors, number of goods return, and on time deliveries. Internal Business Process Perspective (What internal processes must we excel at? This perspective is concerned with assessing the quality of people and processes. Wilkinson’s vision is to deliver instinctive service & irresistible value in the heart of the community. Wilkinson can measure whether it is delivering irresistible value for its customers by comparing the price of its products against other competitors. Wilkinson can measure how the new replenishment system (CPR) is creating value for its customers by measuring the cost savings that can be passed on to customers from reduced stockholding and operating costs.
The company can also measure how the CPR system is helping Wilkinson to deliver instinctive service for its customers by looking at frequency of stock run outs at the shelves, system downtime at the EPOS, and shorter till lines. Wilkinson is focusing on improving its sourcing by setting up Wilkinson Asia in Hong Kong to source from the Far East. The company can measure how effective this strategy is helping the company to drive efficiency and cut costs by looking at the profit margins and unit costs. The company has also invested in its people and strive to make Wilkinson a great place to work.
The ‘Be A Star Awards’ is a good measure to reward and encourage team members to provide good service to customers. Wilkinson needs to ensure that good corporate social responsibility (CSR) is performed across every aspects of the business. The company is currently measuring its environmental footprint through reduced packaging, energy consumption, and carbon footprint. Another measure that can be used is the use of plastic bags. The company can also measure its CSR performance in supporting local communities by looking at the amount of donation contributed and the number of charity causes that have benefited.
Learning and growth (How will we sustain our ability in innovation, change and improvement) This perspective is concerned with how the company can constantly improve itself to create value in the future. The most important asset for the company is its people. Therefore the company has invested in its people to ensure that they grow and develop with the company. This can be measured by looking at the number of staff training provided and the number of employees that have been trained under the Emerging Leaders Programme.
In terms of innovation and improving every aspects of the business, the company can also measure the impact of the ‘in the loop’ initiative by looking at the number of employees’ suggestions and feedback that have been received. ? Benchmarking We will now evaluate how benchmarking can be used together with the balanced scorecard to enhance the company’s competitiveness. Balanced scorecard identifies performance measures for each of the four perspectives, but by solely looking at those measures, Wilkinson cannot evaluate how well it is performing and how successful its strategy is.
Therefore, benchmarking helps the company to evaluate its current position in relation to ‘best practice’ within the industry or even beyond the industry to learn from other companies and identify areas of performance improvement. Competitive benchmarking Wilkinson is trying to escape the downmarket image by introducing the new ‘Look and Feel’ format in its new stores. To achieve this, the company is focusing more on broadening its product range. Therefore, it can benchmark its in-store and online product offerings for the homeware sector against Dunelm Mill and Debenhams.
To enhance price competitiveness for ‘Wilko’ brand, Wilkinson can benchmark its product prices against Asda and Tesco. The strategy of putting price comparison directly with other retailers on the price tags can attract customers. Wilkinson can also provide price comparison on WilkinsonPlus. com like what Asda is doing on its website through ‘Asda Price Guarantee’. Best-in-class benchmarking Wilkinson can benchmark the effectiveness of its online sales delivery against Amazon’s delivery time and strive to improve the features on WilkinsonPlus. om Wilkinson can improve staff retention and HR policies and by benchmarking itself against RPS Group Plc (Britain’s Top Employer for 2010). Limitations of balanced scorecard and benchmarking Even though balanced scorecard and benchmarking is said to be able to help company achieve its strategy and enhance competition, it can be time consuming and costly. Sensitive information especially those regarding other company’s internal operations and processes may be hard to obtain. Besides, innovation is often the key for extraordinary performance.
By merely measuring what the company is already doing against best practice will result in constant catching-up and does not stimulate innovation. Conclusion We have used the PESTEL framework and Porter’s Five Forces to analyse Wilkinson’s external and assessed that the company’s hybrid strategy that focuses on offering broad range of products at low prices has helped the company to maintain profitability despite the challenging economic climate. Last but not least, we have evaluated how the balanced scorecard and benchmarking tools can help Wilkinson achieve its strategy and enhance its competitiveness.