It’s tempting to think right now that business is in dire straits, some big retailers have gone to the wall and as a smaller business its difficult not to worry about where things are going. We need to look closer at why these giants went under seemingly so quickly.
Toys R Us, a large warehouse full of cheap toys and pretty much every child’s dream at Christmas appeared to fail so quickly; so where did it go so wrong? Whilst the easy option is to blame big internet retailers, they certainly didn’t help, there real issue was the customer experience; the 90’s was all about big, out of town retailers, stock piled high and warehouse style salesfloor. This continued into the new century but even then, the tide was turning, customers were getting price point conscious and the internet was just starting to become a more consumer friendly shopping environment.
Then late summer 2008, the economy was wobbling along until October when globally the stock markets imploded and with them huge losses in the property markets, these ripples spread across the globe and eventually to consumers’ pockets; Christmas 2008 was going to be tough. We all know that then next few years were tough for any business but really what changed the landscape was going to be access to technology and ultimately the online environment.
Lets fast forward a few years, large retailers were still expanding but this time on the cheap credit which was being dished out as a result of quantitative easing. This carried on for several years and with some, young, forward thinking enterprises really thrived on the brave new world; consumers were getting used to internet purchasing and with faster home internet connections it became so much easier. Some traditional retailers also joined this new world, however for some they simply relied on existing formats believing their size would see them through.
In the last few years consumers really have moved from simply shopping trips to an experience, they want coffee, they want luxury but not by paying for it; they want coffee, cake and time to eat it! But price consciousness is now at the forefront of every purchase, but service is king; certain traditional ‘brick and mortar’ shops such as John Lewis have embraced this although they still have pressures to overcome. Unfortunately, an example of what not to do is Toys R Us, the last time I walked in there was over 3 years ago; my memory of the experience? A large sign warning me that my bag might be searched, large yellow price labels misplaced along shelves with dusty boxes and warning signs not to touch displays.
What the internet generation want is to look, touch, feel and interact but more importantly they want to feel special. How you do that as a business depends on your market, whether you’re focusing on a price point or providing outstanding service you have to be better than your competitor. Promotions, social media, instore experience, this is where it matters; long gone are the days of pile it high, sell it cheap and just hope people will come because those days are over. If you want even more proof that those days are gone, just look at Homebase…… A belief that DIY sheds still worked ended in one of Australia’s largest listed companies selling the business for £1.
The importance for small business is to never lose sight of your customer, maintain a flexible base but don’t diversify too far away from your core markets. That’s not to say diversification is bad, it’s a good thing but only as part of your longer-term goals. But keep an eye on the money, your balance sheet might look good with all those assets - unfortunately those assets might be doing you no good at all!