How to Go Out of Business

Steven Dutch, Natural and Applied Sciences, Universityof Wisconsin - Green Bay
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Although the economy is having a tough time, a depressing number ofbusinesses are still surviving. In an effort to help these companies achieve thesuccess of Enron, I offer helpful hints for failing in business, based on actualobservations of my own.

Case Study 1: A Mom-and Pop Grocery

I lived for a year outside New York City in 1975-76. There was a lot beingwritten in those days about the demise of the corner mom-and-pop grocery store.So, since there was one just around the corner, I patronized it. Then one day Iwent in to buy a paper and was told the papers on the counter were for "hisregulars." Not long after, I went in to get something and waited tenminutes while the owner chatted with one of "his regulars." I decided"let 'his regulars' keep him in business." After that, I went tothe supermarket.

And no, I didn't discuss my concerns with the proprietor. Anyone stupidenough to watch a customer wait while he carries on a personal conversation istoo stupid to change and too stupid to be in business.

Not long ago, while traveling in Vermont, my wife tried to buy a few thingsat a souvenir place. She waited for ten minutes while the proprietor gavedirections and generally chatted with someone else. So she put her purchases onthe counter and walked out.

"Personal service" is great if you're the one getting the service.But for everyone else, it often means "lousy and inattentive service."

Case Study 2: Losing the Vision

When I first moved to Green Bay in 1976, I used to frequent a hardwarestore not far from my home. It was a pretty good, well stocked, old fashionedhardware store. And pretty successful - successful enough to expand. But didthey expand to include a broader array of hardware? Nope - they went in forkitchen utensils and housewares. The only problem with that plan was that notfar away was BuyStuffCo, which had only a little hardware, but lots ofhousewares. Meanwhile, the hardware store reduced its array of hardware and wentto the generic plastic baggies of nuts and bolts. In terms of hardware, it waslittle better than BuyStuffCo, and in terms of housewares, it was still greatlyinferior. After trying and failing toget some needed items there a few times (things they used to carry when theywere unsuccessful), I stopped going. Soon after, they wentout of business. I didn't miss them a bit.

Case Study 3: Obsolete Methods

My hardware needs were well taken care of not long after when UsefulWorldopened. This is a cool store, starkly utilitarian and loaded with stuff. Inaddition to hardware, they have farm supplies like tractor tires, teat cream and50-pound salt blocks that your so-called classy stores like Bloomingdale's andNeiman-Marcus never even heard of. Nevertheless, I don't go there as often as Iused to.

It was because of paving blocks. I was laying a sidewalk and needed a dozenor so to finish the job. UsefulWorld had been successful enough to expand, butthe store was hemmed in by streets and had to put a lot of constructionmaterials across the street in a separate yard. I knew they had lots of bricks -I had seen a large pile out in the yard not long before and this style of brickwasn't selling all that briskly. Nevertheless, the inventory in the store,updated by hand, said there were only a few bricks left, so before writing me upa yard ticket, the clerk called the yard for a quantity check. After waiting tenminutes for an answer, I went to another store where the inventory was updatedby computer, where I knew the store had an accurate count, and customers couldgo directly to the yard to load up. And UsefulWorld is no longer my first choicewhen buying supplies.

Case Study 4: How Not to Compete

BuyStuffCo and another chain, ThingsLand, were the two main departmentstore chains in Green Bay for a long time. In response to flat sales, both trieddifferent strategies to lure customers. ThingsLand decided to go upscale. Theywidened the aisles, eliminated most of their stationery and school supplies,automotive needs, and hardware, and emphasized clothes and housewares. I gather they've been fairly successful, justnot with me. They're still there and I don't hear any dire tales of theirimminent demise. They don't have anything I need or want, so I don't go theremuch any more.

BuyStuffCo decided to stay low key to the point of getting a bit seedy.Meanwhile, HumungousCo, a huge discount chain, has opened up. BuyStuffCo isreally taking a pounding from this evil juggernaut that crushes all competitionin its path. Well, maybe.

Since I was over in that part of town, I stopped in to BuyStuffCo to get somenew light timers in preparation for a trip. I didn't see any. So I asked aclerk. He said they'd be over in the Christmas section, because that's when theysold most of them. I had never heard of light timers being a seasonal itembefore; if anything, I'd expect them to sell in the summer when people are onvacation. But the clerk said they only stocked them seasonally.

So I went over to evil, monopolistic, HumungousCo. As part of their diabolical plan to crush weaker competitors, subjugate the proletariat, and achieve global hegemony, they had half a dozenvarieties in stock. So when BuyStuffCo goes belly-up, I will not believe it'sbecause HumungousCo stifles competition, but because the competition gave upcompeting.

HumungousCo is widely accused of destroying local businesses by undercutting prices. I don't shop at HumungousCo because of price. I go there because I can depend on them to have what I am looking for. BuyStuffCo and ThingsLand were dominant in my area for years. They had every opportunity to expand their inventory to equal or surpass HumungousCo, and chose not to. Also, HumungousCo is open when I need things. Before it opened, I can't count the number of times I needed something for the coming week, only to realize that BuyStuffCo and ThingsLand closed at 6 PM on Sunday. Wonder whose bright idea that was?

Update: It seems my Philips screwdrivers have been going to the same alternate reality that missing socks go to, and since I was over by BuyStuffCo, I stopped in to their hardware section. Sets of screwdrivers? Check. Pairs of flat head and Philips screwdrivers? Check. Except I have more flat-head screwdrivers than I can shake a stick at. Guess where I finally found a box of generic Philips screwdrivers sold individually? Now let's not always see the same hands - that's right - evil HumungousCo.

A Unified Model of Failure

Opening Day 

WidgetWorld opens up with every imaginable variety of widgets.They come in every conceivable color and are made of stainless steel, wood,plastic and tofu, among other things. There is a line of checkout counters 800 yards long, allstaffed.

Three months 

The 800 yards of fully staffed checkout counters has shrunk tosix open, the rest closed.

One Year 

Realizing that people only need so many widgets and that marketshare is no longer increasing, WidgetWorld adds a toy aisle.

Two Years 

The pink and plaid widgets, as well as those made of tofu and bellybutton lint, are not moving as fast as some of the toys, so they are quietlydiscontinued. The toy aisle is expanded and a housewares aisle is added. Salesimprove but the customers who want pink and plaid widgets, as well as those madeof tofu and belly button lint, leave. They are not missed.

Five Years 

WidgetWorld now sells toys, housewares, clothing, shoes, and has apharmacy and optician. Only the most generic and best selling widgets are nowsold. There are still only six open checkouts but the full 800 yards of checkoutcounters are still there for visual effect. Meanwhile, customers often wonderwhy more checkouts aren't opened up to handle the lines.

Eight Years 

Lines are less of a problem as customers leave for stores withbetter selection and service. Customers who want widgets don't come here anymore because the selection of widgets is no longer better than most otherstores, and customers who want other things shop at places closer to home. The suits decide that diversification is the keyand reduce the widgets to a single aisle, while adding consumer electronics,cameras, an espresso bar and an acupuncture clinic.

Ten Years 

WidgetWorld, now a complete department store with everythingimaginable, including even a few widgets packed in bubble packs, continues tospiral into the ground while the managers and stockholders wonder what wentwrong. Meanwhile 666-BeastKo, with 1200 yards of checkoutcounters, five square miles of floor space, an indoor landing strip and its owncurrency, time zone and passports, opens across town. WidgetWorld goes out ofbusiness. Its managers, the local press, and consumer advocates blame thefailure on the growth of mega-stores that crush and undercut smallercompetitors.

Bottom Line

My bottom line is that a business has what I need when I need it. Theirbottom line doesn't count. They're in business to serve me, not the other wayaround, and if they can't or won't serve me, I see no reason to help them stayin business. If you don't satisfy my bottom line, you don't get to have abottom line yourself.

"We Can't Compete Against Low Prices"

Can't? Or Won't? Every single store that goes out of business because of a super-chain had a chance to become that kind of store themselves.

More Red Flags

Wider Aisles

Lots of customers prefer wide aisles. They allow more room for maneuvering carts, and present a more open, less claustrophobic appearance.

Me? More aisle space tells me you're stocking less stuff. Every time I go to your store and you don't have what I need is one less reason I have to come back again.

Going Upscale

I don't care in the least if you cater to people who want dog collars by Cartier. Just as long as I can get a generic dog collar. So stock a respected if pricy brand of tools, like BuyStuffCo is now doing, if that floats your boat. But if their Philips screwdrivers are $5, and I can get a generic over at HumungousCo for 88 cents, well, I hope you get enough buyers for those screwdrivers to match the six who buy them at HumungousCo.

Rearranging the Store

Sometimes it makes sense to rearrange your floor plan. Maybe your analysis of traffic shows that lots of customers are tramping to opposite ends of the store to get related items that should logically be stocked together.

But whenever I see this going on, I wonder:

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Created 8 November, 2002, Last Update 20 January, 2020

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