6 Business Failures From The Last Decade To Help Your Business Succeed

The rearview mirror of the retail highway is riddled with failures. Excuses of market forces or shifting dynamics are not valid. They're the outcomes of poor decision-making. Reviewing the dynamics of all these failures will help your business be more successful

Faulty Economics

Pets.com began in 1998 selling on line pet supplies to individuals. Sales fast grew due to the exposure the company received by its involvement in the Macy’s Thanksgiving Parade, Super Bowl commercials and its “Sock Puppet” ad campaign. The company raised over $300 million and ceased operations in November 2000 after being listed on the NASDAQ for 298 days. $300 million vanished in that short quantity of time. Although the business had a strong advertising campaign and garnered superb exposure, the main issue was that the  firm  lost cash on any single sale. Volume will never hide poor economics in a business. If you do not have a solid economic model for profitability, no matter how much money or how lots of sales you have, you can't sustain the business.

Faulty Strategy

Webvan was founded in 1998 as a credit and distribution business for Groceries. The company was bankrupt by 2000 leaving behind $830 million in debt in mere eighteen months. The business over extended too aggressively with an incredibly complex  model for grocery shopping. Webvan far over estimated the customer’s willingness to leave the typical grocery shops in favor of an on-line experience. Not one of Webvan’s founders or senior managers ever worked in the grocery industry. They didn't understand the business they were in or how people  make food options. By adding tremendous costs to a business with razor thin margins, the firm  couldn't be competitive and offered no perceived value to the clients. Ultimately, consumers store for food with their hands and their eyes. That is very challenging behavior to replicate efficiently  in a digital environment.

Failure to recognize consumer change

Tower Records operated retail music shops from 1960 until 2006 when it filed for bankruptcy. At its height, the business operated 89 shops in the us and 114 international stores. In addition to music, the firm  sold DVDs, video games, accessories, toys and electronic gadgets like mp3 players. Here was a company poised to dominate the on-line music transition. Instead, they continued to focus on retail as the clients migrated to MP3’s and the iPod, which debuted in 2001. Tower records had the brand, the selection, the infrastructure and the ability to have developed not only the most beneficial music website but also need to have developed the 1st Internet radio system. Instead, they were so set on their style of retail stores that when they realized the world had changed, it was too late and they were forced into bankruptcy liquidation.

Failure to Update the business Strategy

Circuit City traced its roots in purchaser electronics and equipment to 1949 concluding with its liquidation in 2010. It pioneered the mail order electronics business in the 1960’s, the Warehouse concept in the 1970’s and the Superstore concept in the 1980’s. By the mid 1990’s and 2000’s, the business had lost ability to innovate and ran tired shops. The company was operating under an outdated compensation model for its sale’s individuals that provided little value to the user and increased merchandise costs. Circuit City didn't totally grasp the shift to ecommerce for electronics and gadgets. They felt that service and face-to-face interaction with sales individuals were the keys to a effective business. The concept that eluded them was that of show rooming. Supplying the customer with the choice and the capability to view and test the products in the store with the capability to order from the web and have it delivered right to their door. Holding tightly to this tired model led to the 2010 bankruptcy and liquidation.

Complacency

Ritz Camera  operated 137 photo retail and photofinishing shops in the U.S. under multiple banners. The firm  traced its roots back to 1918 and the third generation of the family grew to be rather unfocused on this company and complacent that the company could just run on autopilot. Unfortunately, the shift to digital photography caught the company off guard as they started to play catch-up in the early 2000’s but it was too late. An attempt by the owner of the firm  to setup an on line digital holding business  was a failure of strategy, execution and direction. This also created an issue of focus for the business and ownership. By 2012 the business had gone via its second bankruptcy and was forced into liquidation.

Giving your customer's to your competitors

Borders was founded in 1971 in Ann Arbor Michigan and at its peak operated 511 Borders Books and another 175 Waldenbooks. We can analyze the many mis-steps Borders had throughout the 1990’s and early 2000’s. The failure to embrace e-books was definitely one. A large investment in slow moving CD’s and DVD’s hurt cash flow. It was overstored and had too much debt, which put a strain on the companies’ ability to run. Yet the single biggest issue, and one that should go down in history as one of the biggest business blunders was when the CEO Gregory Josefowicz gave the online customers to Amazon. This essentially provided Amazon the capability to market directly to Borders clients and fulfill their book demands, bypassing Borders altogether. The CEO felt the deal he structured was so good, he even celebrated with Champagne given by Jeff Bezos himself. Mr Josefowicz was so short sighted that he thought this complete Internet craze was a fad and people will always require books stores. Who's going to ever wish to purchase books over this Internet either way? Pure genius.

There are plenty of flaws that happen in business daily and we'll continue to make them. Yet at the end of the day, the lessons from such examples are really clear, make certain you've a sound economic model that you continuously enhance. Keep an obvious eye on your customer and make certain you adjust to their changing needs and never ever give your clients to your competition.

About Phil Masiello: Phil is the co-founder of 800razors.com, the largest internet retailer of high quality American made razors. Mister Masiello was cofounder and COO of Raw Beauty prior to his involvement with 800razors.com, a pioneer in the raw skincare industry. Prior to that Mr Masiello held several C-Level positions within retail also as founding six other businesses. His personal web log is The Commerce Shift focused on the changing retail landscape. Mr Masiello holds an MBA in Fund and Selling from the University of Maryland.