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We all know the recession is bad, but I was shocked today to see a headline that said “One Shop Was Closed Every Hour Last Year.” I immediately thought “That can’t be good for business. How is that bloke going to make any income? You’ve got to be open sometime.”
Of course, then my rapier-sharp mind quickly deduced that retail stores closed at the rate of one per hour during 2012. Wow! I was feeling bad for one poor shop owner. Now I am feeling sorry for a lot of people.
Some 7,300 High Street shops closed in 2012. Applying a bit of arbitrary math, saying an average of 20 employees per shop – a bit on the low side I think – that would put 146,000 out of work. To be fair, with 5,500 new shop openings, the net loss of stores was only 1,800. Assuming that the unemployed because of the closings were able to find employment at ALL of the new stores and that ALL the new stores hired 20 employees, that would have put 110,000 back to work, leaving only 36,000 unemployed. That’s not so bad. Unless you are one of the 36,000.
One peace of telling evidence of the valley of death that retail is walking through is the vacancy rate for retail space. From December 2007 through June 2008 – that wonderful year – the vacancy rate was well under 5%, and declining. In response to the crippling, rippling effect of the recession the vacancy rate rose consistently until it hit 15% in late 2011 where it remains today.
There are others reasons, of course, that so many businesses closed their doors. We must understand that poor management, which is seldom mentioned as a factor, may, in fact, be the biggest factor. By poor management I mean everything from poor financial management to poor operational management to poor strategic management.
Poor financial management sets a business up for failure. The axiom that “This too shall change” applies in the good times as well as in the bad. For some inexplicable reason we tend to hope that things will change when everything is going bad, but we never consider that things will change when things have been going swell. Hello! Remember 2008? A company that is poorly run financially is not prepared for the storms that will inevitably come.
Poor operational management typically drives customers away instead of drawing them in. It is typically evidenced at the point of sale where customer satisfaction is critical for success. It also means that there are some customers who are on the cusp of deciding whether to maintain their custom of shopping in your store or not. In a recession it may take just one straw to break the camel’s back, and it may not even be your straw.
Poor strategic management is a pitfall lying in wait for the unsuspecting. If a company does not see that pitfall in the road ahead, it will fall right into it. So how do you avoid that? You change course, something most businesses are not inclined to do. Management needs to be looking down the road, not in the rear-view mirror. The success of the past has nothing to do with the avoiding what trap lies ahead.
One of the very best examples of failing to change is failing to recognize the competitive impact of online ventures. More and more people are shopping online. That means that they are frequenting brick and mortar stores less and less. Excuse me, but isn’t it logical to get into this new market channel? It means that you will have to have a strong online presence and that you will have to set up a shipping department, among other things, but that’s the change I’m talking about. You say, “But I operate a pizza shop,” to which I say, “I order all my pizza online.”
One last word. If you see that your product or service is becoming obsolete, change your product offering. Remember when TV repairmen would come to your house? Me neither. And if your clothing store is still carrying hot pants, you may be in trouble. Or you could create a campaign to bring them back in style. You could live with that, and so could we.
