When a business owner starts to achieve some success, there’s a subtle temptation to be overly confident. In the back of your mind, you start to think that you’re past the point of failure. All that’s ahead of you is growing success.
But if history has taught us anything, it’s that no business is too big to fail
Unless you’re a bank or automotive company. Then you might be.
For the rest of us, it’s important to remember that the marketplace is fickle. Consumer demands change. Technology is introduced that upsets the system. If you’re unable to adapt, improve, and grow, you can quickly be left behind.
Here are a few big retail companies that went from thriving success to complete disaster in the span of a few short years.
If you went to a mall in 80’s, 90’s, or early 2000’s, there was a fair chance it had a Sharper Image. It was the place you’d go to sit in massage chairs, play with fun gadgets, and wonder why there was a Superman statue in the middle of it.
Like most everyone in there, you probably never bought anything. But apparently, enough people did to keep it in business for 3 decades.
Unfortunately, in 2008, the company filed for Chapter 11. At its peak, the company was worth $760 million with 196 physical stores, 2500 employees, and a huge circulation of their catalogue. Today, it exists in name only, licensed on certain products sold in other stores.
Why did they fail? The company says it was due to a decline in consumer spending along with a nasty situation involving one of their most popular products, the Ionic Breeze air purifier.
The founder, however, says it has more to do with failure to adapt to online shopping, losing their cool edge in malls to places like the Apple store, and a lack of innovation in their own product line. Ultimately, he believes they grew too complacent in their success.
Even at its peak, Circuit City was always a bit of a second fiddle to Best Buy, but it was certainly no slouch. By the year 2000, Circuit City was employing 60,000 people at 616 locations. However, at that point, their problems were already starting to mount.
Circuit City was known to be in less than ideal locations, and many of the stores themselves were outdated. In an attempt to update, they made what would prove to be a costly mistake by abandoning the large appliance business.
At the time, they were the number two appliance retailer in the US. The company’s executives were focused on the costs they would save in warehousing and delivery. They slowly began to introduce movies and entertainment, but their rollout was slow and clunky.
One of their most controversial moves, however, came in 2007 when they fired a large number of higher paid hourly, sales, and management employees, replacing them with cheaper, inexperienced workers.
Employee morale and customer satisfaction dropped like a rock thrown into the Grand Canyon. By the time the recession came in 2008, it served as little more than a coffin nail. Where Best Buy adapted to market changes and focused on improving customer experience, Circuit City continuously tried to save money while offering less to their visitors.
By 2009, the brand was sold off and the remaining stores were closed.
If you didn’t have a Blockbuster in your town, you wished you did. The advertisements were everywhere, and it looked like a one stop shop for all things entertainment. All the movies, video games, and candy you could enjoy were to be found at Blockbuster.
The company was synonymous with rental stores. At its peak in 2004, Blockbuster was a $6 billion company with 60,000 employees and 8000+ stores. To put that in perspective, Target has approximately 1800 stores.
So what happened? Two words, really: Netflix and Redbox.
Those two companies changed the way people rented movies, adding convenience and affordably that Blockbuster wasn’t able to match with their business model. Blockbuster had greater selection and more availability, but that wasn’t what modern consumers wanted.
Ultimately, Blockbuster adapted too slowly, taking reactionary measures to their new competitors rather than innovate. The saddest part of their story is the fact that they had a chance to buy Netflix for a mere $50 million in the early 2000’s.
But they didn’t want to upset their traditional system.
The truth is, the company let their failure happen by being unwilling to look ahead and see what their customers actually wanted. Though they limped on longer than the other major rental chains, they filed for bankruptcy in 2010 and spent the next few years closing down thousands of stores.
Today, there are still about 50 franchise Blockbusters scattered around the US, including 4 in Alaska, 6 in Indiana, and 7 or more in Texas.
Don’t Let Failure to Happen to You
By learning from the failures of others, you can avoid the same mistakes. For additional business tips for success, as well as proven strategies to follow, make sure to get my book, Business is ART. Available now!