Failures in Retail: What Went Wrong

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The last couple of years have not been an easy time for traditional retailers. Several household names have ceased trading, and many others had brushes with death, being saved at the last minute by wealthy investors.

In 2012 alone, 54 major chains failed, causing the closure of more than 3,900 stores, and leading to more than 48,000 job losses. If the trends seen in the first half of 2013 continue, then we can expect the figure for 2013 closures to be even worse. Let’s take a look at some of the most notable failures, and how they could have been prevented.

Blockbuster

Blockbuster was once a market leader in the video rental space. The company went into administration in January 2013, after a long period of losses. Blockbuster’s downfall was a failure to move with the times. Rental charges were high, and the short term rentals, coupled with the hassle of bringing a DVD back to the store put off customers from using the service. Consumers have a lot of choices for how to consume media these days. They can download or stream movies, or use an online rental service which offers far more relaxed rental terms. Blockbuster stuck with an old model and an outdated pricing structure for too long, and failed to improve their service in other ways to hold on to their existing customers.

Jessops

Jessops was the only truly national camera retailer in the UK. It was the first major store to go into administration in 2013. The administration news came suddenly, at least from the point of view of consumers. Jessops’ downfall may have been caused by excessive expansion (the company had 193 stores at the time of closure), combined with a failure to keep an eye on their target audience. When Jessops first opened, film cameras were still the device of choice. Today, digital cameras have all but completely taken over, and many consumers don’t use discrete cameras at all, because they have serviceable cameras built-in to their smartphones and tablet PCs.

Jessops failed to position itself clearly in the market. They sold budget and mid-range digital cameras, but offered little in the way of highly specialist equipment for serious photographers. Their film and accessories business may have attracted some regular custom, but clearly that wasn’t enough to pay ever-increasing mall rents.

Comet

The closure of Comet was one of the highest profile store closures of 2012. After a long and difficult administration, Comet finally shut its doors in December 2012. The failure of Comet was attributed to fierce competition from online retailers, the difficult economy in general, and the fact that Comet was no longer seen as an authority in consumer electronics.

The failure of Comet shows how important branding can be. During the 90s, Comet was a major brand, and the go-to place for white goods. After consumers lost faith in the Comet brand name, it did not take long for the company’s profits to enter a downward spiral.

Peters Bakery

Peters Bakery was a long-running northern bakery chain which had several stores and also acted as a supplier for many wholesalers and supermarkets. Peters Bakery entered administration in June 2012. The chain produced good quality food products, however many of its stores were in high street locations that no longer received a lot of footfall. This, combined with prices that were higher than those of their main competitor, Greggs, was a recipe for disaster.

Clinton Cards

Clinton Cards is owned by American Greetings. In 2012, Clinton Cards and the related Birthdays brand went into administration. Combined, the brands had more than 760 stores in the UK – in some cases there were branches within a couple of doors of each other in major shopping malls.

Clinton’s closure can be attributed to falling consumer demand thanks to the popularity of e-cards and custom card printing, as well as over-expansion, and the purchase of some low-quality card brands which damaged consumer perception of the Clinton name. In addition, the company struggled to cope with ever-increasing rent in major shopping centres.

GAME

In March 2012, GAME suspended dealing on its shares and went through a drastic restructuring process, closing many of its stores and the stores it held under the GameStation brand. GAME’s brush with death was caused by over expansion, rising rents, and poor pricing structures. Just like Clinton Cards, GAME ended up in a position where it owned competing stores situated next door to each other on the high street. In some parts of the country, the chain owned three stores and a concession in one shopping centre.

This thoughtless expansion, combined with a pricing structure which saw pre-owned games being sold for just a few pounds less than brand new titles caused many problems for the brand. Aggressive up-selling of insurance, extra controllers, strategy guides and other items alienated many regular shoppers, and left the brand struggling. GAME left re-structuring a much leaner company, and is now on the road to recovery.

What Can We Learn From These Stories?

The common threads through all of these chain failures are increasing rents and uncontrolled expansion. Many chain owners forget that there is a finite number of potential customers in each city, and that those customers have a limited amount of money to spend. Opening multiple stores in nearby cities may help to reach a broader audience, but it is easy to reach saturation point.

Another common point of failure is that retail store owners fail to notice changes in the market, and get overtaken by their online rivals. There are some things that retail stores cannot change – they have higher overheads simply because of their location and their need for extra staff compared to an online store. However, retail stores can differentiate themselves in ways beyond price, such as improved customer service, new product lines (such as digital download codes to allow people without credit cards the chance to enjoy digital products), custom fitting options and other customer service improvements. Real-world shopping is an experience, and stores which embrace that and turn themselves into premium boutiques or specialist knowledge centres are more likely to survive the transition to digital for mundane items.