Friday, 1 February 2008

Lessons to learn

The news is out that 'The Works' book shops chain has been placed in Administration by their bank. This is the latest of a number of High Street names that this has happened to in recent weeks and months. My immediate question is "are there any lessons to learn for small businesses"?

The pundits reporting on the administration order blame a variety of issues that have led to this calamitous outcome for the company; terms like credit crunch, increased costs and others are cited - and these probably are real reasons for the firm finding itself in the position it has - but is that all there was to it? As a remaindering outlet, was there a problem with their range - could it compete effectively with the direct competition? As a heavy discounter - was the firm producing sufficient margin to meet their commitments? It is my belief that the answer to these last two questions was no (although I admit that I have no inside information); and these certainly are lessons that we might all benefit from learning.

A balance needs to be struck in all things and the specific needs of a particular shop's market will be the deciding factors that drive the decision making - or at least should be! Too great a range is costly to maintain and sometimes confusing to customers; too small a range or one which is not refreshed regularly will discourage returning customers - at least these are truths for shops who trade in regularly purchased goods. Using discounts to develop business is generally a good thing, whereas a need for regular or permanent heavy discounting is a symptom that something is wrong with the market or the traders' position within it.

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