When I give presentations, I typically like to use case studies to show customers best practices. However, it is frequently the object lessons of those who blew it that clients find most interesting. While doing research for an upcoming engagement, I found six retailers who blew it – and I mean blew it big. What’s most interesting about these case studies is that it wasn’t the market that caused them to fail, as they each have a competitor that thrived under the same market conditions.
Roses
The PH Roses stores were originally founded in 1915, and their most successful stores were located in small Southern towns. The
Roses lost focus on their core customer base to try and target a more upscale shopper. Their traditional customer was left confused and were easy targets for Walmart.
inventory was chosen for affordable quality. To try to keep pace with their key competitor, Kmart, Roses began a period of rapid expansion and a shift in its positioning. By the mid-1990s, Roses was targeting large upscale, suburban areas. This left their core customer base confused about Roses; moreover, Roses did not have the operating capital to truly address the market they were targeting. While Roses was trying to compete with Kmart, Wal-Mart swooped up their core business and customers.
Casual Corner and Petite Sophisticate
At a time when more women were going to work than ever, Casual Corner should have been thriving. Moreover, Petite Sophisticate was a destination store for smaller-framed women. However, these stores lost their focus on the professional woman and began to try to compete with The Limited. While Casual Corner was busy being trendy, Ann Taylor moved in to dress the professional woman in classic designs. In 2005, Casual Corner closed all 525 stores.
http://www.usatoday.com/money/industries/retail/2005-11-23-casual-corner_x.htm
Laura Ashley
In the late 80s and early 90s, Laura Ashley was a beacon of sophisticated taste. Design-oriented women sought to cover everything that would stand still in Laura Ashley fabrics. Soon the vibrant florals and subdued stripes began to look dowdy as traditional interiors gave way to sleek Asian sophistication. Laura Ashley was unable to make the transition and just offered their customers variations on the old styles. By 1999, Laura Ashley could not find a buyer and sold its stores in the US for one dollar. Strangely, it also added Pat Robertson, a TV evangelist, as a non-executive director at the same time. I guess the company felt it could use all the prayers it could get.
http://www.independent.co.uk/news/business/laura-ashley-sells-us-stores-for-1-1090332.html
Blockbuster
Founded in 1985, Blockbuster was – as the name implies – one of the biggest brand names in America. On Friday and Saturday nights in the 80s, the only place nearly as cool as the mall was Blockbuster. However, the company took a Draconian stance on fines and memberships that seemed more focused on penalizing the customer than delivering value. A site called Ihateblockbuster.com soon emerged. To date it has:
Members: 4,499
Threads: 6,222
Posts: 198,058
In its heyday, Blockbuster had 3023 stores and 402 franchises. By 2010, it was struggling for existence and was bought by Dish at a fire sale. Soon after, Dish began closing stores, finding the old model was no longer relevant. Blockbuster missed the streaming and kiosk revolutions, and the damage that had been done to the brand made it impossible for them to fight back.
Circuit City
Even though the consumer electronics market was growing, Circuit City was unable to turn a profit. They were too focused on other ventures creating a brain drain that left them unable to compete.
In the mid-1990s the consumer electronic revolution was in full swing. A trip to Circuit City was what Blockbuster had been in the 1980s: a destination. That sort of success bred hubris, however, and soon Circuit City was doing everything from selling cars (most people don’t remember that Circuit City was the founder of CarMax) to operating a commercial HVAC division. This headiness culminated in the very public failure of DIVX, a proprietary DVD format designed to corner the market on DVD rentals. What Circuit City had not counted on was their competitors wanting no part in distributing DIVX and the nasty internal fighting that soon ensued. While Circuit City was busy fighting internally, Best Buy stepped in and targeted their customers. From there, the fall was rapid, painful, and expensive.
Linens-n-Things
As more Americans became homeowners, the home goods market exploded. The Linens-n-Things strategy was to offer pricing gimmicks and coupons to attract customers, which put the company in direct competition with Target and Wal-Mart. Bed Bath and Beyond permitted their individual stores the control that allowed them to hold a differentiated position. The inconsistency of experience and pricing whiplash eventually led to Linens-n-Things being liquidated.
Lessons Learned
-If you don’t focus on your core business or your customer, some one else will (Roses, Casual Corner, Circuit City).
-If your policies are created to protect you from your customer rather than to add value, then your customers will revolt and your brand will be the casualty (Blockbuster).
-Understanding what your brand offers rather than being centered around a specific product or style allows you to evolve with your customers (Laura Ashley).
-Grow smart and with a purpose or you will have organizational “brain drain” and you won’t be able to meet challenges when they arise (Circuit City).
-Gimmicks only create short-term buyers—not lifelong customers (Linens-n-Things).
