Some time back in the early morning I wanted to buy magazines at a stationery and assorted non-foods and gifts store in a large shopping centre. It was 9 AM and the store was still closed. I waited together with a small group of other potential customers for the doors of the store to open. Staff were in the store as well as security but there was no sign that anyone was going to open the shop. After about 15 minutes I gave up as did almost all the other potential customers.
This flagrant disregard of customers was a worrying sign. The same chain of stores had a few years back gone into near bankruptcy and fortunately had been pulled back from the brink of disaster. Now one wondered what was going to happen next.
You don’t need a business degree to spot that a business is in trouble. Just walk into any business and it’s easy to spot things that are wrong. It wasn’t only not letting customers into the store on time that was a problem. But I’ve mentioned this one because it’s a ridiculous problem. How can you do business without customers? The other signs were no visible presence of management at other times that I had bought from the store. Check out tills that weren’t working. Cashiers taking inordinate amounts of time serving customers meaning you have to wait and wait and wait to be served. Pricing that is much higher than other retailers. Downsizing of stores in shopping centres because of the inability to trade in larger spaces with higher shopping centre rentals. A mix of merchandise that is no longer relevant for the times.
It wasn’t a surprise when one of the so-called business magazines came out with an article on this same retailer and its parent company saying that they now find themselves in dire straits. Bloomberg has indicated that the Eurobond market has ramped up the yield on this chain’s notes. The notes have been downgraded to a deep-junk CCC + rating. The issuer of the bonds is described as being “vulnerable”.
The time has come for a hard look in the mirror for this clothing and non-food goods chain. If their business is going to be rescued, it’s not only on the financial debt and equity side but also in its operations. Poor performers must be told to leave. Managers with the expertise to run retail must be brought in. Store size and merchandising mix need to be changed. A big turnaround strategy is needed to prevent this retailer from going to the wall.
I wouldn’t take as much interest normally in such a large chain group but I suppose I have a nostalgia for working at one of the coastal stores delivering newspapers for them in my early teens. But my other interest is to show how only a few leading indicators at store level can provide you with a pretty good picture of how a business is doing. Most small business owners will be in their stores managing their business compared to the large chains where managers are not visible. Even if you expand as a small business and have several other branches, it’s important to visit them weekly to stay in touch.
While the operational side of running a small business will consume all your time once you have got your business up and running, if you haven’t yet started a business of your own it’s important to know what you doing in the design and conceptual phases.
If you are thinking of starting something of your own from scratch and need to know how to go about doing it, you can find out here.
