The failure of a direct competitor is always a signal for you to act.
I have had a very varied career and worked in several large and rather chaotic businesses that eventually frustrated me so much that I moved onto other things. Frankly, I’m not sure I was cut out for the corporate life. Some of these companies have been through much change since and it is interesting how the people who got into the most senior jobs in the end where often the folk who stayed whilst others, like me, left to try our luck elsewhere. A lot of power comes from really knowing how to get things done in a big company. A “last man standing” strategy is a risky but proven route into senior jobs, if not the top ones, in many corporate cultures. I think this is particularly true in industries restructuring rapidly and these days there are few changing faster than Retail.
I have been struck recently by the emergence of the same phenomena amongst beleaguered retailers who have prospered as direct competition has disappeared from the High Street. Dixons is doing better these days, after the failure of Comet, and just look at what happened to Sports Direct after the failure of JB Sports. Mike Ashley who founded Sports Direct nearly thirty years ago has just sold £106M of stock at a share price of 662.5p. I don’t blame him when you consider that it floated for 300p in 2007, but then flopped to just 32p in 2008, before the competition left the field of play; it has risen ever since. I even went into my local Snappy Snaps today and had a similar conversation with the owner about how it had also benefited from being “the last man standing” in its particular retail category.
This reminded me of another retailer who claimed market dominance after finding itself in the same position. I wrote about the demise of The Game Group in March 2012 SEE HERE and how it and others, like HMV and Comet, no longer had a viable business model. I said there wasn’t a whole lot of value in being a market leader if there was strongly waning demand for your particular marketing mix. Today, you can still buy CD’s and computer games from shops, the old fashioned way, but this is becoming something of a niche as a stand-alone business, or it is integrated into a wider retail concept. Of course, the majority of music and computer game sales now happen online.
So, is being a “last man standing” on the High Street, or in any market space for that matter, simply an evolutionary step on the road to oblivion, or will some of these businesses survive in the longer term? Will the likes of Sports Direct, Dixons, and Snappy Snaps eventually disappear too? There is no doubt that some retail purchasing decisions benefit from seeing the physical object before purchasing but, of course, the company providing the viewing opportunity doesn’t necessarily benefit from the sale in the end. For most familiar product purchases internet retailers have such economic advantages over traditional shops that the transition to online sales is inevitable. The only variable in my mind is the timing, just how long it will take.
Competition in any market proves demand and when it disappears you should always worry: the failure of a direct competitor is always a signal for you to act, not to rest on your laurels. If you dominate a particular product or service category and demand begins to disappear, because of the appearance of a superior channel, you have to react quickly. At times like this it is a business’ ability to react to market changes quickly enough that dictates its likelihood of survival and that is a function of many things: vision & leadership; scale and therefore the cost and sheer difficulty of transition; affordability; and whether it would be a good investment of time and money – is it worth it? Mostly though it is a function of leadership: someone needs to be looking ahead for icebergs and turn the ship early enough to miss them if you want to avoid sinking.
If you are a “last man standing” retailer in 2014 with a strong and developing online channel, like both Sports Direct & Dixons, you have a chance of surviving. If you haven’t then it is just a question of time, like it is for many senior managers who extend their careers for a while during periods of change but find it hard to adapt to the new order in the end. Of course, for both senior managers and current retail survivors, you are in the money, so make the most of it.