The “Second Shop” Phenomenon

One of my customers has a very successful retail business which has been trading for over a decade in a large town. Things had gone so well that, sometime before I met them, the owners decided that it was about time they expanded their business and they got themselves a second shop. About twenty miles away was a similar sized town and so they chose a good central location and invested quite a lot of money in setting it up. After three years trading they closed it, having sold very little. They did not understand why things had gone so badly for them.

I helped them to see that actually, whilst both towns seemed similar, the demographics were in fact quite different and their clients were predominantly from a customer group poorly represented in this second town.

This may seem a rather basic oversight, but that’s why I like to quote this example. It was a basic mistake but not something that had occurred to them at all. It is common for businesses to make such apparently simple mistakes because often there is not much rigour applied to decision making of this sort (see earlier entries to this Blog). It may surprise you just how often businesses do not really understand the demand for their products and services and how it varies.

The business owners had entered uncharted territory, at least for them and did not get help in this important investment decision for their business until it was too late. I was able to work with them to develop a more successful growth plan which they have now implemented with great success.

Interestingly, they told me later that they had been prompted into making this move by competitors starting up near by. Established by people who could see there was excess demand and a chance to share it with relatively low market risk. My clients would have had more success if they had done much the same thing, which was one of the themes of the strategy that we actually developed with them.

This story emphasised two important things: how easy it is for very successful business people to make relatively simple mistakes when they are working outside of their experience and comfort zones and the importance of demand modeling in most directional business decisions. Really understanding demand is a prerequisite for a growth plan that you then have half a chance of delivering.

If you have an important decision to make for your business and little experience of that type of decision, think Circle Rule™ and get help!

Mark

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