The Importance Of Robust Business Modelling – A Lesson From Retailers

Since the New Year it has been very disappointing to hear of several well known and long established retailers in Norwich going out of business. Clearly the trading environment both before and after January 1st has been very difficult. Before January the market was very competitive, highly price sensitive, and demand for good deals was high because customers knew of VAT rate increases to come. Small independent retailers were often faced with trying to compete with nationwide or sometimes global chains with demonstrably greater purchasing power.

After 1^st January things really seems to change as customers felt the full force of higher fuel and energy prices, higher VAT, high food prices on commodity items, and sadly often some job insecurity within the home. In the background inflation continued to rise at a faster rate than salaries or wages, and many home owners know in the back of their minds that their mortgages will only cost more in the future.

It seems to me that all of this makes it a very difficult trading environment. I am very sure it is much easier to say than to do this, but it does seem to me to only reinforce the importance of understanding ones business model, sticking to it robustly, and adjusting critical resources accordingly. Small businesses and independent retailers clearly don’t have the buying power of national chains or internet retailers, but they are very flexible. They can change the levels of resources they have and the customers they choose to target to meet the climate they trade in.

It is easy to ignore the challenges the environment puts to businesses and to customers, but it at the peril of the business to do so. In difficult trading times it is more important than ever to rigorously understand the business model, understand the constraints it places on the business, and most importantly translate that into tangible practical action that protects the business. Not easy, but essential none the less!