The nightly news is full of reports on companies going out of business or struggling during this difficult economic period. Its natural and convenient to place the blame for what has transpired on the recession we are now (hopefully) beginning to climb out of. However, digging a little deeper into the operations of some of these firms and the management decisions made, one gets the sense that there is something else going on:
- A major catalog retailer sends out its Spring catalog, but fails to load that new inventory into its web back-end in a timely manner, so thousands of prospective buyers get errors when entering new product numbers. This occurred for the prior catalog run as well. Thousands of catalogs get thrown out with no purchases made, and the retailer is soon operating in bankruptcy, citing the recession.
- A popular restaurant has long lines for a table every night, and its waiting patrons remark that it must be immune to the economic downturn. A few months later it is closed – the combination of high lease rates and bad expense management required a booking rate beyond anything possible with the actual physical space.
- A clothing store chain is sold to investment firm after investment firm, each taking out cash, resulting in an organizational structure that is so highly leveraged it would need a hockey-stick growth curve to meet its new debt obligations going forward. In short order all the stores are boarded up and thousands of long-term employees are laid off. Loyal customers drive by and remark that it must have been another victim of the recession.