I have always assumed that what was true on a micro level, small stores, was probably true on the macro level, large corporations. At least, certain fundamental principles and concepts.
Which is why I have always been skeptical of huge, out-sized profits, and the huge, out-sized bonuses that go along with them.
I've seen this happen over and over and over again through the years.
A new competitor opens, usually with the announcement that they will do business 'right' (thereby implying, I'm doing it 'wrong.') They are newer, shinier, with better inventory and cheaper prices; they are nicer and handsomer than me.
Soon I get reports about how 'well' they're doing, how much money they're making. They are expanding, buying a van, going on trips to trade-shows.
Inevitably, my customers will start to question me: why don't you do such and such, like they do? Look how successful they are!
(Not to get into details, but the answer to every 'why don't you' is always, time, energy, space and money.)
And then, the worm turns.
I start to get reports that "they don't have as much as they used to..."
Or..."the owner isn't there as much, and he's kind of grumpy...) (...and not as handsome, I presume.)
"They raised their prices...."
Heres' what was happening behind the scenes. They were taking those marginal profits and instead of reinvesting in the store, they were churning the money into more product that they turned over fast and didn't make a profit on which they took the money and churned it again.
Or they spent the money on themselves or on unnecessary flourishes in their store.
What they weren't doing -- reinvesting in the future. Getting a realistic margin that allowed them to replace inventory, pay the bills.
It's relatively easy to make short term sales, if you don't care about margins and reinvestment.
Which is why I have always been skeptical of huge, out-sized profits, and the huge, out-sized bonuses that go along with them.
I've seen this happen over and over and over again through the years.
A new competitor opens, usually with the announcement that they will do business 'right' (thereby implying, I'm doing it 'wrong.') They are newer, shinier, with better inventory and cheaper prices; they are nicer and handsomer than me.
Soon I get reports about how 'well' they're doing, how much money they're making. They are expanding, buying a van, going on trips to trade-shows.
Inevitably, my customers will start to question me: why don't you do such and such, like they do? Look how successful they are!
(Not to get into details, but the answer to every 'why don't you' is always, time, energy, space and money.)
And then, the worm turns.
I start to get reports that "they don't have as much as they used to..."
Or..."the owner isn't there as much, and he's kind of grumpy...) (...and not as handsome, I presume.)
"They raised their prices...."
Heres' what was happening behind the scenes. They were taking those marginal profits and instead of reinvesting in the store, they were churning the money into more product that they turned over fast and didn't make a profit on which they took the money and churned it again.
Or they spent the money on themselves or on unnecessary flourishes in their store.
What they weren't doing -- reinvesting in the future. Getting a realistic margin that allowed them to replace inventory, pay the bills.
It's relatively easy to make short term sales, if you don't care about margins and reinvestment.