Look down your local high street and I bet it looks nothing like it did ten years ago. Charity shops and coffee shops now occupy the retail units that used to be home to big brands. Then there are household names that used to be part of our daily lives, but are no more.
Huge numbers of businesses fail every year. 20% of new businesses fail in their first year, and only half will still be in business by year five. There are many reasons why – financial, poor management or market changes, for example.
Here, we’ll look at some big British, American and global businesses that haven’t survived or thrived as they once did. And we’ll take key learnings from their experiences, to help small businesses like yours to avoid business failure.
What’s the Main Cause of Business Failure?
The main internal factors that can cause a business failure are:
- Cashflow management
- Poor management
- Bad business planning
- Inadequate market research
- Overtrading.
But over the past few years, there have been extraordinary external challenges to deal with. There’s been a financial crisis, global pandemic, Brexit, high interest rates and natural disasters (floods, fires, hurricanes and more) for starters. Big and small brands have been rocked to their core. Some have adapted and thrived whilst others haven’t survived.
10 Famous Businesses that Failed
We know that startup businesses have a high risk of failure. It tends to surprise us more when big companies, particularly household brand names, shut down. But big and small business leaders can make poor decisions. Looking at the business failures below, you’ll see some common themes.
Blockbuster
Remember the days of video and DVD rental? In its heyday in the early 2000s, Blockbuster had 9,000 stores worldwide renting out movies and video games. That was until the digital revolution came along. Blockbuster’s mistake was remaining resolute in its belief in physical stores over e-commerce and online streaming. Instead of adapting its business model to compete online, it stuck with an outdated proposition which couldn’t compete with the likes of Netflix.
Blackberry
In the mid/ late 2000s, 80 million people worldwide owned a Blackberry. It was the go-to mobile phone for business and personal use at the start of the 21st century. Blackberry Messenger was super popular and its curved design was seen as game-changing. But then along came the incredible innovator, Steve Jobs and his Apple iPhone. It’s new touchscreen functionality and sleek design took over the industry. Blackberry stuck with what it knew rather than evolving with changing technology. From being a market leader, its market share had sunk to 0.2% by 2016.
Remember the Nokia flip phone? In the early days of mobile phones, Nokia was another major technology company. But it too failed to foresee the power of the innovative iPhone, and didn’t compete effectively as advancements disrupted the technology industry.
Kodak
Photographic film company Kodak started back in 1889 and dominated that market for most of the 20th century. Did you know that it was Kodak that created the first digital camera in 1975? But they didn’t promote their revolutionary new product due to fears that it would destroy their primary offering – photographic film. Doh! They missed the opportunities presented by the digital revolution entirely, and competitors like Fuji and Canon reaped the benefits by creating new products using new technology. Kodak went bankrupt in 2012.
It was a similar story for another iconic photographic brand, Polaroid. It went from a huge success in 1991 to a business failure by 2001.
Yahoo
When you want to find the answer to a question online, do you Yahoo it or Google it? In 2005, Yahoo owned 21% of the online advertising market. By 2011, it was one of the biggest webmail providers (behind Microsoft Hotmail) and in 2016 it was the most-read news and media site.
But focusing on their media offering was their downfall. Social media and search were on the rise, and Yahoo neglected this consumer trend. The Yahoo user experience soon felt outdated when compared to competitor offerings. It’s struggling to remain competitive today with a mere 2% market share (Google has 82%).
Borders
In 1971, Borders opened its first bookstore. Borders grew to be huge in America with around 400 stores and over 10,000 employees. Its demise can be attributed to one word – Amazon. But it’s not quite as simple as that. Its business strategy focused on opening more and more physical stores, and it continued to support stores in unprofitable locations. Yes, e-commerce was a big factor in the demise of Borders. But it was its rigid business strategy that didn’t evolve with changing times that ultimately caused Borders to fail.
Toys R Us
Toys R Us stood head and shoulders above the competition at the end of the 20th century. It was a hugely popular toy and baby goods retailer with stores in the US, UK, Australia, Europe and Asia.
It didn’t jump on the e-commerce bandwagon when it was taking off. Instead, the company took the ill-advised business decision to sign a 10-year contract as the exclusive vendor of toys on Amazon in 2000. However, Amazon allowed other toy vendors to sell on its site despite its exclusive deal with Toys R Us. Toys R Us totally missed the opportunity to build its ecommerce offering. It also struggled to compete with other big retailers like Walmart and Target in the US. In 2017, they filed for bankruptcy.
Topshop
Topshop was an absolute institution in its day. The iconic high street fashion brand was a total trendsetter. It knew its customer base and had a strong creative vision for the brand and its offering. Kate Moss had a collaboration with Topshop and the brand even took part in London Fashion Week (unheard of for a high street retailer). But it lost its way. With a change of personnel, it stopped innovating and stuck with a formula that no longer appealed to its young customers. Moving away from its brand values of creativity and innovation was detrimental to Topshop as a business. Coupled with increased competition online and offline, and the Arcadia Group’s huge debt, the now defunct Topshop has left gaping holes on high streets nationwide.
The Body Shop
Only this year, The Body Shop fell into administration. Launched in 1976 by its passionate and inspiring founder Anita Roddick, it was a much-loved British beauty, skincare and cosmetics brand. What made The Body Shop stand out from the crowd was its principles. It was cruelty-free and became a B-Corp organisation. Its mission and values were at the forefront of The Body Shop. When it was sold to L’Oreal in 2006, those values were diminished. It was sold again, to private equity company Aurelius, and it lost credibility. Not staying true to its values proved detrimental to The Body Shop.
Tower Records
The pioneering retail music superstore was the first of its kind. Like its competitor, HMV, it sold music, films and accessories. It was one of the first music retailers to launch an ecommerce site, but it wasn’t enough. It didn’t evolve quickly or effectively enough to compete with music streaming services like Spotify. In 2004, Tower Records went bankrupt.
The good news story is HMV. Having closed its stores, the recent resurgence of vinyl has boosted its fortunes. HMV has recently reopened its famous store on London’s Oxford Street.
Pan Am
Founded in 1927, Pan Am was America’s largest international air carrier. It was seen as innovative, being the first company to introduce jumbo jets and computerised reservations. Its downfall was a heady mix of poor management decisions and irreparable damage to its reputation. Pan Am’s management continued to invest in its existing business model instead of driving the company forward. It was no longer innovative. The company folded in 1991.
There are so many technology companies that we could have listed in this article. Remember the likes of Compaq, IBM, MySpace, Xerox, Netscape, AOL, Palmpilot? Then there are retailers like Debenhams, Woolworths, Laura Ashley and Wilkos. The list is endless, sadly.
What Can Small Businesses Learn From These Big Business Failures?
Entrepreneurship isn’t easy. 20% of small business startups fail in the first year and 30% in the second year. But business is tricky for big organisations too.
There are common themes in the business failures listed above. A lack of innovation and failing to adapt and evolve a business in a changing market is a major issue.
I’d advise any small business to continually review and adapt your business strategy and plans. Keep your finger on the pulse of consumer trends and advancements in your industry to inform your decision-making and the evolution of your business.
Discover the main internal causes of business failure
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