OPINION: Part II: Dealing with failure – kill the worst performing SKUs

The three key ideas I took from visiting Malcolm’s with Jai Singh and Sid Sidhu on our Coventry Study tour were range, change and dealing with failure. When Pinda told us that they had experienced some significant failures on their own journey to building the successful business they now have I was surprised. I have found that people rarely admit to past challenges, I know from my own personal experience that it took me years to confront my life-changing failure.

I regularly hear people ask, “What does success look like?” I don’t recall being asked the flip side of that question, “What does failure look like?”

Failure is something that every business needs to understand because there is a degree of failure in every enterprise, from products on your shelf collecting dust to eventually closing down – even high street shops like BHS and My Local, who recently closed, are not immune.

When I worked for WHSmith, I learnt that buying the wrong products is an inevitable part of doing business in a fast-moving market place. I also learnt that WHSmith had a process for dealing with these failures: the January and Summer sales. Behind these customer-facing events, there was the branch annual budget process that focused the store managers’ attention on sales and costs, including the price of selling through the failing lines.

The rule was that if the product had not sold for six months and it was not returnable to the supplier, it was reduced by 50% and put in the sale. A simple and easily executed instruction that kept the shelves in each of their hundreds of stores productive.

Paul and Pinda told us that they were removing their poor performing products in a similar way. Every line is measured against constructed rules to check their value to the business. Lines that don’t make the grade are removed and the space is used more productively, either for double facing the best performing lines or to make space for new lines.

What is your policy for recognising and dealing with your failing products?

For Part I in our series of dealing with failure, find out Steve’s take on managing risk.