Payless ShoeStore Inc. will close its 2100 U.S. stores – reported to be the largest-ever retail liquidation. The chain is preparing to make its second filing for bankruptcy protection, known in bankruptcy parlance as a Chapter 22.
During its first filing, Payless eliminated debt from its balance sheet by providing equity stakes to lenders in exchange for debt forgiveness. Senior lenders received a 91% equity stake in the reorganization; junior lenders, the remainder. This is another one of those stories about a company that was riding high at one time – in the 1990s – and sold 250 million pairs of shoes per year. The problem with being a success in the sales arena, however, is to figure out how to stay successful. Maintaining the success that one has achieved as a company requires continuing to act as though one is the same entrepreneur that started the enterprise to begin with. And, this is difficult to do – requires constant attention and vigilance to make the corrections needed in order to stay at the top of the game. Most companies that achieve success then float along and assume that all will be well if they keep on doing what they’ve always done once the success was achieved. That is, they tend to become complacent and assume that people will continue to come to Payless and shop there, that the company will continue to be prominent in shoe sales. The only problem with this approach is that change happens on a daily basis, and unless a company is monitoring that change regularly and responding to it, the company winds up like Payless, Kodak, Montgomery Ward, Woolworth, Circuit City, Blockbuster, Borders – and many others. In order to stay in business and to stay successful, a company must monitor the changes going on in its particular retail environment incessantly; with Payless, that hasn’t happened. In recent months, the company has been working with a financial advisory firm to explore the sale of the business. It’s said that the company has “suffered from inconsistent pricing in recent years,” whatever that might mean. If I were guessing, I’d say that the company leaders failed to ensure that the prices in one store matched the prices of shoes in another of its stores. It’s also mentioned rather frequently that the company had competition in recent years from on-line shopping as well as from large retail companies like Walmart. But, then, Payless, itself was a large retail company – they simply failed to see the handwriting on the wall, to notice that there was more competition developing, and the shoppers, unless wooed successfully, would find other ways to buy shoes. I have to admit that I’ve never been inside a Payless store, but I have heard former customers comment that, for years, Payless was the “go-to” place for shopping for their children’s shoes and while there they’d buy their own as well. So, what made that change? Clearly, those children have now grown up, but it’s possible that they have children of their own – so why didn’t they continue the practice of shopping at Payless? The simple answer is that Payless didn’t excel at making it “cool” to shop there any longer, while other merchants did. Certainly, there is still the need for inexpensive shoes – that’s why shoppers go to Walmart, TJ Maxx and other such stores. With both of those merchants, however, it is also possible to buy shoes at the same time that one makes other purchases – it’s not a one-item store. Consequently, with the onset of stores that seemed to offer more, the challenge was for Payless to figure out how to engender loyalty among their shoppers. For some reason, that did not happen. But it certainly seems that it could have.
ALL THE MOVING PARTS – customers are one of the five essential elements that’s necessary for a company to make a success of its business and to continue with that success. Ensuring that the customer is pleased while they’re shopping and willing to tell others about their experience goes a long way to ensuring a loyal following. The loyalty of shoppers is an intangible element that has to be strived for at all times.