When A Micro-Business Crumbles

Here's one ... this category had problems last year.

• 4 Years Ago = $6.1 million.
• 3 Years Ago = $6.7 million.
• 2 Year Ago = $6.7 million.
• 1 Year Ago = $6.7 million.
• As of Today = $5.9 million.

The decrease happened in a growing business. This means somebody messed up. If customers like other categories and this category is struggling, it's a merchant who messed up.

I like to look at my "Class Of Report" next - analyzing merchandise classes over time. The story becomes obvious when we look at the table.

Look at the classes from three years ago and two years ago. Tell me if you see a problem?

The problem is sales in the year ending "today".

• 3 Years Ago Class = $1.4 million to $0.8 million.
• 2 Years Ago Class = $1.4 million to $0.8 million.

A "normal" drop-off might have been 20% ... these two classes dropped off by more than 40%. In other words, "somebody" decided to discontinue a bunch of items from these classes, and the business got hammered to the tune of about $600,000.

Look at the number of new items in the class ending today. New items went from 176 the year prior to 250 ... regardless, demand decreased by $100,000.

Look at the price of new items across time ... from $61 to $76 to $99 down to $86. What impact did this have? Quantity of items sold are half of what they were three years prior.

Yup - this is a merchandising problem.

It gets worse.

Customers who bought from this category exhibited the following behavior the following year (within the entire business, not just within this category).

• They were 6% more likely to repurchase next year.
• If they repurchased, they spent an additional $35.00 next year.

The merchants hurt the business this year.

The merchants hurt the potential of the business next year.

When a micro-business crumbles, problems cascade.

Every business has a set of cascading micro-business problems.

Are you looking for these problems?