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Planning To Close A Store?


9/6/2012
By Gerald Wheelus

 
Gerald Wheelus
Fortunately with my current company, we’ve not had to close a store. But, in a previous lifetime, we had to close a few stores for a numbers of reasons.

It’s never easy to waltz in and tell the staff that they have a few days left to work. “And, oh by the way — could you stay and help us pack this stuff up and move it?” That’s not fun. Large corporations have an easier time shutting the doors as they have a way to liquidate the inventory, furniture and fixtures and other assets that are included with the overall store assets. An independent jobber is faced with the remaining debt that was incurred and what to do with the investment that is left sitting there.

When any store begins the closing process, it should be of no surprise. Most people see the warning signs. However, it does happen to profitable and solvent stores from time to time. 

In my experience, one closure happened when the lease came to a close, real estate was hard to come by and too expensive to buy, so the only option was to close. That may sound strange that a huge company could not afford to buy property, but a smart business with smart people will not go and buy property that will require a 20-year payback. Another time, we closed a store due to competition. When you have a town of about 10,000 and all the top-name stores are there and one more decides it’s a good idea to set up shop, someone is going to lose. We considered the overall market in that area as being $250,000 per month and, at best, you get your piece of the pie with seven other competitors, each of whom are cutting the profit margins to the bone. You have to pick your battles wisely.

Sometimes, it’s just time to move on. A store in a poor location with no good options can be a difficult one. These are the most difficult as they may be great profit centers but the location has become inadequate. We can see it’s going to get worse, so we choose to cut it loose, much like the coach who wins the championship and quits while he or she is on top.

It makes things easier when a company has many stores and some are in close proximity to the one they are going to close. They will be able to easily absorb staff into another nearby location, thus not having to put anyone in the unemployment line. A large company can more easily absorb the excess inventory as they can make a simple transfer of the inventory to a store that can turn it — and not having to liquidate it for pennies on the dollar.

Moving the major lines comes easily. But what about all the little stuff that tends slow the closing process down? It’s not as simple as loading it on a truck and shipping it back to the warehouse. The small stuff usually is not neatly packaged and in most cases, is just loose in a bin of some sort.  Then again, it has not been properly inventoried for years and that is a major nightmare in itself. The largest casualty to a store closing is the human element. Many times over, it is the employee who takes the biggest loss of all. Many times the employee has been a long-time servant to the company and has sacrificed a great deal to keep their individual standing with that same company. When it’s logistically and financially feasible, a loyal employee will easily be transferred with not much to do about it. However, it is never fun when the employee has to be given a pink slip.

Stores come and they go. Inventories can be moved and liquidated, furniture and fixtures can be stored for the long-term greater good of the company and employees know that there is a real possibility of a failure in business at some point. But having an exit plan for a store can not only help the management work through many issues in advance, but make for a smoother transition if the need to close a store should arise.












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