I’m probably dating myself, but if you recall that late ’80s Kevin Costner movie Field of Dreams, you’ll remember the “If you build it, he will come” mantra.
Many folks going into business seem to subscribe to the same theory. If you build a business, surely customers will come and appreciate all of your hard work and efforts, right? Not so fast. Take the recent example of the sad folks at Local Market Collingswood.
As reported by NJPen.com, this long awaited grocery business recently closed after being open for just three weeks. You read that right, just three weeks. The article mentions that the concept and planning took three years. If it takes three years to open a market, I’d say that’s probably the first red flag. Unless you are designing a product that requires a patent, some kind of testing or government approval, no brick and mortar business should take three years from concept to opening. In fact, just before Local Market opened, a competitor grocery store opened just up the street. There is a distinct value to being first in.
Second, Local Market mentioned having a staff of 32, all of whom were paid $14 to $16 an hour. While they were proud to employ local persons and even “three families,” what small business just opening their doors needs 32 employees? Living wages are great, but not if they put the business out of business. $10-12 an hour is better than unemployment.
The co-owner estimated their monthly utilities cost $10,000. Whoa! That is just utilities, not rent, labor or inventory. Their monthly expenses must have been in the range of $50-70k. To even remain open another few months, the market owners estimated they needed another $100,000.
Where was their marketing plan? What was their budget? What was their starting capital? Clearly, a number of elements were grossly underestimated or not well thought out. Also, if you know anything about the grocery industry, you know that it is highly competitive and has thin margins. Within just a few miles of this location were mega-grocers such as Wegman’s and Whole Foods.
Sometimes when starting a business it makes sense to go all in and reach for the stars by dreaming big and making a big splash. Other times, the better strategy is to take it slow and steady and prove your concept while expanding as needed and according to market demand. The problem is, how do you decide which way to go? Unfortunately for the folks at Local Market, they chose the wrong way to go. They built it, and people did not come.