If anyone has had a child in the past decade, you may be familiar with a brand called Gymboree. I used to even take my daughter to their play stores to take music and play classes when she was a baby. However, I most heavily relied on the brand to outfit my daughter as she progressed from infant to toddler to kid and now edging towards tween!
The last Gymboree store in my area closed in April of this year. Of course, I took time to go stock up on her future sizes, as my love of their products and prices still exists! This was a very hard thing for me to swallow. How did a high-quality kids’ clothing store file for bankruptcy? What happened? Could it have been prevented? Can we learn anything from it, and how does it apply to insight?
Why Brands Fail
The main reason Gymboree failed was too much debt. In 2010, Bain Capital acquired the company for $1.8 Billion, and they tried to grow and expand too quickly by opening 1300 stores and racked up too much debt at the wrong time. For example, during this time, industry mall conditions were not favourable for this approach, as we know, online retailers were aggressively growing during this time. Think Amazon.com! The business world debates what the main issue was, but it seems that even though the brand had value, they had a bad corporate structure that brought them down.
This story plays itself out many times, especially among retailers, which is one of the most volatile sectors in the S&P 500. US online sales account for 13% of the total retail sales according to Forrester Research. A lot of retailers have adapted by growing their online channels and transforming the customer experiences, but many are not doing enough to survive. In fact, according to Yale Professor, Richard Foster, S&P 500 companies’ life cycles are becoming notably shorter and are predicted to last only 12 years by the year 2027! To give you some perspective, in the 1980’s and 90’s, the duration of a brand was closer to 30 years. To add insult to injury, he also predicts that 75% of S&P 500 companies will be replaced in the next 10 years.
What’s driving this shift is the pace of change in both technology and the economy. According to a study conducted by Innosight, companies are missing opportunities to change either because of a slow response or they are applying legacy models to new markets, or they are not investing in new growth areas. Additionally, we are seeing new disruptive business take hold of the market and take off!
Lifesaving Insight-based Strategies
So, how does insight play into all of this? Are companies’ C-suite leaders basing growth strategies on the present business models like Gymboree did, or are they taking into consideration the fact that the future will be different? In order for brands to adapt, they have to implement policies and shift resources to better prepare their businesses for the disruptive future. It’s important that they start paying attention to early signs of change.
And this is where insight comes into the equation; it’s paramount that brands study customer habits and behaviours to inform their future strategies. Perhaps Gymboree could have asked its’ consumers where they prefer to shop and why in order to gain a better understanding of their shopping habits? Perhaps this would have helped prevent Gymboree from deciding to open 1300 stores at the time when brick and mortar retailers were getting headwinds from online retailers.
Discovering the Value of Insights
These days, there are many ways to conduct fast, relevant, and agile insights to help inform faster decisions. For example, for a brand like Gymboree, insight could be the answer to bring them back from the dead. Gymboree is using Insights by directly asking their avid fans, like me, qualitative open-ended questions to gain a deeper understanding of why we love the brand so much, what our favourite collections were, and anything else consumers feel is relevant to tell the brand. They have even asked for their super fans to share photos of some of our kids’ favourite Gymboree Outfits!
This is such a smart move on their part and will allow them to get direct hands-on feedback from their most important customers, the super fans who will now become an integral part of their potential resurrection. If they pull this off then they could become a case study of how insight can act as a figurative defibrillator for dead or dying brands.
At FlexMR, our core belief is that every decision a brand makes needs to be backed by research in order to survive in today’s disruptive world. We have developed an entire technology platform with this goal in mind. We feel that C-level executives and other decision makers need to use insights when making decisions about the direction of their company in this fast-paced world we live in, or it is highly likely it will become one of Richard Foster’s stats and fall into the 75% of companies that don’t exist in 2027. The Gymboree story could end up with a happy ending, but it sure would have been easier had insight been given a seat at the proverbial table!
Heather has 16 years' experience in the market research industry, over which time she has worked closely with major brands such as MillerCoors, P&G, Welch's and Philip Morris. This, combined with her natural ability to build rapport, gives her a deep understanding of how research can help our clients meet their business goals.