Recession Story 2008: The Bombay Company
Growing up, my mom’s favorite store to shop at in the mall was the Bombay Company. Whenever we had a chance to visit the mall, we would always stop by this mysterious store to for her to look at the beautiful furniture. We never had much money, so purchases were rare. But I have many distinct memories of walking in, looking at the wooden butler at the entrance, getting too rowdy and my mom telling me to be quiet and careful, and generally being impressed by this popular store.
Well, sorry mom, but the Bombay Company is gone. Economists and politicians are saying that we are in a recession, and the recent wave of bankruptcies in the retail sector (NY Times), especially in furniture, is a strong indicator.
Bombay, a chain with 360 stores, was considered a success in the furniture world, after its sales surged from $393 million in 1999 to $596 million in 2003.
Then the chain decided to move most of its stores out of enclosed malls into open-air shopping centers. It started a children’s furniture business, called BombayKids [Given that I never liked the store as a kid, this does not seem that smart...]. And it started carrying bigger items, like beds and upholstered couches, with higher prices than its regular furniture [which were already very high!].
Consumers balked at the changes, hurting Bombay’s sales and profits at the same time that its expenses for the ambitious new strategies began to grow. The timing was unenviable: By early 2007, the housing market began to falter, so purchases of furniture slowed to a trickle [ouch!]
The company was running out of money, but banks refused to lend more. “They did not want to take the chance that we might not repay the loans,” Elaine D. Crowley, the chief financial officer, said in an interview. [Probably a wise move, on their part]
In September 2007, Bombay filed for bankruptcy protection. The highest bid for the company came from liquidation firms, who quickly dismembered the 33-year-old chain. Bombay, which once employed 3,608, now has 20 employees left. “It is very difficult and sad,” Ms. Crowley said.
Ok. Hold on. In six months, this 33-year old company with over $500 MM in annual revenue went from 360 stores and 3,608 employees to essentially nothing!? Wow. Thirty-three years of sales, stores, and employees. 3,600 paychecks. 360 stores. All gone in less than 2% of the time it took to get there. A couple wrong moves, combined with some unfortunate market turns, and it is all gone!
Personally, I see three strong principals that are illustrated in this story:
- Watch Diligently. In business, it is critical to be vigilant and to watch market trends like a hawk while planning wise strategy to build for the future. Market trends and customer demand can quickly change, and you must be willing to change your entire business to adapt.
- Save for the Tough Times. If at all possible, store up some cash for the tough times when the debt and credit markets are not flowing freely to your industry. The same applies to startups: raise enough to take you through the rough economic times, and keep your burn rate low to draw out your cash longer!
- Success is not Forever. Over 300 stores and 3,000 employees did not stop the Bombay Company from going under in less than six months.
