How businesses fail fast -- and learn from it
(MoneyWatch) No one likes to fail. But if you realize you've made a mistake, what should you do?
Pull the plug fast, says Grace Kang, owner of the two Pink Olive boutiques in New York City. Then see how fast you can pivot to something better.
When Kang opened the first Pink Olive in the East Village in 2007, the shop specializing in "whimsical" products had three departments: baby, gifts and "getaway" -- a category encompassing items such as swimsuits, T-shirts and travel items. "I'm from California, and I love being in that warm environment," says Kang. "I always thought it's good to go on little getaway trips." Since she liked the products, she assumed others would too.
But the getaway items didn't sell well. When Kang reviewed her sales statements each Monday, she saw that the category "was really clogging up a big portion of my inventory." Swimsuits aren't cheap. "I could have used those dollars on other things that were really selling out and moving fast." She moved her getaway items at a discount, but she didn't want to rely on sales as a strategy. So after one season, she decided to nix that department.
- Women more likely to ditch dream jobs
- What to do if your kid wants to be an artist
- 6 ways to become more resilient
That left the question of what to put in its place. Baby items always sold well. But after pouring over her her sales numbers, Kang realized that paper products, including cards, stationery and art prints, did too. Although these items were lower priced, she decided to experiment with giving them more space. Once they had more shelf space in the store, sales of these these affordable luxuries soared upwards of 70 percent per year, roughly double the growth rate for other products.
Indeed, it turns out there are tons of people who are nostalgic for high-end paper. "I'd have customers come in, pause for a second and even verbalize comments like, 'I want to capture this all in a box and take it home with me,' " Kang says.
She calls it a "light bulb moment" that spurred her to launch OliveBox, a service that sends out a curated box of paper and lifestyle products to subscribers each month. Though it just launched, Kang says this sister business is doing "very well." Certainly the growth potential is higher than in the old "getaway" department.
Her takeaway? "You can't be afraid to fail," Kang says. "You have to always be trying new things." As long as you move fast and pay attention to what's going on in your business, "the answers are around us."
Photo courtesy of Flickr user trevy