Tuesday, August 23, 2011

The Bigger They Are, The Harder They Fall | Boston Newborn Photographer

I know, I know, another blog post about cost, but this one is interesting, I promise!

In a world where 99% of photographers quit within 2-5 years in business due to their inability to compete with "Loss Leader" models, such as Walmart and Sears, it comes as quite a surprise to read THIS article. What is it about? It states that Walmart has shot itself in the foot and is now on a downward spiral that leads to bankruptcy. The reason given is the very reason why photographers who do survive have much higher prices than Walmart. They're realizing they need to cover costs in order to survive. When your only claim to fame is "lower prices", you eventually get yourself to a point where you need to raise prices in order to cover costs, which means your claim to fame is lost, leaving you with nothing but angry ex-customers who think you're raising prices "just to be greedy".

The reality of the matter is, when you take a loss just to get customers in the door, like Sears, Kiddie Kandids, Walmart and the like, you HAVE to make up the loss somewhere or you go bankrupt. Places like Sears make up the loss in the rest of their store (which is why "loading the images" conveniently takes 30 minutes, so they encourage you to look around. Here's a clue: it actually takes about 2 minutes to load the 10 images they take). However, with Walmart, their entire business model focused on lower prices. EVERYTHING was lower at Walmart. So when they stopped expanding, stopped bringing in new customers, they lacked the ability to make up costs elsewhere, forcing them to raise prices. And what happened when prices were raised the few cents it took to cover costs? Factor in the fact that gas prices are astronomical and you find that they lost the loyal customers who drove the extra mile or two for the additional savings.

I guess it makes it easier to swallow the "you're too expensive!" comments now that it's come to light that Walmart hasn't magically avoided the "rules" of profitable business, they've only delayed the inevitable.

You know what they say, "the bigger they are, the harder they fall".

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