As holiday shopping picks up steam with Black Friday, we are reminded that Toys-R-Us has shut down and shoppers must buy their toys elsewhere this year. Despite the dire fate of Toys-R-Us, however, throngs of children still have toys on their holiday wish list. So, new outlets will have to handle the demand once met by the now defunct toy chain. The media tells us that several retailers are interested in serving this demand, including Wal-Mart, Target, and even Meijer, a chain more known for food.
This kind of push to serve the demand abandoned by others is not unusual, nor is it new. For example, decades ago when the airline industry was deregulated, the largest carriers abandoned some smaller less profitable geographic markets, and smaller regional carriers moved in to serve the market need.
This is something companies must think about whenever they consider shutting down or de-emphasizing lines of business that have experienced a slowdown. They must ask themselves if the slowdown really means they should abandon that aspect of their business. Or, would doing so mean they are merely moving out of the way so competitors can thrive by picking up the castoff demand? Companies need to assess these kinds of issues when they shut down lines of business. Likewise, companies should pay attention when competitors shed lines of business, since those areas abandoned by others may be excellent opportunities to profit from now unmet demand. In other words, there may be valuable treasure in what another business shuts down.
These kinds of issues can come into play regarding GM’s latest brand pruning announcement. According to a recent Business Insider article titled “GM will kill off these 6 Chevy, Buick and Cadillac sedans when it idles select factories in 2019”, GM announced that it is eliminating six car brands, essentially cutting sedans, which exhibited a slowdown, and is instead concentrating on “crossovers, SUVs, trucks and electric vehicles”. The article reports that one brand slated to be eliminated by GM is the long popular Chevy Impala, a sedan whose sales are down about 13%. According to the article, traditional sedans have “been losing sales to crossovers and SUVs for much of the last decade”.
As the article explains, however, “While sales have slipped, many of GM’s sedans win critical acclaim. For example, the current generation full-size Impala has long been praised for its comfort and refinement and has frequently appeared on Consumer Reports’ ‘Top Picks’ list.” As I see it, this raises an interesting question: is GM’s move to do away with still highly regarded products an opportunity for other auto makers to fill a need that GM will no longer meet? Granted, that need apparently represents a smaller market than it once did. But, is there room in the sedan market for something akin to what is happening to toys now that the struggling business of Toys-R-Us is gone? That’s the kind of question that must be evaluated, not only by every company considering changes when sales slow, but also by their competitors.
It is beyond the scope of this blog post to answer that question for GM. After all, there are situations when product lines do reach a point where it’s time to move on. But, it is important to remember that not all slowdowns signal a dead business. And, there may still be life in that slowing business, whether for the company experiencing the slowdown, or for a competitor who might find treasure in what someone else has abandoned.