The fall of Zavvi along with several other soon to be notable high street absentees and the troubles the banking system has been going through has got me thinking.

First I want to tackle failure of business processes. Zavvi's main reason for going out of business, according to the press was a domino affect from Woolworth's going into administration. Zavvi relied heavily on Woolworth's wholesale as a source of DVDs and CDs. From the outside in, it seems Zavvi operated with wholesale distributors of goods rather than dealing directly with manufactures. There's nothing wrong with that of course, however, if you deal with a middle man who goes out of business than you're left scrambling looking for a replacement at the same costs. No doubt, if you have one middle man, you've probably aligned prices closely (albeit probably a given percentage above) the distributor.

Why wasn't this adequately highlighted as a risk? Why only have one supplier? If you must have one supplier, at least have a good idea of alternatives at the drop of a hat if that risk is realised.

This comes nicely into my second point, it almost seems that Zavvi have suffered a misapplication of the Toyota Production System in that they pulled stock into their store as to minimise inventory, and therefore waste. Keeping the time between ordering from the wholesaler to getting into the customers hands is a worthy goal to aim for. After all, unsold stock is not money in the bank. But again, this raises the risk of only having one core supplier.

Moving onto Woolworth's itself, I find myself asking what Woolworth's actually sells and the only answer I can fathom is that it's a general store. They never specialised in anything, meaning that they never had the buying power to lower their prices and pass the savings onto their customers leaving them with a breadth of stock. In my opinion that stock wasn't a breadth of high end stock, it was a breadth of medium to low end goods, odds and ends and overly priced electrical/entertainment goods. If I needed a new set of tea towels, brilliant, but for the floorspace they wouldn't be able to justify just selling bits and bobs like that.

This leaves me asking, who are your customers, and what differentiates you from your competitors?

Finally, how can you expect to survive charging the prices both Zavvi and Woolworth's seemed happy to charge? In both stores I could find a product, say a DVD, from a fairly well known internet only business, play.com, cheaper that wasn't even on sale than on the highsteet in post Christmas/liquidation sales. Play.com does advertise nationally on TV, radio and in print, and although I won't argue the brand awareness between Woolworths and Play.com, it's not like people couldn't find Play.com.

I guess after all is said and done, as a business you need to know your customers, know your competitors, know your business processes and understand your risks and how to mitigate those risks. On top of that, I'd like to add you should always be asking these questions, always looking for improvements and changes.

Just look at Tesco, boy have they changed! They seem to know what their customers want, and are constantly changing, adding new product lines in store and online.