Colorado Group Limited, a company that existed in Australia for around 150 years, has recently decreased its’ production after going into receivership in the end of March 2011. The company, which used to be a large retailor with annual turnover of $431 million and 430 stores across the country, has currently closed all of its’ stores with clothing lines, and retained only the shoe lines (Colorado Group Ltd, 2014). As a result of the decrease of company production and cut-down of a whole branch of the company business, more than 1000 people were laid off in different Colorado Group Limited stores across the country (Colorado shuts the doors, 2011). While the business was developing, the company has owned a number of brands and stores: Colorado (fashion and footwear); Williams (budget footwear); Mathers (comfort footwear); Diana Ferrari (fashion/footwear specialist); and JAG (iconic denim-inspired label) (Colorado Group Ltd, 2014). Colorado stores were the most under-performing ones. Currently the company is returning to its’ basics, which is the devotion of the whole business to shoe stores, both online and off-line ones.
After a long period of growth and success, Colorado Group Limited began to loose its’ profits and constantly under-perform over a long period of time, which led to the complex negative consequences described above. The brands owned by Colorado Group Limited were well-known and respected Australian brands with long history, but they still did not manage to maintain stability on the market. The main under-performance is seen in the Colorado brand, while others are more profitable. Among the main problems of Colorado brand there were “depressed spending, online competition and lower consumer confidence” (Fusion rises from the ashes, 2014). Therefore, inadequate management of the company, its’ brands and businesses, which could not adjust to the new requirements of the market can be named as the main problem of Colorado Group Limited, which was additionally influenced by the global financial crisis.
- Industry issues
The world financial downfall of 2007-08 has left its’ footprint on Colorado Group Limited. Although the company was already an under-achiever, the crisis made an additional “hit” on the company and its’ brands. It is well seen from the fact that Colorado Group Limited was delisted from ASX in 2007 and wasn’t able to return top its’ full strength since. The decreased consumer spending after the crisis has had a significant impact both in Australia and worldwide.
- Organizational issues
The organizational issues are clear from the fact that the company wasn’t able to be an adequate competitor on the market, especially – in the on-line sphere. Therefore, company leadership was not able to foresee the growth of on-line market and change the structure of its’ sales. If at an earlier stages Colorado Group Limited would open less stores and devote more time to the development of on-line business, such as advertisement and stores, the company could have avoided a significant fail.
- Discipline issues
Although at a later stage Colorado Group Limited was headed by Kevin Roberts, the ex-CEO of Adidas, it, in fact, required a strong leader open for change at earlier stages of the company development (Janda, 2011). The lack of leadership that would be open for changes and restructuration was one of the main problems of Colorado Group Limited.
Factor 1: the change in buying behaviors and spending habits
After the global financial crisis of 2007-2008 the buying habits and behaviors of people have changed. They began to spend less and devote much less attention to luxury goods than ever before. Although the products of Colorado Group Limited cannot considered to be luxury, they are at the same time cannot be classified as the objects of first necessity. Therefore, with the decrease of overall shopping activity people began to spend less on “what they like” instead of that focusing on “what they need” (Hampson & McGoldrick, 2013). Moral and religious values began to be placed above material things, which resulted in the overall decrease of interest towards shopping and retail industry. What is interesting, even though the financial situation is getting more stable, the change in spending habits of people turns out to be a lasting one, as more than a half of those who have limited their expenditures during the crisis state that this is their new personal spending strategy (Kadlec, 2013). The factor of changing spending behaviors is critical, as it has a direct and significant impact on the development of Colorado Group Limited. One should remember that year 2007 became the most critical time for the company, and afterwards the business only got worse.
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Factor 2: the growth of market competition with the focus on on-line shopping
With the limitation of individual spending habits it is clear that the competition among businesses is rising. In order to maintain the same amount of profits, companies have to spend more time and efforts in order to attract customers. The on-line retail industry is constantly growing. For example, from 2012 to 2013 it has grown 13%, and the numbers constantly increase (Malpuru, 2013). And apparel and accessories comprise a significant part of online-shopping, being the most rapidly growing sector (Schonfeld, 2010). The on-line revenues are able to support off-line expenditures, which is one of the ways in which a company could survive the financial downfall (Center for Retail Research, 2014). Competition growth together with the expanding market, but the problem of Colorado Group Limited was that it did not compete for on-line markets enough, and thus lost the whole battle.
Alternative solution 1: turning brands into on-line retails
Instead of closing a large amount of stores and stopping of the clothing line production, Colorado Group Limited could have moved all the retail on-line, thus, although loosing employees, the company could retain its’ production and retails. Without off-line stores the expenditures would decrease, while there would still be profit from on-line sales. After a while, the company would be able to restore some of its’ off-line stores (Walter et. al., 2012).
Alternative solution 2: re-selling parts of the brands to foreign partners
The company could involve foreign investments, or even introduce foreign partners to the business. Loosing popularity on the domestic market, Colorado Group Limited brands could enter their markets of neighboring countries, such as the states of South-East Asia (Poulsen & Hufbauer, 2011).
It is recommended that Colorado Group Limited strongly enter on-line market with the company’s shoe lines, thus establishing a stronger position in on-line retail industry. Through the strengthening of the company’s positions on the market it is possible restoring Colorado Group Limited to the pre-crisis size.
Rationale & Justifications
It is clear that the global financial downfall, which has not only shaken the positions of many companies, but also changed the consumer behaviors and buying habits of people, had a significant influence on Colorado Group Limited. The company could not adjust to the changes of the market, which has led to the closure of its’ stores and cancelation of clothes lines. It is clear that now the main task of Colorado Group Limited is the establishment of strong position in on-line retail, as this sphere is constantly growing at a significant pace.
- Center for Retail Research. (2014). Online Retailing: Britain, Europe and the US 2014. Available at http://www.retailresearch.org/onlineretailing.php
- Colorado Group Ltd. (2014). Ferrier Hodgson. Available at http://www.ferrierhodgson.com/au/publications/specialisation-case-studies/retail/colorado-group
- Colorado shuts the doors on 1042 jobs. (2011). Herald Sun. Available at http://www.heraldsun.com.au/news/breaking-news/plus-jobs-to-go-in-colorado-closures/story-e6frf7ko-1226075162418?nk=f6b0b44ee23984afe4f1ebd9b5744ff1
- Fusion rises from the ashes. (2014). Financial Review. Available at http://www.afr.com/p/business/companies/fusion_rises_from_the_ashes_1E3qSZjCBm3tJX2V7EorsL
- Hampson, D. P., & McGoldrick, P. J. (2013). A typology of adaptive shopping patterns in recession. Journal of Business Research, 66(7), 831-838.
- Janda, M. (2011). Colorado Group for sale. Available at http://www.abc.net.au/news/2011-04-05/colorado-group-for-sale/2627008
- Kadlec, D. (2013).Scared to Prepared: How the Great Recession Changed Our Spending Habits. Time. Available at http://business.time.com/2013/04/03/scared-to-prepared-how-the-great-recession-changed-our-spending-habits/
- Mulpuru, S. (2013). US Online Retail Sales To Reach $370B By 2017; €191B in Europe. Available at http://www.forbes.com/sites/forrester/2013/03/14/us-online-retail-sales-to-reach-370b-by-2017-e191b-in-europe/
- Poulsen, L. S., & Hufbauer, G. C. (2011). Foreign direct investment in times of crisis. Transnational Corporations, 20(1), 19-38.
- Schonfeld, E. (2010). Forrester forecast: Online retail sales will grow to $250 billion by 2014. Available at http://techcrunch. com/2010/03/08/forrester-forecast-onlineretail-sales-will-grow-to-250-billion-by-2014
- Walter, F. E., Battiston, S., Yildirim, M., & Schweitzer, F. (2012). Moving recommender systems from on-line commerce to retail stores. Information Systems and e-Business Management, 10(3), 367-393.
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