How To Not Be Blockbuster (And Other Failures, Like Netscape And Sears)

Starting a business isn’t an easy task, no matter how small it is. Unlike employees, entrepreneurs are faced with uncertainty ahead of them. In fact, a study found that 20% of small businesses fail in the first year, 30% in the second year, 50% after the fifth year, and 70% fail in their tenth year. However, it turns out that big companies aren’t immune to failures as well.

History has taught us over and over again that in business, no company is ever too big to fall. From Yahoo, Blackberry, and Nokia, we’ve all heard about the tales of how those once-dominant companies fall from grace. But luckily for them, they still survive even though not exactly as big and as profitable as they were before.

In this article, we’ll take a look at 5 big brands that weren’t as lucky and actually had to file for bankruptcy. The reason for their demise varies between one another, and we sincerely hope that you can take valuable lessons from the death of these brands [link to infographic] and apply it to your business to make it even better.  

Blockbuster

Blockbuster was the main player in the DVD and video game renting industry. Founded in 1985, the company once had 9,000 stores across the U.S and $6 Billion yearly revenue at the height of its success. In 2000, a small startup called Netflix offered a partnership where Netflix would take care of Blockbuster’s online business. 

Being a big brand and an industry’s market leader that it was, Blockbuster turned down the offer. What happened next is history. Ten years after turning down Netflix, Blockbuster went bankrupt and Netflix now worth billions of dollars.  

The reason for its downfall

Blockbuster was doing really good and being too comfortable at its own success, they failed to see the future. Instead of expanding its business to digital, they just kept wasting money on their offline stores.

On the other hand, Netflix saw a weakness in Blockbuster’s business model, which was the fees for late return, and created the monthly subscription model where customers only need to pay once a month to watch an unlimited amount of movies. 

This and the fact that people don’t need to leave their house to rent a DVD anymore helped Netflix in running Blockbuster out of business.

The lesson of the story 

When you’re on top, don’t be arrogant and think that you’re invincible because it will cloud your judgment to see other opportunities or threats. Keep learning and keep finding ways to grow your business. 

Sears

This is another case of an extremely old company that failed to adapt to changes. Sears was the Amazon of the 1890s when they first created its product catalog, where people can order things and have the goods shipped to their home. 

This was the innovation that no other company did at that time, and helped Sears rose to prominence while eliminating other smaller general stores. 

They opened their first department store in 1925, selling almost everything from home appliances, electronics, to men and women’s fashion products. In the next few decades, Sears asserted its position as the leading company in the retail and department store industry.  

Then in the 80s and 90s, Walmart came along and took over as the leading retail store company in the U.S. Things were starting to go downhill for Sears, and the new online business model by Amazon in the 2000s put the final nail in the coffin. Sears filed for bankruptcy in October 2018. 

The reason for its downfall

So, what went wrong? How can a 132-year old company fail? The simplest way of putting it is because Sears stopped innovating and became stagnant. The problem with most big old companies is that the business model is rooted too deep and for too long, making it hard for them to change their ways of doing things.

Take a look at its mortar and brick competitor, Walmart. When the online department store model by Amazon became a hit, Walmart reacted well and added an online service to its already well-developed offline business. When Sears realized its mistakes, it was too late.

Several attempts were done to revive the struggling company, one of them was to divide the company into 30 divisions and let them compete with each other. It turned out to be a fatal mistake, as this bold change only worsened their financial management and increased unnecessary costs, leading to its eventual demise.

The lesson of the story

Don’t ever stop creating new innovations and different ways of doing things. Sears was and Amazon is a pioneer in the retail industry, and that’s what made them stand out from their competitors. 

Netscape

Before Google Chrome and Safari even existed, there was Mosaic. This browser, who later changed its name to Netscape, was among the first web browser during the early days of the internet. By early 1995, Netscape was the leading gate to the internet with no apparent competitor. 

However, unknown to the public and Netscape itself, Microsoft was secretly working on its own web browser to compete with Netscape. In August 1995, Microsoft released Internet Explorer 1.0 and the rest is a history of the browser war between Netscape and Internet Explorer. 

While Netscape was a paid service, Internet Explorer offered a free service to the public. This caused a massive drop in revenue and market share for Netscape. While struggling to keep itself stay afloat, the browser was eventually purchased by AOL for a whopping $4.2 billion.  

Unfortunately, Netscape still failed to compete with Internet Explorer and the division was eventually shut down by AOL in 2003. As a consolation, however, Netscape open-sourced its web browser and eventually gave birth to Mozilla Firefox.

The reason for its downfall

There are several factors that led to the demise of Netscape. The first one is the fact that Microsoft could offer a free web browser. Netscape charged its users because it was the only source of income for them, while Microsoft can offer Internet Explorer for free because they mainly sold operating systems (Windows). 

The second factor is because Netscape lost its focus. When Internet Explorer was catching up, Netscape panicked and tried to stuff down as many features as possible. Netscape Communicator 4.0 came with a web browser, an email reader, a web page editor, a conferencing tool, and Netcaster. 

On the other hand, Microsoft focused only on making Internet Explorer a web browser and nothing else. As a result, the Netscape browser became laggy and slow, further convincing its customers to move away.

The lesson of the story

Take it one step at a time, don’t force something when you’re not ready yet. Always give the best quality when it comes to your product and service. Also, give values that no one else can give to make the customers keep coming back to you.

Takeaway

Running a business isn’t easy, that’s why you need to keep learning from other companies’ successes and failures. From the death of the Blockbuster, Sears, and Netscape, we can conclude that there are 4 things you need to avoid in business:

  1. Arrogance
  2. Stagnation
  3. Bad financial management, and
  4. Loss of focus.

And there are 5 essential things you have to do in your business:

  1. Keep learning 
  2. Adapt to changes 
  3. Keep innovating
  4. Always maintain a top quality for your product and service, and
  5. Give values that no one else offers.

Doing these things won’t guarantee you success, but it will surely give you the necessary guidance in growing your business.

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