What’s wrong with this picture?

First, does this look like a basement to you?

Second, it is in suburban New Jersey where I would guess no one has any idea who Filene was and how he changed the way people shop for clothes.

Sadly, Filene’s Basement will be liquidating in January 2012 putting more than 1500 people out of work.  The company spokesperson said, “fierce competition and the worst economic downturn in our lifetimes” were the reasons for the choice to liquidate.

Granted those things put the final nail in the coffin, but the patient had been on life support for at least 10 years.  Why did the company that coined the term “bargain basement” with a destination location in Downtown Boston die during a time when great discount retailers are highly sought after by consumers?

My bargain hunting wife tells me that once they went away from the automatic markdown system* that “made it a challenge to get a great bargain” they became just another discount store that competed with hundreds of others for locations and merchandise.

When you said Filene’s Basement 25 years ago, everyone in New England (and a lot of people all over the country) knew what it meant.  They were #1 in the minds of savvy shoppers looking for a bargain.  They began to expand by adding locations in the suburbs, then outside of New England but without the “secret sauce” of the automatic markdown.  They abandoned the thing that made them unique.  When they became just another discount store, bigger chains with more buying power lured away Filene’s Basement customers and the march toward extinction was on.  They tried many different things to stay relevant but never regained #1.

We recently sold a small manufacturer South of Boston.  It sold in six months to two veteran investors with impressive backgrounds in managing emerging companies.  Why did they buy this small company?  Because it was #1.

The company was the #1 maker of 200cc-2500cc specialty cylinders for containing dangerous materials.  In a world where customers were more focused on quality and potential liability than price, the company consistently delivered a product that could be trusted while working with the customer to continuously improve design and efficiency.

Rather than increase the size of the company by diversifying into other products or making promises he couldn’t deliver, the owner focused on producing the best cylinder possible. He did so efficiently, profitably and by being a leader in his space, rather than just another machine shop.

Buyers were attracted to the idea the company could identify where it was number one, the niche they fulfilled, the fact that quality of product was more important to the customer than price, and the depth of relationship the company had with its clients.

If you would like to discuss how positioning your company as #1 effects value as part of getting ready for a sale, please call Beacon Equity Advisors (781) 551-8000 to learn more about this and 33 other ways to increase the value of your company.

* The concept was that every week the price of an item was automatically reduced so it pitted one shopper against another to see who decided that the price was finally low enough to warrant the purchase.  People even hid items in other parts of the store so no one else could find them.