The Super Plus Story, The Good, The Bad and Lessons Learnt – Part 2

We have been looking at the story of Super Plus and the lessons to be learned.  In Part 1 we looked at the main factors that contributed to its success i.e. going into areas where there were no supermarkets, providing superior service and offering the best prices. In this part we look at the things that went wrong with Super Plus.

I can vividly recall that about five years ago things changed dramatically at Super Plus.  It seemed as if overnight all of the prices at Super Plus were increased and suddenly they moved from being the cheapest supermarket to being almost the most expensive.  I remember speaking with my friends who shopped at Super Plus and it was the same reaction – Super Plus had gotten too expensive.

At the same time I noticed that the quality of service had dropped dramatically.  Suddenly there were only two or three cashiers open and it seemed as if the express line was never open.  The cashiers became slow and inefficient and even if there were only two customers in front of you, it was taking 20 minutes to check out.

Two of the main factors that contributed to the success of the Super Plus stores had been thrown out of the window.  What caused this decision to be made?  I believe it to be due to two factors.  Firstly, I believe that there was a level of complacency that set in to the management level.  They believed that now that they were the major supermarket chain they could charge whatever they wanted and people would have no choice but to buy at their stores.  They didn’t consider that other supermarkets would respond to their push and offer better prices, better service and more stores.

Secondly, they overextended themselves by buying properties out of their cash flow in an effort to add more stores thus hurting their cash flow.  In addition they added too many stores too quickly and some that seemed unnecessary.  Three stores in Spanish town and four in Half Way Tree/Cross roads/New Kingston.  Expansion of a business which involves the purchase of buildings should be financed by long term borrowings.  This I believed also led to higher prices in the stores.

Super Plus forgot the basis of their success and got into trouble by growing too quickly. In part 3 of this series we will look at the lessons that the financial sector especially the banks can learn from the failures of the Super Plus chain.

Feedback Question: Will Super Plus survive their current crisis?

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One Response to “The Super Plus Story, The Good, The Bad and Lessons Learnt – Part 2”

  1. Charlie says:

    Just as I suspected. Over expansion can lead to financial implosion. The picture would have been different if they got a source of funding with attractive interest over a long period.
    This is an important lesson for future CEOs. Expansion is good, but proceed with caution

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admin Posted by: admin April 23, 2009 at 9:25 am