Brunswick St Cycles shops closed during the week. The business appears to have suddenly collapsed, but I think that behind this the scenario was somewhat different. Reading the articles in the Age about it, a pattern of illogical capitalism emerges.
Cycling has become increasingly popular amongst the middle class as a form of transport and as a hobby, driven by such diverse forces as increasing traffic congestion and fuel prices, the need for sedentary office workers to get more exercise, and the coverage of cycle racing on SBS.
Consequently, more bike shops have opened. The problem is that there seems to be too many shops, as owner Peter Hess is quoted as saying in the Age: there are ‘too many stores opening up in our area‘. Our area? Fitzroy and the CBD? They don’t own an area or the customers in it.
Is Greensborough ‘their’ area? The shop BSC opened there failed and they had to close it. The reality is that the capitalist philosophy of infinite growth in a finite world is fundamentally flawed, and BSC contributed to the problem of too many bike shops opening by opening too many shops itself, including 3 in the CBD.
Such rapid expansion is often built on debt, which is risky and often leads to failure. The irrational growth projections fail to generate sufficient income to support the debt and the whole business collapses, just as it has. It’s been trading while debts to suppliers have mounted to the extent that some suppliers, according the Age, have refused to continue supplying stock.
Hess then does a Gerry Harvey and blames the internet (and implicitly customers) for providing too much competition to real world retailers. Retailers like Hess and Harvey seem to think that customers owe them loyalty. No we don’t. We don’t care about your brand, identity or anything else other than getting what we want.
If retailers get greedy and attempt to expand rapidly fueled with debt, assuming that customers will always be there to support them, then they fail. It’s that simple. In my experience, BSC has not been competitive on price for new bikes and I have purchased elsewhere, but I have had bikes services at the original Brunswick St shop and bought parts there and the service has always been good.
I have no sympathy for entrepreneurs who indulge their greed with debt and leave a mess behind, including staff who lose their jobs and unpaid creditors. The idea that you can expand to gain a greater market share and more customers with debt is illogical. Instead of making a business more profitable it often makes it less so. If you’ve built a successful business, why not sit back and enjoy life?