Linens' n Things company deals with a broad selection of high quality home textile products like bed linens, kitchen accessories and many other domestic wares found in the United States of America.
During the 1990s, the company kept an impressive growth with a lot of expansion and high profit returns. In 2005, the company was operating 500 stores in 45 states and 5 of them in Canadian provinces and all were giving good profit margins. Later in 2005, a quest for interest for potential suitors to run the chain of stores was placed. In November the same year, it was under management of Apollo Associates (Mammarella pp H6-H7).
The company operated under strategies that were designed to ensure that services to customers were guaranteed and that profits were maximized. It employed the strategy of provision of brand names of house accessories merchandise at exceptional levels in its every days value. It also provided for customer care as another strategy and maintenance of low operational costs in the running of its chain of stores. The brand names of the company were under continuous review for strategic fit and high potential of predictable growth. This positioned the company to expand on a sustainable basis. Leveraging of the brand equity meant capabilities to expand the business with already existing costumers and as a way of getting new ones. Most companies utilize this strategy to increase its sales through increased customer satisfaction. The brand strategy of a business supports and communicates the key business strategy and its meant to sustain customers at their utmost satisfaction.
This strategy once employed by companies should exist even before the business strategy comes into play. Brands have a lot of power but they cannot be strong unless the business fundamentals are set right. The importance of brands depends on the nature of the company (Melinda pp4). For instance Linens 'n Things company utilized brands due to its nature and ambition of overcoming competition. Its supply of domestic accessories and house appliances was guided by the assumption that people like reliable supplies of commodities that are found to be fit by the majority in a population. Once this is utilized, customers tend to go to a particular store because they associate it with particular brands.
The customers in a business are the core values that influence decision on a day to day basis in a business. Customers in a business are the enduring and essential tenets on which the company stand in. The core essence in maintaining customers is being consistent, being steadfast and being true to them. The core business of a company and the essence must be held in a manner that keeps the business smooth at the sometime sustaining customers by satisfying their desires. Customer care plays an integral part in the growth and expansion of a company. It is what makes customers spent most of their time shopping in a particular store while there are other such stores elsewhere. This played a very important rile in the Linens' n Things company where the company was run on the basis of what satisfied the customers and it was consistency of brands.
The economics of customer service in a business firm need to give rise to equal or more out put in business development and expansion. The good rapport created between customers and a company gives an external image of reliability and service. Good customer service makes customers have a feeling of being part and parcel of the company. Good managers value customers more than they value their business.
Brief History of the company
Linens' n Things company was incorporated in 1958 in the United States of America as a company that dealt with home textiles, house wares and decorative home accessories. The stores brand names gave the company its ideal concept with “linen” referring to home textiles like bed linens, towels and pillows and “things” like housewares and a collection of household accessories.
The operational ground work of the company was laid down by Eugene Wallace when he was 22 years old. After this work he began ground work of organizing the purchasing and supplies to the Linens' n Things company.
In 1958, Wallace entered into partnership with a retail discount chain of stores called the Great Eastern Mills, Inc, of the U.S and together formed the General Eastern Linens,Inc,. At the same time, Diana stores bought the Great Eastern Mills and its 50% share of Great Eastern Linens. The Diana stores corporation run a ladies store chain in Southern Unites States with a good market position. The Diana chain of stores sold its company to Beverly- Hills based Daylin Inc. which was a departmental store together with its 50% share of Great Eastern Linens. The Daylin chain of stores later in the 1970 bought Wallaces shares of the Great Eastern Linens in exchange for business stock. In 1975, Daylin went to court and filled for bankruptcy and the stock that Wallace had bought became worthless. Its initial public offering of its share later was a boost to its sustained market although it was not predictable on how long it would last.
In 1998, the Linens' n Things company was operating a total of 176 stores comprising of 153 superstores and 23 smaller stores in a total of 37 states in America. Estimated 25 stock keeping units were utilized by the company in its six product categories which were bath section, home accessories, house ware products, storage, top-of the bed, and window treatments like curtains.
During this time, Linens' n Things company bought its supplies from approximately 1000 suppliers most of them companies of the United States. The company traded in a number of brands including domestic things like Wamsutta, Field Crest and Martex; glassware like Luminarc products, Lancaster Colony, Zwiesel products; store ware like Sango, Tienshen and Gibson.
In May 2008, Linens' n Things filed a petition on bankruptcy in a Delaware court. It said that it would close 120 of its under performing stores in California. This time the company was facing difficulties due to the decline of market in the housing market and a downturn in consumer behavior of spending particularly in housewares and home finishings. These radically affected profitability and its liquidity. Analysts said that the newly established housewares company called Bed, Bath and Beyond was a major competitor of Linens' n Things overlapping 50% with Linens' n Things store within three miles in the united states.
The Bed Bath and Beyond company in the 1990s expanded swiftly even re inventing the concept of superstores as compared to what Linens' n Things was doing it. Its stores were even bigger and fully stocked. The company quickly adopted an advanced computer technology for tracking inventory records in a manner that proved to be true competition. The company operated over 300 stores in the United States. The store sold many domestic appliances including bed linens, cook ware and kitchen utensils. By 1993, the new automated inventory system enabled the company to maintain a wide chain of management that was thought to impact positively on direct annual sales.
The current financial problem facing the Linens' n Things house ware accessories company can be traced back when the company was established in 1958. This was the time when the Diana Chain of stores sold its company to Daylin chain of stores together with its 50 % share of Great Eastern Linens which was as a result of partnership between Linens' n Things and the Great Eastern Mills company. This kind of partnership resulted to a poor operational base of the Linens' n Things company and this predetermined every other episode that was a major blow to the company.
On the other hand the good economy of the U.S in the 1970 elicited a lot of enthusiasm among consumers on the Linens' n Things stores. Every other related company kept an eye on its rapid expansion which was too promising for the future. In 1983, Melville corporation also called CVS corporation was attracted to Linens' n Things and sold its 55 store chain with sales of over $85 to Linens' n Things. In the late 1980s changes were taking place in the industry affecting the sector including banks, brokerage firms and departmental stores were crumbling. Most of them were undergoing bankruptcy, acquisition or consolidation (Rifkin, Kevin, pp15). Many people who were married particularly in the urban centers shifted to suburbs and their buying power was reduced by planned mortgages, medical bills, children and the need to save for the future.
In addition, more women had joined the workforce and therefore they had less time to visit these departmental stores but instead visited branches located near their homes. This resulted to the stores becoming less efficient due to the reduced number of customers who reported to them for shopping. It could even take months before customers reached on particular shelves within the stores. The company went ahead and introduced a sophisticated system that was allowed to to get the exact number of stock that was sold in a day to day basis (Rifkin, Kevin, pp16). This was to make a policy of monitoring what buyers bought mostly. Efforts were made to have the company to be in a more customer friendly manner and more visually appealing to costomers. They re invented a new method of arrangement withing the stores one which was aimed at easily provoking impulse buying by customers. New brands were arranged in the front and in open space to capture the attention of incoming customers and make them buy them. The company explained its optimism and opportunities in increasing sales in its “things” without having to sacrifice its market share and/ or customer image on the other side of the “linens” business (Duff, Mike pp5).
In May 2008, Linens' n Things filed a petition on bankruptcy in a Delaware court. It said that it would close 120 of its under performing stores in California. This time the company was facing difficulties due to the decline of market in the housing market and a downturn in consumer behavior on spending particularly in housewares and home finishings. These radically affected profitability and its liquidity. Analysts said that the newly established housewares company called Bed, Bath and Beyond was a major competitor of Linens' n Things overlapping 50% with Linens' n Thing store within miles (Denitto pp3-5). The reason why Bed Bath and Beyond put a lot of pressure leading to the unprecedented collapse of Linens' n Things was its good financial backing which translated to proper stocking of its stores compared to those of the Linens' n Things. Their prediction of the market environment and laying proper strategies to survive it can be viewed as good management skills. The competitive power of the Bed Bath and Beyond came to its levels when it came to their realization that Linens' n Things company was at the blink of its collapse. Its good financial status allowed it to step up a serious sales program aimed at pulling the largest number of customers from the Linens' n Things company now that it was in a crisis. The company organized a period of offers to customers at lowest prices compared to all other stores including Linens' n Things. At this time other companies could not give such offers since Bed Bath and Beyond seemed to be in good financial status than even Linens' n Things including other companies. The collapse of the Linens' n Things company was however found to be related to the lagging economy of the United States. It was indicated that the retail consumer industry was facing poor business and it was predicted that it would continue and only big business were feeling the impact due to their high running expenses and maintenance costs. The bankruptcy of Linens' n Things was also attributed to economic factors and not mismanagement. The face of the economy of the united states was changing and this was a serious business dilemma whose impact is highly felt by the business community mostly when it reached them unawares. The introduction and expansion of credit markets affected house ware chain of stores reducing them to profitless business. The impact of the retail collapse of major stores in the unites states especially those on the Linens' n Things caught its management unplanned. When this economic retail recession hit the U.S, the Linens' n Things lacked potential strategies to survive the unfriendly business environment resulting to its poor performance.
The Linens' n Things company is facing a major challenge that needs to be resolved to pave way for continued business. A number of measure need to be taken to re invent the Linens' n Things company and keep its market share.
Franchising is one way of reviving the company. This involves using another companies patent or philosophy of business in another business. The franchise operate at a fee paid back to the franchise company on percentage gross monthly sales. Franchise works best with companies that have had a good track record of profit margins before facing economic challenges. It also applies to companies with broad geographic appeal and those companies which are easy to operate.
In this situation, the Linens' n Things company has had a good truck record in profits since its establishment. For the purpose of its existence and its already achieved good reputation with its customers, it would be wise for the management to franchise it to other companies. This would bring back funds to the company through monthly payments. The assumption here is that if Linens' n Things reaches to young growing companies of the same nature then liaising with them to share the came business name but the company stocks the stores then manage them accordingly to their standards. This would keep the Linens' n Things company's reputation although this performance is not theirs but that of another company.
The other advantage of franchising is that it offers a good basis of a will known trade mark in the market as opposed to building a new business and its brand name from scratch. Franchise also enable a business to expand rapidly across countries and continents. With regard to Linens' n Things and its presence in most states of the U.S, its franchise would mean even expanding to parts of Europe and Africa. The other company that gets the patent has the advantage of exploring deeper to utilize the already existing basis.
Acquisition is the other possible solution to this company. It involves buying of a company by another. It is also known as take over of a company. In friendly acquisitions, companies operate in negotiations. In this case, the Linens' company can sell some of its branches to other companies particularly Bath, Bed and Beyond company which is one of its major competitor. In this situation, the company buys shares from the other company therefore taking control over its assets. In doing so Linens' n Things company will be in a position to manage only those branches it considers profitable to it. The company can even sale its stores to other up coming companies that are looking for an operational basis for their markets. They can even change the name of the stores to suit theirs but at the same time they would enjoy the benefit of its strategic location for the business.
The process of debenture is another method of helping companies in hard times of their business. This involves getting of an unsecured debt which is not backed by a collateral but only by the company. Debenture holders are considered creditors if theres is bankruptcy. It does not have pledges on assets. Covertable debenture is one of the types that involves buyers decision to choose to take stock in the company instead of receiving payment when the debenture matures. They are used by many large companies to raise capital for their projects. At times of bankruptcy, debenture holders turn to be creditors and have a right to be paid back. Companies utilize this method to raise capital without having to use their assets or giving up the ownership of their companies. The Linens' n Things company needs to adopt this method which is aimed at retaining its market share in the business world.
On the other hand, mergers can be possible where two or more companies combine their efforts and start operating as one. Such a move is voluntarily and involves companies combining stock then trading towards a target. In this situation, the companies combine their management for assured transparency and production. A horizontal merger can be recommended for Linens' n Things company with its major competitors the Bath, Bed and Beyond company. This is because they both deal with the similar brands under the same industry. When they merge they are likely to reach out for more profits than usual. Also, Linens' will not feel the weight of running its stores since they have a backup of resources. The risk of this kind of merger is that one of the companies may just be trading with others time such that in case it realizes that the combination is not giving any profits then they pull out unceremoniously while the other company is left to collapse literary.
At times of bankruptcy, a receivership process can be adopted. In this case, a receivership manger can be appointed by a bankruptcy court to run the company in question. The main duty of the receiver is to recover money in form of unpaid loans to suppliers. With Linens' n Things company, they need to get a receivership manager who works with the company to regain funds to pay up debts in the form of loans. With time the company regains its market share after all outstanding bills and loans are paid.
At another level, Linens' n Things company can close most of its branches that are not performing well. This reduces expenses of running them without getting any profits out of them. Although the company had already closed down some of its branches in the USA, it was necessary to asses others for closure. Once they get back enough money to clear their debts, then the company can start its re expansion process gradually.
With the current situation at the Linens' company, it is vital to offer outstanding customer service as a way of convincing customers about their products and brands. Quality products should be pronounced as its strategy to fight for its survival in the competitive market environment. If this is not the case, they then risk total collapse. In any case, their good image in house accessories sector should be an added advantage for them and try as much as they can to live to its expectations. As a short term goal, it needs to hold refresher courses for its employees and educate them of ways of getting more closer to the customers then before.
The company can even go ahead and get loans from financial institutions to sustain its business. These loans should be their saving hands such that once they are misappropriated then a disaster results. The first option for the loan should be to pay suppliers of the company and any other exceeding balances.
A company like Linens' can even think of offering its shares to the public through an initial public offer to raise some capital to help the company from collapse. However, this should not come when the company has already started collapsing but should be a first step towards rescuing the company when signs of collapsing are noticed. The company can give most of its shares to its suppliers who already owe the company some money. This secures their continued supply and keeps its good reputation to all its customers.
The Linens' company does not need to go the legal way and initiate the legal process towards its rescue from failure. This may not give rise to any profitable benefit to it since it is time consuming. Its option of cooperating with other companies is likely to be of great advantage. This corporation with its stakeholders is the only workable solution towards its revival.
If the company is declared bankrupt through judicial proceedings then their reputation goes away but this is an equally important asset for it as a business firm. It may not be appealing for other companies even to merge or even franchise their services with Linens' due to their destroyed image in public.
The current status of the Linens' n Things company is at the blink of collapse but it needs this kind of approach to save it. Having been established in 1958, the company cannot afford such a collapse with all that kind of investment and thousands of employees worldwide and its service to customers not forgetting its renown good international reputation. Since then the company has seen its worst days in business leading to closure of a number of its branches due to financial set backs. The mangers of the company need to rethink of a way of taking the company to its heights however longterm it may take to keep the once leading house ware accessories company in the United States to its firm ground. The company needs to develop mechanisms of suppressing the new upcoming companies like Bed Bath and Beyond.
Denitto, "Meeting in the Streets," New York Business Magazine, April 15, 1997, pp. 4-5.
Mammarella, "Freedom Fuels Linens 'n Things:" Discount Store Chain News, May 6, 1998, pp. H6- H8.
Melinda, "Linens 'N Things Records of the Year:" The Weekly Newspaper for the Home Furnishing Network, February 8, 2000, pp. 6.
Rifkin, Kevin M. “The Household Furnishings Handbook:” A Manager's Guide to Understanding and Investing, Minneapolis: Piper Jaffray Inc., 1997, p. 16
Rifkin, Kevin M. “Linens 'N Things Plans to Get ahead,” Home Textiles Today Magazine, March 30, 2005, p.17.