Towards the end of 2018, unfortunate news emerged that one of Australia’s startup prodigies: Shoes of Prey, collapsed into liquidation.
The story of any young brand’s demise contains important takeaway lessons for small business owners and would-be startup investors, and the Shoes of Prey story is no different.
But before launching into what went wrong, let’s look at how the brand came into being, as well as some of its successes along the way.
Toeing the line: A brief history of Shoes of Prey
Founded in 2009 by three Australian entrepreneurs, Mike Knapp, Jodie Fox and Michael Fox, Shoes of Prey was an online fashion retailer that turned female shoe-shoppers into designers by giving them the tools to create bespoke shoe styles online.
The company took off and received millions of dollars in investment, quickly making it one of Australia’s startup success stories.
Over the years, Shoes of Prey expanded their logistics to grow their customer base, advertising their wares overseas and refining their manufacturing processes as they went.
All the while, Shoes of Prey continued to get ample attention in the media and its founders went on to build out their careers working on other products and businesses as they went.
Then, in August 2018, the company announced that they would temporarily bring trading to a halt due to some questions that key stakeholders were asking about the company’s sustainability.
After eight or so months of speculation, things went from bad to worse, and what had been a burgeoning online fashion brand announced the necessity to shut up shop, leaving investors out of pocked by around AUD$35 million in total.
So, what exactly went wrong with this stylish Aussie startup?
Shoes of Prey: Out of runway, out of time
When asked what it was that brought on the downward spiral over the last year, the Shoes of Prey founders explained that, as time progressed, people seemed to prefer to leave the designing part of shoe-shopping to the professionals and wanted to be presented with ready-made options instead.
“As with our customisation business, while there were strong early signs that the sizing and short-run manufacturing markets might work for us, we weren’t able to clearly prove that these customers were willing to pay us enough at a large enough scale to cover our fixed costs,” Michael Fox said, according to SmartCompany.
The reality is, situations like this are not always in the control of the business.
Fast-paced startup culture attracts so many hungry entrepreneurs that it’s hard to keep up with. Plus, ongoing technological advancement means the environment is changing rapidly.
All of this can lead to exciting new business concepts ending as failed experiments.
But, when large and thriving companies are forced into liquidation, it’s important for small business owners to take a closer look into the reasons why the collapse occurred and how to prevent those same things from occurring to them.
Four lessons from Shoes of Prey’s demise
1. Diversify your offering
Most businesses these days aim to create niche products (or services) to capitalise on a clearly defined market share.
While this strategy can play a big part in separating your offering from others in similar markets, it is important not to put all your eggs in one basket and solely rely on your niche product for revenue.
By finding a way to diversify your offering and bring in additional streams of revenue to your business, you are more likely to have enough cashflow and financial runway to survive through the harshest changes that the market faces and come up with new and innovative ways to make your way back into your original niche.
2. Be creative in your go-to-market strategy
Aside from diversifying your offering to include a range of other products or services, it’s also important to be clever around exploring which different avenues you offer, sell or distribute your niche product to your target market.
According to Aron Steg, Founder of Mystic Pants, using diverse sales methods or targeting “diverse audiences” can be a good way to steer clear of a Shoes of Prey like horror story.
For example, if you run a service-based business (whether it be SaaS or professional services), you can explore the idea of creating strategic partnerships with other large players who have significant influence or reach.
Or, if you’re running a retail business, in addition to offering your product online, there may be other distribution channels through which you may be able to reach more customers.
The overarching lesson here is that there is more than one way to do things – and the more ways you can find to sell and distribute your products, the more breathing space you’ll have if things go sour.
3. Always remember the risk of investment
While people often look to increase their wealth through financial investment, they can often forget to consider the fact that high rewards only come to those who are ready to enter into high-risk arrangements.
High-risk investments mean that there is a chance that, once you let go of your money, you may never see it again.
As the news of Shoes of Prey going into administration surfaced, reports of its investors losing millions of dollars emerged as well – proving that even when investing in what may seem to be a ‘unicorn’ start-up, there is always risk associated with such an investment.
So, if you’re looking for ways to invest your money, before you put your life savings into what you think might be a ‘blue-chip’ startup, make sure to run substantial due diligence on the fund you’re contributing to and that you’re aware of all the relevant and potential risks.
4. Help others learn by sharing your failures
A very admirable part from the Shoes of Prey debacle (and perhaps one that can be easily overlooked) is the fact that the company’s three founders are open and transparent about the reasons why the business went under – something which would have required plenty of courage and bravery to do.
The ability to share success stories in business is always nice, but to come out and face the music is something all business owners should aspire to do when called for.
By publicly sharing the reasons behind your failures, you can make people wiser from your experiences and help them ensure that they don’t make those same mistakes. You may even gain some goodwill in the process.
About Benjamin Kluwgant:
Ben is a government incentives advisor at Catalyst Solutions, as well as start-up mentor at incubators and accelerator programs across Australia.
Article was originally published by Ben via MYOB.com.