This case is about an art gallery, which means it is far from the normal “TOC environment” where we all feel we know what to do. TOC knowledge is not a requirement, but it could provide guidance.
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Is there a future for the WideArt Gallery?
Sergey worked hard for ten years to materialize his dream of opening his own art gallery in Philadelphia. He loved art, knew a lot about it and he especially knew well the artistic situation in Philly. His idea was to offer good art at affordable price.
The WideArt Gallery contained four rooms. Each had pictures and sculptures for prices that fall within a certain price range. The cheapest one contained lithographs and other pictures valued from $100 up to $500. Next room contained items up to $1,500. The third room’s prices went up to $5,000. The last room contained the most expensive pieces of art. Naturally it contained outstanding works of art and most visitors spent more time in that room than in the others.
Problem is that Sergey felt somewhat disappointed from the amount of sales. The gallery attracted quite a lot of people who came in to look at fine art for free. Some people even commented that they expected more new items to be displayed since their last visit to the gallery. Eventually relatively small percentage of the visitors showed an interest to buy an item. Still, the gallery made enough money to provide reasonable living for Sergey and his family, but not much more. Sales improved a little after Sergey published an article on “How to place art in your home for great effect” in a known home design magazine. He made copies of the article so every visitor to the gallery could take one.
Rudolf Kempe entered the gallery on July 20, 2015. A date Sergey will remember all his life. Rudolf, an important tycoon with diversity of businesses, is widely known for his colorful appearance and innovative ideas, which few of them made him billions. Rudolf went through all the rooms in the gallery without much attention to the pictures on the wall. Instead he watched the people in the gallery watching the pictures on the wall. Then he saw Sergey sitting at the counter looking at him. Sergey immediately recognized Rudolf and simply hoped he might buy something expensive. However, fine art did not interest Rudolf much. Instead he approached Sergey and asked if he could spare the time to have coffee with him.
The conversation in the nearby coffeehouse took almost an hour, a very long time for such a talk for Rudolf, who showed keen interest in the business called “selling art”.
Rudolf concluded the conversation with the following remarks:
“Dear Sergey, you tell me your business is constrained by two things. One is that your working capital prevents you from buying additional excellent and relatively cheap pictures. The other is being constrained by the space to hang pictures. Are you aware of the clash between your allegedly two constraints? You told me that items that are not displayed are not sold! What would you achieve with higher stock of art items if your display is limited? How do you think the rate of sales to stock would improve if you have more stock?
“Here is my challenge to you. Think how you are going to reach more potential clients, make them willing to buy moderately priced art items and provide much better return on your stock. This is your business problem. If you come up with a good idea call me. Please note that I’m ready to listen to you just one more time.”
Can you help Sergey to come up with a good idea or even several ideas?