Employees at Woolworths wake up this morning not knowing if they are going to have a job much longer. Not the kind of news that 25,000 people want just a month before Christmas, but sadly their company has gone into administration. Woolies owes its creditors some £385m – a debt it can no longer handle.

But let’s get this right; the Woolworths collapse has nothing much to do with the credit crunch or the current global economic turmoil. The Woolies collapse is down to one thing and one thing only – bad management.

The bosses in charge of Woolworths have spent at least a decade floundering not knowing what to do or how to respond to the situation the store found itself in. Supermarkets out-of-town offered everything you could get from Woolies, but at lower prices and 24 hours a day. In response Woolworths tried to be all things to all people.

You could get some CDs and DVDs there – but nowhere near as many as at HMV, or at their prices. You could get children’s clothes at Woolies, but Tesco had a wider range at cheaper prices. You could get newspapers and magazines there, but WHSMiths was better. No matter which section of Woolworths you looked at, someone else did it better or cheaper.

In response, Woolworths tried to do even more things. For instance, it sold mobile phones. Why? The High Street is full of mobile phone shops – all with better buying power and better deals. What on Earth was in the minds of the managers of Woolworths?

The lack of a focused offering is the reason why Woolworths went bust. Indeed, Woolworths is thought to be a stark demonstration of the High Street’s failure to respond to out-of-town shopping and online retail. Do you understand why, for instance, all High Street shops close their doors at around 5.30pm just as thousands of people poor onto the streets out of offices or who come into town to eat? High Street retailers are mentally stuck in the 19th Century where we all went home at 5pm and stayed there.

So what does the Woolies collapse tell you for your online business? It shows, once again, that lack of focus is the problem. Most web sites and most online businesses are poorly focused. People spend less than a second on a typical web site because it is so general. Online, people want specific answers to particular problems. If your online business, like Woolies, is trying to be all things to all people you will inevitably fail.

So if, for instance, you run an online pet shop, break it up into a dog food store, a cat toy store and a horse hay shop. Drill your business down into ever decreasing niches and run several online shops. That way your Internet customers will see your focus and will continue to shop with you. Behave like Woolies and try to run a pet shop that provides everything to every pet owner and you will disappear.