January 5, 2009
Retail’s Dearly Departed
By Tom Ryan
Every year,
Hollywood honors its dearly departed with a moving photomontage during
the Oscars. At retail, those leaving or having left the marketplace include
KB Toys, Linens ‘N Things, Mervyns, Sharper Image and Steve & Barry’s.
Unfortunately, most retailers
are only remembered in their final stages when they were flailing to survive.
But each had a heyday when they scared the competition and millions were
invested to open scores of stores across the country. Here is a synopsis
of few key defunct chains:
KB Toys: KB Toys opened its first store in
1959 as suburban malls began popping up across the country. Besides a mall
focus, the chain was known for its deep bargains displayed prominently
at the front of the store. Under the ownership of Melville Corp. in the
eighties, it became a major consolidator and grew to more than 1,200 stores.
It began to struggle as it faced more off-mall competition from Toys ‘R’ Us as
well as aggressive pricing in toys from Walmart.
Linens ‘N Things: Founded in 1975, the retailer’s
growth spurt came in the late eighties when it switched to a superstore
format in becoming the number two U.S. home goods chain after Bed Bath & Beyond.
While it benefited from a greater emphasis toward home décor in
the nineties as well as an "everyday, low price" model, some
retail observers believed the chain never capitalized on the housing boom
in recent years as much as its rivals.
Mervyns: Founded in 1949, Mervyn’s was one
of the early retailers to focus on "value" over store experience.
Part of that came from its vaunted private-label apparel program. It
was also the only California retailer to publish tabloid advertisements
for many years. In the eighties, Mervyns was the primary growth engine
for Dayton Hudson, the precursor for Target Corp. Its struggles came as
other retailers increasingly copied many of its core principles, including
a greater value-focus and private label emphasis.
Sharper Image: Founded in 1977, the retailer was
one of the pioneers of the retail-tainment craze, with its vibrating leather massage
chairs, robotic vacuum cleaners, and nose-hair clippers. Its first growth
spurt in the ’80s was driven by a thirst by yuppies for high-priced gadgetry.
Its second in the ’90s came after it brought in more practical items, such
as suitcases and cordless telephones, and was topped off by the arrival
of the Razor scooter craze. Although a lawsuit over its Ionic Breeze purifiers
was blamed for its bankruptcy, some retailer observers believed the chain
focused too much on one-hit wonders to establish sufficient customer loyalty.
Steve & Barry’s: Founded in 1985, its growth spurt
began in the early part of this decade when it began opening 30 to 40 stores
a year to quickly reach over 250 locations. Its success was built on being
able to offer $10 t-shirts by using no advertising, importing its own apparel,
and selling in volume with lines endorsed by actress Sarah Jessica Parker,
NBA star Stephon Marbury and
others. Its expansion, however, was allegedly supported by up-front payments
by landlords while operations showed scant profits. Despite the scandal,
some retail observers believed raising prices slightly higher would have
enabled the retailer to shore up its margins with little effect on consumers.
Other chains exiting
the marketplace in 2008 included Bombay, Demo (part of Pacific Sunwear), McMahan’s Furniture, Metromedia Restaurant Group
(owner of Bennigan’s), Shoe Pavilion, Value City,
Whitehall Jewellers and Wickes Furniture.
Discussion Question:
Which of these notable retail liquidations over the last year do you
think was most worth saving? What would it have taken to turn the business
around?
- 2008 was the year of
disappearing brands – The Associated Press/The Boston Globe - KB Toys – fundinguniverse.com
- Linens ‘n Things, Inc. – fundinguniverse.com
- Mervyn’s California –
fundinguniverse.com - The Sharper Image Corporation
– fundinguniverse.com - Steve & Barry’s, Short of Cash,
May Shut Stores – The Wall Street Journal
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Many of the chains that failed in 2008 did so because they were also-rans in their chosen categories, without the benefit of strong branding or compelling merchandise content. Of course, the final nail in the coffin turned out to be the shortage of credit where companies carried too much debt in the first place. Perhaps the biggest surprise on the list is Steve & Barry’s, which at least offered a compelling product story in well-merchandised stores. As it turns out, their financial model was to some degree a “house of cards,” and it’s possible that the brand name or concept could be revived by a more solid operator.
But did anyone ever BUY anything in the Sharper Image? My hunch is no.
None of these retailers deserved another chance because they were clutter creators. They got in the way with poorly created retail experiences. In the past year while doing store checks, I imagine all of us said, “I’ll check in on them and give them another chance.” And those of us who did that walked out shaking our heads and wishing we’d gotten to Chipotle for lunch that much quicker.
We are all witness to the long predicted “great retail shake out.” It has now fully arrived and it will be shaking throughout the year.
Let’s remember: retail ain’t for sissies.
Sharper Image is my choice for saving. They created retail excitement causing mall shoppers to stop in just to see what was new. Clearly they lost their way. Merchandise was not longer cutting edge. The same thing could be bought elsewhere. Additionally, they lost their exclusivity. Unfortunately, their mall store base did not help as malls decline in market share.
This is not unlike what happened to department stores. The internet also did not help as many are simply just selling through the web. Sharper Image’s demise is really just another example of not having good merchants.
My vote is for Sharper Image, in that they offered the most distinct and unique merchandise within a somewhat interesting retail environment. Whereas the other brands suffered from lack of differentiation, SI was in many ways done in by its higher pricing. It was a great store to browse, but I was always struck by how few customers were actually buying anything.
Interesting that most of your respondents mention Sharper Image. All of them are surely frequent flyers who, like the rest of us, are addicted to thumbing through worn copies of catalogs in the back pockets of airline seats and imagine owning the latest gadgets from Sharper Image. But how many of them actually bought the products?
I have a soft spot for Mervyns as it was servicing the Latino community in terms of both consumers and employee base. There aren’t that many chains that had the commitment to that community that Mervyns did. And like others, Sharper Image was always intriguing. I’m still missing FAO Schwartz. But bottom line, none of them were really worth saving. Retailers still have a way to go in terms of differentiation and relevance.
Quite honestly, I never saw a use for any of them with the exception of Steve & Barry’s (which I often referred to Ben & Jerry’s in jest). It was, in my humble opinion, a ‘cool’ store. It was always interesting to visit and I have made significant purchases from there in the past–although, it’s hard to call $5 and $10 purchases significant. Nevertheless, it’s the only one on the list where I can say that another retailer hasn’t filled the void.
The rest, well, the competitors have mostly all been mentioned that fill the voids. Oddly, I don’t shop them either. Maybe their fate is soon to be met, too?
It seems to me that the phenomenon going on here is being able to buy most anything anywhere. Things are very diluted. I don’t see that changing. It should be an interesting year.
Any retailer who makes the mistakes that these listed few (there’s many, many more of course) made, to the magnitude that they made them, deserves to go out of business. Good riddance.
Retail is the consummate Darwinian business–survival of the fittest. So, in every case, there is someone fitter that caused an extinction. We may not like it, but in the end, it’s the law of the jungle that rules retail.
Selfishly, I would have saved Mervyns because that’s where I buy my Levi’s. I’d never heard of Steve & Barry’s, which appears from an outsider’s POV to be a trendy, NY-centric t-shirt chain appealing to celebrities (although they apparently had stores in 40 states). Their employees, creditors, and investors will miss them, but will consumers?
Sharper Image could continue as an internet play, if only to liquidate. If there is any interest in wringing any equity out of the well-regarded Sharper Image brand, online promotion is the way to go. Like Anne Howe, however, I also bought three Ionic Breeze units. I pitched mine out after a year or so.
If these chains weren’t saved, free market economics requires that they not be. It’s encouraging to note that no supermarket chains were mentioned in this discussion, somehow endorsing their generally more prudent business approach (except for Tesco’s Fresh & Easy) and broader appeal.
I have much the same comment on Sharper Image: a fun place to shop but a bad place to buy, with an abundance of overpriced items (some of them overpriced at any price).
But I’m surprised/disappointed that more people didn’t pick Mervyns; maybe this has to do with it being more of a regional nameplate, but for longevity and “saneness” of concept, it–IMHO–certainly trumps the others. Perhaps it was a problem of generic merchandise + an uncompelling shopping “experience,” or maybe it was corporate neglect and/or financial manipulation(s), but I will miss them nonetheless.
And I’ll miss even more some of the names likely to end up on the 2009 list…. 🙁
I will personally miss Steve & Barry’s. Early last year I made several purchases from this chain and found the quality of my purchases to be top notch. This opinion has endured and strengthened over the year as the garments wore extremely well. This is especially true of the jeans and jackets. In fact, I have received several compliments on both and at times had to introduce the concept of Steve & Barry’s to the person offering the complement.
A stylish, female co-worker brought a friend to the store to purchase a variety of garments suitable for the office, which their limited budgets could handle. In addition to the values they were impressed by the fashion, including clothes from the Sarah Jessica Parker collection. They too miss Steve & Barry’s.
Oh, did I mention the price for all these garments, including serious winter outerwear, was $7.98? While I love a bargain, there wouldn’t be a deal without quality, style and comfort.
On the other hand I was surprised The Sharper Image lasted as long as it did. They were a strong product promoter. But how long can a retailer last by relying on the sales of scooters and inferior air purifiers?
Attention Sharper Image customers: the mojo continues! Go to http://www.RichardSolo.com It’s the web site run by Richard Thalheimer, founder of The Sharper Image, who was bought out for $31 million a while ago. Retail companies may come and go, but the great retail entrepreneurs are often serial entrepreneurs.
By the way, Sharper Image isn’t gone forever, they live on as a license. While unable to maintain profitability as a retail chain they created a strong enough brand that Sharper Image branded product will be found on shelves across the retail marketplace in 2009 and beyond.
Dayton Hudson/Target put Mervyns on a banana peel quite a while back through its benign neglect and Cerberus’ subsequent and not-so-benign actions put a nail in the coffin. Had they not, I truly believe that a more focused Mervyns could have thwarted Kohl’s growth considerably, stolen some of J.C. Penney’s thunder and…perhaps hastened the demise of Dillard’s that many believe is now in progress. The new wisdom is that more than two players in a space is overkill(!); however, the “big middle” softlines space that Mervyns occupied had, and still has, quite a bit of room as Walmart dominates the lower end and mid-tier players such as Kohl’s and Penney’s push upward. Target emerges as the true mid-tier player…Mervyns could have been a contender.
KB Toys and Mervyns seemed to sell redundant products that you could buy anywhere, making for no compelling reason to shop their stores. Steve & Barry’s seemed to have way too much of the same thing in a flea market type format.
I went to my first Linens ‘N Things during a liquidation sale and it was so comical to see all the expensive items that you might only use once in your life. My vote goes to Sharper Image. While most of their products we could easily live without, I would often dream of owning some of them while thumbing through their catalogs while flying on planes.
Sharper Image had a unique concept and great merchandising. Brookstone, their closest competitor, still doesn’t come close in store experience and merchandising variety with the newest trends and products. The Ionic Breeze lawsuit was their downfall which, surprisingly, a lot of people didn’t know about. Their model will rise again.
I’ll miss the wacky items for sale at Sharper Image. SI always seemed to have the newest, freshest products first. That having been said, will many consumers really miss these retailers? Most had their core stories co-opted by other retailers and lost a clear “reason for being” in consumers’ eyes. The products they offered are still available at other retailers.
Two other retailers calling it quits last year–Marty Shoes Holding, which liquidated its 47 stores in New York, New Jersey and Connecticut. Whitehall Jewelers Holdings, which is liquidating its merchandise and disposing of more than 370 leases.
I liked Marty’s, which sold great shoes at serious discounts. I’m not sure what the problem was, probably had something to do with lack of access to credit, but I think it was worth saving.
Whitehall is a different story. They suffered that fatal disease nopointofdifferentiation. Walking into one of their stores was just like walking into any other jeweler. Same stock, same help, same prices.
Not sure any of the names here were worth saving. Retailing is all about adapting to change and some here were notorious for embracing old and stale ideas instead of evolving with the customer.
KB had a small chance but really needed to revamp their stores to cater to the upscale mall shopper. I still believe mall toy stores can survive and flourish if executed in a way that really connects to the customer. Yes TRU and Walmart will sell more toys but there is a real opportunity to provide outstanding service and unique product selection which the big guys can never match.
I also have to wonder about Sharper Image. They were selling unique products; what happened to them? Too much focus on their own brand and the quality just wasn’t there. I really lost faith in the company when I saw their own air purifiers sold at swap meet under another label.
Brookstone went the other way and brought in products that are higher quality and are more practical in their use. Lesson learned is to not put too much focus on one category and to be able to adapt to an ever changing marketplace. Seems like common sense but here we are….
I think the real story is less about which of these chains could/should have survived and is more about how many others will join the ranks of the departed in 2009.
Retail consolidation has been waiting for a push for some time now and the “new economy” is their last straw. Consumer spending is dependent upon consumer credit and the outlook for credit doesn’t look good for 2009.
As one of the other BrainTrust panelists mentioned, most of these retailers were “also rans” in their categories or were debt leveraged to the point that the credit crunch ended their operations.
In the new economy, only the strongest will survive and it doesn’t appear that there will be much room for anything beyond third place in market share in many categories.
Department stores have already gone through a wave of consolidations and closings but I see more on the horizon. November retail sales dropped 2.5% and another 4.0% in December.
Department stores like Dillards, discounters like Sears/Kmart and specialty store retailers like Staples, sporting goods chains like Sportsman Warehouse…are all candidates for the next round of consolidation which will take place in 2009.
I think Sharper Image is the failure least expected. The shopper experience was always fun and even educational. I remember that over the years my kids would drag me in there, it was always some form of discovery for them, or an inspiration for a science project. Just as a point of reference, I did buy three of those Ionic Breeze units!
Like the majority so far, I voted “none of the above,” although I admit to having had a soft spot for Sharper Image. But again, while I always loved looking at the stuff there, I knew I didn’t really need any of it and the prices were pretty steep. As has been suggested here in other threads before, aging boomers with households full of “things” are finding it easier to “walk” than buy, especially expensive items that aren’t really necessary.
All retail chains that went out of business are a loss because of jobs, now the abandoned buildings, blight, etc, however, with the possible exception of Sharper Image, none of the retailers that went out of business this year had any notable points of differentiation from their stronger competitors.
Times change. Moods swing. Preferences modify. Demographics churn. Each company named had support from many consumers for a period of time. Then the wants and needs of their consumers modified and new buyers came into the marketplace with new and varied wants which these former companies weren’t prepared to satisfy. Retailers must adapt closely and efficiently to the ever-changing vicissitudes in the marketplace or die. Amen.
Probably the most notable chain that departed, that was worth saving was Mervyns. It was not necessarily a trendsetting chain, and certainly similar merchandise could be found elsewhere, but the chain had a great reputation amongst its customers, and great service, and they had loyal, dedicated employees.
The problem with this chain is that the private equity investors looked at ways to milk the chain for capital, and made it a real estate play. The fact is this; what we have learned from a lot of these departed retailers is that Private Equity firms are not great retailers, and when they have control of the money, the love to tell you how to run your business. But I have not met a PE firm that has had a great long-term strategy in growing a retail business successfully. And now that we have hit difficult economic times, this lack of expertise in really shining through.
So, should all of the failed retailers have been saved? No. But the PE firms have a lot to answer to for the overbuilt, over-retailed country in which we exist. And now they are going to leave a lot of mall and strip center owners holding the bag.
If I may–A few words on the demise of Value City
Value City was one of America’s first off-price clearance houses and for the lower-rung shopper it provided an opportunity to own something much better than the price portrayed–yes it was last year’s product–or 2 years ago or over-runs or irregulars–however, it gave the lower rung the opportunity for a much better product, perhaps lifting their expectations for product overall.
Value City was outdone by Marshall’s and Ross (and Target) and was unable to compete due to its size and scope but hung on valiantly for a long time. Its fate was seriously in question when the parent sold (almost the entirety of) its interest last year and the economic downturn sealed its fate. It is very telling when a store called “Value City” can not make it, especially for the lower end shopper, but again–its “day” was over and a fair time ago as well. It is worth an obit however, because it was one of the pioneers of off-price retail and helped pave the way for a whole portion of the retail industry, especially in the vast Midwest.
While it was called a “department store” it was always off price and a true “bargain” store. I am certain a fair number of shoppers will (initially) suffer from its absence.
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Many of the chains that failed in 2008 did so because they were also-rans in their chosen categories, without the benefit of strong branding or compelling merchandise content. Of course, the final nail in the coffin turned out to be the shortage of credit where companies carried too much debt in the first place. Perhaps the biggest surprise on the list is Steve & Barry’s, which at least offered a compelling product story in well-merchandised stores. As it turns out, their financial model was to some degree a “house of cards,” and it’s possible that the brand name or concept could be revived by a more solid operator.
But did anyone ever BUY anything in the Sharper Image? My hunch is no.
None of these retailers deserved another chance because they were clutter creators. They got in the way with poorly created retail experiences. In the past year while doing store checks, I imagine all of us said, “I’ll check in on them and give them another chance.” And those of us who did that walked out shaking our heads and wishing we’d gotten to Chipotle for lunch that much quicker.
We are all witness to the long predicted “great retail shake out.” It has now fully arrived and it will be shaking throughout the year.
Let’s remember: retail ain’t for sissies.
Sharper Image is my choice for saving. They created retail excitement causing mall shoppers to stop in just to see what was new. Clearly they lost their way. Merchandise was not longer cutting edge. The same thing could be bought elsewhere. Additionally, they lost their exclusivity. Unfortunately, their mall store base did not help as malls decline in market share.
This is not unlike what happened to department stores. The internet also did not help as many are simply just selling through the web. Sharper Image’s demise is really just another example of not having good merchants.
My vote is for Sharper Image, in that they offered the most distinct and unique merchandise within a somewhat interesting retail environment. Whereas the other brands suffered from lack of differentiation, SI was in many ways done in by its higher pricing. It was a great store to browse, but I was always struck by how few customers were actually buying anything.
Interesting that most of your respondents mention Sharper Image. All of them are surely frequent flyers who, like the rest of us, are addicted to thumbing through worn copies of catalogs in the back pockets of airline seats and imagine owning the latest gadgets from Sharper Image. But how many of them actually bought the products?
I have a soft spot for Mervyns as it was servicing the Latino community in terms of both consumers and employee base. There aren’t that many chains that had the commitment to that community that Mervyns did. And like others, Sharper Image was always intriguing. I’m still missing FAO Schwartz. But bottom line, none of them were really worth saving. Retailers still have a way to go in terms of differentiation and relevance.
Quite honestly, I never saw a use for any of them with the exception of Steve & Barry’s (which I often referred to Ben & Jerry’s in jest). It was, in my humble opinion, a ‘cool’ store. It was always interesting to visit and I have made significant purchases from there in the past–although, it’s hard to call $5 and $10 purchases significant. Nevertheless, it’s the only one on the list where I can say that another retailer hasn’t filled the void.
The rest, well, the competitors have mostly all been mentioned that fill the voids. Oddly, I don’t shop them either. Maybe their fate is soon to be met, too?
It seems to me that the phenomenon going on here is being able to buy most anything anywhere. Things are very diluted. I don’t see that changing. It should be an interesting year.
Any retailer who makes the mistakes that these listed few (there’s many, many more of course) made, to the magnitude that they made them, deserves to go out of business. Good riddance.
Retail is the consummate Darwinian business–survival of the fittest. So, in every case, there is someone fitter that caused an extinction. We may not like it, but in the end, it’s the law of the jungle that rules retail.
Selfishly, I would have saved Mervyns because that’s where I buy my Levi’s. I’d never heard of Steve & Barry’s, which appears from an outsider’s POV to be a trendy, NY-centric t-shirt chain appealing to celebrities (although they apparently had stores in 40 states). Their employees, creditors, and investors will miss them, but will consumers?
Sharper Image could continue as an internet play, if only to liquidate. If there is any interest in wringing any equity out of the well-regarded Sharper Image brand, online promotion is the way to go. Like Anne Howe, however, I also bought three Ionic Breeze units. I pitched mine out after a year or so.
If these chains weren’t saved, free market economics requires that they not be. It’s encouraging to note that no supermarket chains were mentioned in this discussion, somehow endorsing their generally more prudent business approach (except for Tesco’s Fresh & Easy) and broader appeal.
I have much the same comment on Sharper Image: a fun place to shop but a bad place to buy, with an abundance of overpriced items (some of them overpriced at any price).
But I’m surprised/disappointed that more people didn’t pick Mervyns; maybe this has to do with it being more of a regional nameplate, but for longevity and “saneness” of concept, it–IMHO–certainly trumps the others. Perhaps it was a problem of generic merchandise + an uncompelling shopping “experience,” or maybe it was corporate neglect and/or financial manipulation(s), but I will miss them nonetheless.
And I’ll miss even more some of the names likely to end up on the 2009 list…. 🙁
I will personally miss Steve & Barry’s. Early last year I made several purchases from this chain and found the quality of my purchases to be top notch. This opinion has endured and strengthened over the year as the garments wore extremely well. This is especially true of the jeans and jackets. In fact, I have received several compliments on both and at times had to introduce the concept of Steve & Barry’s to the person offering the complement.
A stylish, female co-worker brought a friend to the store to purchase a variety of garments suitable for the office, which their limited budgets could handle. In addition to the values they were impressed by the fashion, including clothes from the Sarah Jessica Parker collection. They too miss Steve & Barry’s.
Oh, did I mention the price for all these garments, including serious winter outerwear, was $7.98? While I love a bargain, there wouldn’t be a deal without quality, style and comfort.
On the other hand I was surprised The Sharper Image lasted as long as it did. They were a strong product promoter. But how long can a retailer last by relying on the sales of scooters and inferior air purifiers?
Attention Sharper Image customers: the mojo continues! Go to http://www.RichardSolo.com It’s the web site run by Richard Thalheimer, founder of The Sharper Image, who was bought out for $31 million a while ago. Retail companies may come and go, but the great retail entrepreneurs are often serial entrepreneurs.
By the way, Sharper Image isn’t gone forever, they live on as a license. While unable to maintain profitability as a retail chain they created a strong enough brand that Sharper Image branded product will be found on shelves across the retail marketplace in 2009 and beyond.
Dayton Hudson/Target put Mervyns on a banana peel quite a while back through its benign neglect and Cerberus’ subsequent and not-so-benign actions put a nail in the coffin. Had they not, I truly believe that a more focused Mervyns could have thwarted Kohl’s growth considerably, stolen some of J.C. Penney’s thunder and…perhaps hastened the demise of Dillard’s that many believe is now in progress. The new wisdom is that more than two players in a space is overkill(!); however, the “big middle” softlines space that Mervyns occupied had, and still has, quite a bit of room as Walmart dominates the lower end and mid-tier players such as Kohl’s and Penney’s push upward. Target emerges as the true mid-tier player…Mervyns could have been a contender.
KB Toys and Mervyns seemed to sell redundant products that you could buy anywhere, making for no compelling reason to shop their stores. Steve & Barry’s seemed to have way too much of the same thing in a flea market type format.
I went to my first Linens ‘N Things during a liquidation sale and it was so comical to see all the expensive items that you might only use once in your life. My vote goes to Sharper Image. While most of their products we could easily live without, I would often dream of owning some of them while thumbing through their catalogs while flying on planes.
Sharper Image had a unique concept and great merchandising. Brookstone, their closest competitor, still doesn’t come close in store experience and merchandising variety with the newest trends and products. The Ionic Breeze lawsuit was their downfall which, surprisingly, a lot of people didn’t know about. Their model will rise again.
I’ll miss the wacky items for sale at Sharper Image. SI always seemed to have the newest, freshest products first. That having been said, will many consumers really miss these retailers? Most had their core stories co-opted by other retailers and lost a clear “reason for being” in consumers’ eyes. The products they offered are still available at other retailers.
Two other retailers calling it quits last year–Marty Shoes Holding, which liquidated its 47 stores in New York, New Jersey and Connecticut. Whitehall Jewelers Holdings, which is liquidating its merchandise and disposing of more than 370 leases.
I liked Marty’s, which sold great shoes at serious discounts. I’m not sure what the problem was, probably had something to do with lack of access to credit, but I think it was worth saving.
Whitehall is a different story. They suffered that fatal disease nopointofdifferentiation. Walking into one of their stores was just like walking into any other jeweler. Same stock, same help, same prices.
Not sure any of the names here were worth saving. Retailing is all about adapting to change and some here were notorious for embracing old and stale ideas instead of evolving with the customer.
KB had a small chance but really needed to revamp their stores to cater to the upscale mall shopper. I still believe mall toy stores can survive and flourish if executed in a way that really connects to the customer. Yes TRU and Walmart will sell more toys but there is a real opportunity to provide outstanding service and unique product selection which the big guys can never match.
I also have to wonder about Sharper Image. They were selling unique products; what happened to them? Too much focus on their own brand and the quality just wasn’t there. I really lost faith in the company when I saw their own air purifiers sold at swap meet under another label.
Brookstone went the other way and brought in products that are higher quality and are more practical in their use. Lesson learned is to not put too much focus on one category and to be able to adapt to an ever changing marketplace. Seems like common sense but here we are….
I think the real story is less about which of these chains could/should have survived and is more about how many others will join the ranks of the departed in 2009.
Retail consolidation has been waiting for a push for some time now and the “new economy” is their last straw. Consumer spending is dependent upon consumer credit and the outlook for credit doesn’t look good for 2009.
As one of the other BrainTrust panelists mentioned, most of these retailers were “also rans” in their categories or were debt leveraged to the point that the credit crunch ended their operations.
In the new economy, only the strongest will survive and it doesn’t appear that there will be much room for anything beyond third place in market share in many categories.
Department stores have already gone through a wave of consolidations and closings but I see more on the horizon. November retail sales dropped 2.5% and another 4.0% in December.
Department stores like Dillards, discounters like Sears/Kmart and specialty store retailers like Staples, sporting goods chains like Sportsman Warehouse…are all candidates for the next round of consolidation which will take place in 2009.
I think Sharper Image is the failure least expected. The shopper experience was always fun and even educational. I remember that over the years my kids would drag me in there, it was always some form of discovery for them, or an inspiration for a science project. Just as a point of reference, I did buy three of those Ionic Breeze units!
Like the majority so far, I voted “none of the above,” although I admit to having had a soft spot for Sharper Image. But again, while I always loved looking at the stuff there, I knew I didn’t really need any of it and the prices were pretty steep. As has been suggested here in other threads before, aging boomers with households full of “things” are finding it easier to “walk” than buy, especially expensive items that aren’t really necessary.
All retail chains that went out of business are a loss because of jobs, now the abandoned buildings, blight, etc, however, with the possible exception of Sharper Image, none of the retailers that went out of business this year had any notable points of differentiation from their stronger competitors.
Times change. Moods swing. Preferences modify. Demographics churn. Each company named had support from many consumers for a period of time. Then the wants and needs of their consumers modified and new buyers came into the marketplace with new and varied wants which these former companies weren’t prepared to satisfy. Retailers must adapt closely and efficiently to the ever-changing vicissitudes in the marketplace or die. Amen.
Probably the most notable chain that departed, that was worth saving was Mervyns. It was not necessarily a trendsetting chain, and certainly similar merchandise could be found elsewhere, but the chain had a great reputation amongst its customers, and great service, and they had loyal, dedicated employees.
The problem with this chain is that the private equity investors looked at ways to milk the chain for capital, and made it a real estate play. The fact is this; what we have learned from a lot of these departed retailers is that Private Equity firms are not great retailers, and when they have control of the money, the love to tell you how to run your business. But I have not met a PE firm that has had a great long-term strategy in growing a retail business successfully. And now that we have hit difficult economic times, this lack of expertise in really shining through.
So, should all of the failed retailers have been saved? No. But the PE firms have a lot to answer to for the overbuilt, over-retailed country in which we exist. And now they are going to leave a lot of mall and strip center owners holding the bag.
If I may–A few words on the demise of Value City
Value City was one of America’s first off-price clearance houses and for the lower-rung shopper it provided an opportunity to own something much better than the price portrayed–yes it was last year’s product–or 2 years ago or over-runs or irregulars–however, it gave the lower rung the opportunity for a much better product, perhaps lifting their expectations for product overall.
Value City was outdone by Marshall’s and Ross (and Target) and was unable to compete due to its size and scope but hung on valiantly for a long time. Its fate was seriously in question when the parent sold (almost the entirety of) its interest last year and the economic downturn sealed its fate. It is very telling when a store called “Value City” can not make it, especially for the lower end shopper, but again–its “day” was over and a fair time ago as well. It is worth an obit however, because it was one of the pioneers of off-price retail and helped pave the way for a whole portion of the retail industry, especially in the vast Midwest.
While it was called a “department store” it was always off price and a true “bargain” store. I am certain a fair number of shoppers will (initially) suffer from its absence.