Correction: A previous version of this article stated that BCBG no longer operated stand-alone stores.
Old retailers don't die. They just become e-tailers or branded products at somebody else's stores.
Or that's the case for some. This holiday season one could find displays of The Sharper Image products at Target and FAO Schwarz products at Barnes & Noble and Bon-Ton stores. The Limited is now an exclusive brand at Belkin stores and Circuit City is trying to make a come back, too, with a new e-commerce site and store concepts.
These are all names of once-prominent retailers that have gone bankrupt and closed their stores. Retail has a long history of resurrecting brands from failed store chains. The overarching reason for this is fairly straightforward: Even if a business fails at physical retail — by overextending their footprints, taking on too much debt, investing too little in stores, failing to win over younger shoppers or just declining in popularity — it's brand might still carry value.
"I think there's a fundamental difference between having a business model problem and having a brand problem," Michael Dart, a partner in A.T. Kearney's private equity practice and author of the upcoming book Retail's Seismic Shift, told Retail Dive. When chains close, "you end up with a lot of customers saying, 'Wow I liked that place. I liked the store. It's a shame it's gone,'" Dart added.
Or, as Marshal Cohen, chief industry analyst at The NPD Group, put it in an interview, "There are millions of people who had purchased these brands, who grew up with some of these brands." That equity means someone buying the brand out of bankruptcy, or some other crisis, can have instant name recognition for a different venture — be it a label or e-tailer or catalog company, Cohen pointed out.
But the promise and durability of a known brand, even if it's decades old, isn't necessarily infinite. "The short-term opportunities, they're pretty strong," Cohen said. "When a retailer goes out and stays online only, generally the shelf life, if they're not really operating on all cylinders, is really only a few years. … I have to really spend a lot of time and energy sending you to my site if I'm a brand trying to resurrect myself."
"There are millions of people who had purchased these brands, who grew up with some of these brands."
Chief Industry Analyst at The NPD Group
However a defunct retailer reinvents itself, there must be a matching business model for that format, and it still has to get down to the nitty gritty business of making money. Lauren Bitar, director of retail consulting at RetailNext, told Retail Dive that success means making margin goals, growing year-over-year, staying financially stable and winning return shoppers — in the main, the same goals a physical retailer has.
"You have to be operating a profitable business that is serving a unique need to its customers," Bitar said. "If you're having to give away product in order to get purchases, you're just going to fail again."
With the recent years' uptick in retail bankruptcies, more brands have entered the post-retail brand afterlife. Below we've taken a look at some of these resurrected brands, including some of the most recent cases, to see how they've adapted to life after physical retail.
After filing for bankruptcy in 2008, the onetime mall staple Sharper Image ultimately liquidated its 180-plus stores. Facing tough competition in the electronics space, the company grappled with sales declines in the years before it filed for bankruptcy. As The New York Times wrote at the time of its initial bankruptcy filing, "It turns out that buyers of R2-D2 Interactive Droids ($129) are not the best repeat customers."
But today the 40-year-old seller of offbeat gadgets and gifts exists as an e-commerce and catalog retailer, which is how it began. Private equity firm Camelot Venture Group relaunched the Sharper Image's website and catalog in 2010, after acquiring the rights the previous year.
Separately, in December 2016, consumer products maker ThreeSixty Group bought the rights to make branded products under the Sharper Image name for $100 million. Those products sell at other retailers including Target, Macy's and Bed Bath & Beyond, as well as the namesake's website and catalog.
"In its heyday, Sharper Image, what it was known for was really cool, leading-edge tech and gadget stuff. People still remember that."
President of SiteWorks International
"In its heyday, Sharper Image, what it was known for was really cool, leading-edge tech and gadget stuff. People still remember that," Nick Egelanian, president of retail development consultants SiteWorks International, said in an interview. "A brand isn't a name. A brand is a concept."
The once-iconic high-end toy store FAO Schwarz has been featured in movies and was a tourist draw in New York City for decades. It's since gone through several stages of evolution — or decline, depending on your perspective.
FAO Schwarz filed for bankruptcy in 2003 after damaging price wars with Walmart and other retailers. The toy seller was eventually acquired by Toys R Us, only to be closed close to three years ago.
As the Washington Post noted in 2015, the beloved toy store created an "experience" — or as The New York Times described it in 2003, "a certain retail fantasy" — that drew customers into stores. But many of them didn't buy anything, and the experience they got from visiting came free.
Toys R Us closed FAO Schwarz's flagship store in 2015 and then the next year sold the brand property to ThreeSixty Group (buyer of some of Sharper Image's brand properties, as well). Both Toys R Us and ThreeSixty Group had tried to capitalize on the brand's enduring currency with Americans.
"It is a depressing story, because for many people, that image of FAO Schwarz is part of their holiday tradition,'' Chris Byrne, editor of a toy trade publication told The Times in 2003. ''It is an entire holiday tradition that is going away, or at the very least, is being jeopardized and will change radically."
ThreeSixty Group's acquisition of FAO Schwarz's brand rights helped keep that tradition alive for consumers who still remember and have a relationship with the name. To boost toy sales during the holidays, discount department store Bon-Ton chain (which is grappling with deep financial issues) added FAO's full assortment to 186 stores last year. That assortment included a toy piano mat made famous by Tom Hanks and Robert Loggia in the movie "Big."
Barnes & Noble also featured FAO Schwarz toys at its stores during the holidays as part of an effort to, as the book seller's CEO Demos Parneros said in a November press release, "curate an assortment of exclusive books and other products to make shopping easier and gifting more meaningful."
FAO could soon be making a return to physical retail as well. The company plans to open a new (much smaller) store in Rockefeller Plaza in New York, according to the Commercial Observer.
All this shows that the FAO Schwarz still means something to a lot of people, just not enough to support a full retail chain. The looming question for it and other revived brands is: for how much longer? "If you didn't grow up with FAO Schwarz, you don't know what it is. It means nothing to you," Cohen said.
Founded in 1963 by current L Brands CEO Leslie Wexner, The Limited by the 1980s helped define casual fashion. The retailer, once a host to some major brands that it later spun off (among them Abercrombie & Fitch and Lane Bryant), boasted globe-trotting buying teams that curated stylish designs from boutiques around the world. The company then brought those styles to market via a nimble supply chain that pre-dated fast fashion — a category that ultimately beat The Limited at its own game.
A turn in the 1990s toward older women's workwear sapped the brand of much of its energy, according to Lee Peterson, who spent 11 years at The Limited and is now an executive vice president with retail design firm WD Partners. The Limited, like many retailers to go bankrupt over the past two years, was a private equity buyout. Bought by Sun Capital in last decade, The Limited's owners allowed it little financial room to reinvent itself or adapt to a changing retail world.
By the end of 2016, the retailer was a shell of its former self, beset by falling traffic and offering styles that could also be found at rivals like Loft, and at department stores and fast fashion retailers. As it looked to restructure, it also suffered executive turnover that left the retailer without a solid go-forward strategy.
In short, there were plenty of practical and strategic reasons why The Limited's retail model collapsed. "A lot of customers liked the product, liked what it stood for," Dart said. But, he added, The Limited's business model could no longer support itself amid price deflation and competition for customers. "You don't have to lose too many customers in a retail outfit" for it to fail, Dart said. "You can still have 80% or 90% of customers that still like you. But that's still enough [decline] to cause a crisis."
When another private equity firm, Sycamore Partners, bought The Limited's intellectual property (including its e-commerce business) out of bankruptcy for nearly $27 million last February, it was placing a bet that The Limited still had enough customers that cared about the brand. Sycamore then paired The Limited with another retailer in its portfolio: Belk department stores. Belk announced in December that The Limited-brand apparel, in addition to being sold online, would be sold as an exclusive, private brand at Belk stores.
Dart said that customer awareness and The Limited's long history, were among its chief brand assets. "I know the Limited. I know what that's going to sell and what it's going to look like," he said, describing customer reactions. He also pointed to existing customer data files, which present a "rich target to market" — an especially valuable asset given the high cost of acquiring customers online — as "something that's really highly valued."
In 2002, when Wet Seal was still a public company, shares hit $25 as consumers embraced its laid-back, surf-and-sun aesthetic. But styles changed, as they so often do among younger demographics, and two years later its stock plummeted to a little over a dollar.
The rise of fast fashion sellers like Zara, Forever 21 and H&M sealed Wet Seal's fate. Those companies' rapid supply chains brought clothes to stores faster, preserving their margins by ensuring they didn't have as much excess inventory. It also made them better adapted to quickly changing trends.
"Wet Seal had been selling forever, since the 1960s, and they just kind of got mowed down," Bitar said. "They kind of lost their way over what their aesthetic would be."
Shortly before its first Chapter 11 filing in 2015 — which came after the company lost more than $150 million in a span of two years and defaulted on $27 million in bonds — Wet Seal abandoned its Arden B brand and closed 338 of its mostly mall-based stores without warning. (That drove some employees to post angry signs in vacant store windows.)
Private equity firm Versa bought the beleaguered brand in April 2015 for $7.5 million three months after it filed, only to go looking for a buyer less than two years later as it mulled yet another bankruptcy. That second bankruptcy filing came last February, shortly after The Limited shuttered all its remaining stores and laid off nearly 150 corporate employees.
In March, global restructuring, investment, advisory and branding firm Gordon Brothers bought Wet Seal's assets at auction for $3 million with plans to "rebuild and reposition the brand and develop a unique new business model to best position it for future success," according to Gordon Brothers President of Brands Ramez Toubassy.
"Store locations are free advertising. They only have a website now."
Director of Retail Consulting, RetailNext
Wet Seal is back as an e-commerce retailer, but the future of the brand is far from certain. "Their demographic has grown up a little bit," Bitar said. "Are they going to try to get them, or try to be this teen-early 20s brand again. They look like they're trying to be Express. What is their unique aesthetic?"
Not having stores also puts the brand at a disadvantage. "Store locations are free advertising. They only have a website now," Bitar said.
American Apparel, with its made-in-the-USA ethos, was a go-to apparel retailer for basics. But fast fashion, changing consumer habits and a growing discomfort with the retailer's highly sexualized marketing took a toll over the years.
The company also suffered during a bruising battle with founder Dov Charney, ousted in late 2014. Ultimately, Charney, whose vision largely defined the brand during its lifetime, tried to buy back his company during its first bankruptcy late in 2015. The $300 million bid topped estimates of the brand's value entered in court, but it also came with the stipulation that Charney would return. The board rejected his offer.
Ultimately, Canadian clothing basics wholesaler Gildan Activewear bought American Apparel's intellectual property and some manufacturing equipment (but not its stores) out of bankruptcy a little over a year ago for $88 million. Leading up to the auction, several other companies jockeyed for the company's assets. California-based apparel maker Next Level Apparel, teen apparel retailer Forever 21, band licensor Authentic Brands Group and even e-commerce giant Amazon were said to have prepared bids.
Gildan was able to get American Apparel's wholesale sales and distribution up and running within four weeks of the acquisition. Within six weeks, the company also started Southern California-based production of key styles for American Apparel's Made-in-the-USA collection. By last August, American Apparel had re-launched e-commerce operations.
"In the six months since the brand went silent, the outpouring of love for this brand has been great," Gildan Vice President of Corporate Marketing and Communications Garry Bell told Retail Dive in August. "We are very thankful to this brand's loyal fans for their patience and support as we bring this iconic brand back, better than ever and always Sweatshop Free."
Now the brand has turned its attention to rethinking its marketing in the era of #MeToo, a necessity given that the brand's founder and original driving force has been accused of sexual harassment. Charney, meanwhile, has made significant process in launching a new brand, Los Angeles Apparel.
Circuit City once had more than 1,500 stores across the U.S and Canada. But it had long played second fiddle to fellow big box electronics retailer Best Buy. Circuit City's low wages and out-of-date stores in unenviable locations didn't help its competitiveness. Then came an internal investor battle and a recession, and with it a pullback in consumer spending and a freeze in credit markets.
The company filed Chapter 11 in 2008 — during the holidays, arguably the worst possible time — with plans to become more competitive and, later in the process, to find a buyer. Neither happened. Holiday sales collapsed. No acquisition agreement materialized. In January 2009, the retailer liquidated.
For years afterward, Circuit City operated as an e-commerce retailer. That ended in 2012, though, when owner online electronics retailer TigerDirect bought the Circuit City and CompUSA brands and consolidated them, according to Internet Retailer.
The electronics retail market hasn't exactly gotten easier to crack since then (consider the bankruptcies of RadioShack and HHGregg). Today, Amazon is a beast and Best Buy has upped its game, with much effort and focus. And Walmart and Target are not exactly bit players in electronics sales either.
The most recent headlines that Circuit City was "back from the dead" emerged more than a year ago, when two retail veterans said they were plotting a comeback for the brand. The plan included up to 100 new smaller-format stores and highly trained employees. But those plans stalled some six months later, ahead of the opening of a new prototype store. CEO Ronny Shmoel said at the time that the team behind the revived Circuit City was "taking our time to get this right."
Now — finally — movement. The company announced early January, at the 2018 Consumer Electronics Show in Las Vegas, that Circuit City would relaunch on Feb. 15. The new plans include "a dynamic, social-focused e-commerce site, along with various concepts of innovative retail stores," the company said.
Circuit City is also partnering with IBM Watson commerce, which incorporates AI and other new retail technologies into its web platform, according to a press release. The website allows various ways to shop — via room layouts, category or brand, according to Dealerscope. The company also shared plans for a concept store, designed with the Taylored Group, which will be spaces of about 10,000 square feet and feature demo areas and displays as well as community areas for hanging out, education and other activities, according to Dealerscope.
Perhaps more modest than a 100-store buildout, the new plans for Circuit City seem to rely on the current common wisdom about retail. The planned stores sound like a hybrid of Apple's community-focused gathering places and Best Buy's practical demo areas. And the e-commerce site sounds like it at least attempts to offer something that has mostly eluded online shopping so far: a unique, discovery-laden experience.
BCBG Max Azria Group had been floundering for years, leading to its bankruptcy filing last March. The brand portfolio struggled to win a following and maintain sales while the company buckled under a debt load that by 2013, had risen to $685 million. By the beginning of New York Fashion Week in February 2017, BCBG, a 20-year veteran of the show, was making headlines for bankruptcy buzz rather than its clothing.
On June 9, BCBG announced that two companies — Marquee Brands and Global Brands Group Holdings — would buy for an undisclosed amount most of its assets in bankruptcy. Per the plan, Marquee would acquire the intellectual property of the flagship BCBG brand, and Global Brands would acquire assets associated with the operation of the BCBG business. Many saw the outcome as the most hopeful in the rash of recent retail bankruptcies, with the long-respected BCBG Max Azria brand kept alive by its buyers.
BCBG ultimately shuttered close to 120 locations but continues to operate 42 stand-alone stores in the U.S., and is available internationally online and through more than 300 partner shops including major departments stores such as Macy's. It's still a strong presence, albeit much reduced from the brand's peak.
The electronics retailer HHGregg suffered for years as electronics became commodities trafficked by Amazon online and in stores by mass merchants like Walmart and Target. The company closed stores and laid off some 1,500 employees in a cost-cutting measure just days ahead of a bankruptcy filing in March.
At the time of filing, the retailer had a term sheet signed by an anonymous buyer (later outed as the retailer's ad agency, which was owed millions). That deal for HHGregg's assets would have brought the retailer out of bankruptcy debt-free, but it collapsed within weeks of the filing.
Then-CEO Bob Riesbeck said in the spring that his company had talked with more than 50 private equity firms and other parties, but couldn't find any takers for the retailer's business. Without another buyer lined up, HHGregg ultimately opted to liquidate in April with a plan to close its remaining 220 stores over the next two months or so.
In June, an entity named Valor LLC paid a mere $400,000 to buy HHGregg's intellectual property, outbidding Sears Holdings and other prospective buyers, according to the Indiana Business Journal. By August, HHGregg was back online with promises of a "grand opening," but, as the Indianapolis Star pointed out: "It's unclear what that means, though. The new owner of HHGregg's brand isn't elaborating."
Today HHGregg's website is live and features pictures of HHGregg stores that no longer exist. You can go to the site and order TVs and washing machines. The brand's Facebook page says that "HHGreg was one of the nation's leading retailers of home appliances and consumer electronics." It adds, "Now under new ownership, we will soon be opening one of the most expansive appliance and electronic websites available." Requests to the company for more details were not returned.
Whatever exactly the new owners do with the brand, it could still have value left in it. According to Dart, "HHGregg still had loads of people who loved the store, what it stood for, the experience inside."