Italiano
EnglishIn the first months of 2018 US retail has taken some hard blows. Last year retailers already filed for bankruptcy at a record rate, and the trend seems to be continuing in 2018.
Let’s take a look at the retailers that have filed plans to restructure, find a buyer or liquidate through Chapter 11 (the bankruptcy procedure governed by US law).
To put it bluntly: last year was a sad year for some retailers.
These include retailers with a high level of debt, those that depend on shopping malls, and those whose business is particularly exposed to the explosion of online and off-price sellers and of Amazon in the physical world (think of department stores and specialist retailers, especially those selling clothing).
By December 2017, 26 major retail bankruptcies had been recorded, according to data from AlixPartners. The numbers exceeded those of 2008, when a severe recession devastated the sector and 20 bankruptcies were recorded. Some of these retailers expect a slowdown in bank lending and store closures.
Since the start of the year, three major retailers have filed for Chapter 11. Let’s look at each case.
1. KIKO USA
On 11 January Kiko USA filed for bankruptcy, with the stated aim of reorganising under a plan that closes most of its stores and concentrates resources on e-commerce.
Kiko USA played in an innovative beauty sector and achieved success in shopping malls. But mall traffic declined, so it launched a new line on Amazon, using the “Fulfillment by Amazon” programme. That business, together with Kiko’s website, was growing at double-digit rates before the company’s Chapter 11 filing. But physical sales shrank too quickly for Kiko to adjust the costs of the Amazon programme in step with the losses in physical retail. The company filed for bankruptcy protection in January with the intention of closing all but five of its retail stores by the end of February.
The chief executive of Kiko USA stated in a court filing that the retailer has a strategic plan centred on its offer, its remaining stores and its e-commerce business.
In a way, the failure of Kiko’s physical stores reflects the trend we are seeing in the United States: large chains giving up offline retail space, crushed by online and off-price competition.
This problem affects every sector: with Kiko we have seen an example of a brand specialised in make-up and, more generally, in lifestyle.
2. BON-TON
The big department store chains, such as Bon-Ton, are not spared.
In December Bon-Ton failed to make an interest payment of several million dollars, entering a grace period that expired while the company was negotiating with its lenders. The retailer filed for Chapter 11 on 4 February, with agreements for more than 700 million dollars of bankruptcy financing to keep the lights on in its department stores. The company obtained court approval for the new financing, shortly after objections from some bondholders, who are asking Bon-Ton to liquidate immediately in bankruptcy and describe the retailer’s prospects of survival in a sector in sharp decline like department stores as “at best, uncertain and unlikely.”
3. A’GACI
Another US brand that has taken a hard blow is A’gaci.
A’gaci’s recent physical expansion performed particularly badly because of the decline in traffic in shopping malls. After opening 21 new stores in the last two years, A’gaci is seeking to close 49 stores, almost 65% of its footprint.
The company’s CEO stated in court that last year’s major hurricanes “devastated” some of its most profitable stores. The brand’s earnings fell by 7.2 million dollars in the last year. The hurricanes, the earnings, the over-expansion and problems with a company software system all came together and pushed the company to file for bankruptcy protection in January.
Now the retailer, founded in 1971 (so a brand with history), is trying to reduce its physical footprint and focus on its most profitable stores, while also expanding online.
After all these negative figures, we ask ourselves what the future of retail in Italy will be.
If so many US retailers have taken a hard blow, there is real fear that this trend will also affect Italian retailers. We were not safe from the 2008 financial crisis, and the collapse of physical retail seems to be just around the corner.
How can we avoid being caught out by this fall and get ahead of a possible retail crisis?
We have to analyse the cases of failure, and then shift our attention to the success stories: brands that are innovating across the board and expanding at a growing rate, in offline retail too.
Examples of excellence can be found in the strategies of Eataly, Tiger and IKEA.
The lever we have seen retailers start to use in recent years is opening evolved neighbourhood stores, turning the act of buying into a memorable experience. Just as important is omnichannel, which creates synergy between a brand’s different sales channels. Digitalisation is now at the centre of every success story.
So there is only one key word: innovation.