According to Forbes over 160 retail companies filed for bankruptcy in 2020. It is easy to assume that the pandemic destroyed these companies, but maybe their failure to adapt to changing trends has been the main cause of their troubles. Let us analyze some popular bankrupt retailers to learn from their mistakes.
Victoria’s Secret
The famous lingerie powerhouse Victoria’s Secret, owned by L Brands, operated over 1.000 stores worldwide, but in May 2020 it announced that over a quarter of its stores will be closed in the US, Canada, and UK. Stuart Burgdoerfer, Executive Vice President & Chief Financial Officer of L Brands, even stated to Wall Street that he expects more store closures in 2021 and 2022.
The brand has been experiencing financial loss in the past three years and the coronavirus lockdown, which prevented physical stores trading, has been its final blow.
Experts say that Victoria’s Secret lost its appeal to consumers because it failed to be inclusive enough. In 2018 its Chief Marketing Officer Ed Razek stated to Vogue that the brand did not want to cater to transgender or plus-size women. Also, Victoria’s Secret was involved in the Me-Too campaign which further tarnished its reputation.
Considering the cultural changes that have been happening in recent years, the company’s failure to follow social, political, and cultural trends led it to its demise.
Lesson: Make sure your brand reflects inclusivity, that it embraces all sizes, races, gender preferences, and human rights. Any form of discrimination will not be welcomed in the new retail era.
Arcadia Group – owners of Topshop, Dorothy Perkins, Burtons, Miss Selfridge, Wallis, and Evans.
UK Fashion Giant Arcadia Group went into administration in November 2020. The company’s popularity peaked in 2004-2007, but since 2012 it cut its store numbers by half.
Retail experts say that the fashion group suffered from low investments and an unwillingness to develop its online sales. In comparison, its fashion competitors such as Next and John Lewis heavily invested in their online operations and now produce half of their sales online.
It is believed that Arcadia would probably have been in trouble in 2021-22, but the impact of the coronavirus pandemic and the closure of physical stores led to its destruction.
Lesson: It is crucial now to invest in online business
Forever 21
Fast fashion giant Forever 21 was majorly popular among teens who wanted cheap clothes that changed rapidly to follow the latest trends. But the brand in early 2020 closed down around 350 stores worldwide, including nearly 200 U.S. stores.
Experts say that the brand lost its appeal among young consumers because it was not environmentally friendly enough. Even young consumers are now questioning whether disposable clothing is good for the planet.
The retailer has been forced to file for bankruptcy and shut down part of its business, but its new owners are planning to save approximately 450 stores that are still open in the U.S.
Lesson: Make sure your business culture reflects sustainability and environmental awareness.
Adapting to a New Normal
Since the pandemic started we talked about how its effects will transform the retail market. We must understand that the tastes and behavior of consumers is changing in this new environment. Retail is a reflection of the current social and political arena. The failure to adapt to changing trends ruined major global retail brands, make sure you don’t make the same mistakes. It is not a time to wait for things to go back to normal, but rather to ride the waves of change.
