It’s Nearly Impossible to Revive Dead Retailers, but Investors Are Trying

It’s a zombie retail apocalypse

Investment firms want to bring retail back from the dead.
Illustration: Trent Joaquin; Sources: Pixabay, Toys R Us, Sears, Barnes & Noble, Claire's, The Limited, Wet Seal

The latest retailer to potentially come back from the dead is Toys R Us, the 60-plus-year-old toy store that ceased operations in 2018.

In the bloodbath that has been brick-and-mortar retail in the ecommerce age—some even call it a retailpocalypse—many long-standing retailers in American malls and shopping centers found themselves flailing against an invisible foe.

Some, like clothing stores Charlotte Russe, The Limited, Nine West and Wet Seal, along with gadget store Brookstone, went belly up, only to be sold for parts to vultures that were typically—although not exclusively—investment firms. They, in turn, have tried a number of tactics—including focus on ecommerce and fewer, smaller stores with experiences—to become the Melisandres to what they hope are Jon Snows. That is, they want to bring these stores back from the dead.

Others, like bookstore Barnes & Noble, tween jewelry chain Claire’s and even department store Sears haven’t quite given up the fight yet, but due in part to the wounds inflicted as they struggled to stay afloat, they, too, ended up in bed with investment firms. And these firms, believe or not, have big plans, too.

Yet, unlike fictional characters, it’s really hard to bring dead retail back to life.

The reasons these brands failed do not suddenly disappear once investors buy them—and the stores still have to overcome the same demons, such as strong competition or lack of innovation, said retail expert and consultant Bruce Winder.

“When brands go to sleep, it’s hard to wake them up again,” he added.

Sucharita Kodali, vice president and principal analyst at market-research firm Forrester, likened reviving many of these stores to reopening department store Montgomery Ward, which seems rather pointless.

“There have been so many retailers that have gone bankrupt—very few make comebacks,” she said. “Usually, when they’re gone, they’re gone.”

Yet the reason so many investors are willing to give it a shot is because struggling retail is cheap—and if it still has some decent equity, it may yield good ROI if the right partner happens to make the right changes.

“Investment groups always circle weak prey,” Winder said. “They see a company in distress and sometimes buy the assets and try to go to market in a rebirth, usually in a much smaller way.”

Sounds familiar, right?

Plus, it’s a lot harder for a struggling retailer to reinvent itself while drowning in debt.

“A lot of these companies … were flipped so many times, even if they’re making money every day, they owe so much that there was no way to dig out of the hole,” said Allen Adamson, co-founder of marketing services firm Metaforce and adjunct associate professor at the NYU Stern School of Business. “It has nothing to do with advertising, marketing and branding.”

So, like consumers, life after bankruptcy is possible, but not necessarily easy.

For a brand to make a comeback as quite possibly the first-ever retailer to rise from the dead, it must have a name that is recognizable and relevant, Adamson said. It can’t just be something consumers have heard of, but don’t care about—and it can’t have a bad reputation.

“I don’t know any of them will be successful in the best of circumstances. It’s hard to make retail work, much less a brand kind of tarnished,” Kodali said. “Circuit City has been trying—whoever owns Circuit City has been trying to have it still stay alive online, but just because you put a website up doesn’t mean anyone will use it.”

Nevertheless, brands with name recognition may have loyal customers wistfully searching for them online. Toys R Us, for example, has 60 years of name recognition, and, if parent company Tru Kids can convert a small percentage of those people, it may have a viable business, Kodali said.

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