The rising market competition is posing major challenges for companies in the retail industry. Multi-channel buying experiences are growing with time between online shopping and brick and mortar platforms, making consumers more open to retailers who can facilitate these transactions. So it has become essential for retailers to get into these trends and focus on creating top-notch customer experience across all platforms. Retailers have been saying they want to put the customer at the center of everything they do but have struggled with how best to do so. This will result in saying goodbye to some of our favorite fast fashion retailers. So far this year, American retailers have announced more than 8,000 store closures.
Topshop Filing for Chapter 15 Bankruptcy
It’s time to say farewell to Topshop or at least in the U.S. The UK-based fast fashion retailer closed all 11 of its U.S. stores after its parent company Arcadia filed for bankruptcy. Arcadia Group, operator of the Topshop and Topman brands, filed for bankruptcy in the U.S., seeking court protection under Chapter 15. This section of U.S. bankruptcy code deals with foreign solvencies, with plans to exit its U.S. operations and begin liquidating inventory in U.S. stores. Topshop operated two stores in Manhattan, along with outposts in Miami, Glendale, Houston, Chicago, Los Angeles, Las Vegas, San Diego, Washington D.C., and Atlanta. Topshop didn’t only get rid of U.S. stores, but also closed 23 stores in the UK. As a result of the closings there are nearly 520 jobs at stake. Luckily for Topshop the filing didn’t affect Arcadia’s wholesale and online businesses, making the brand available in the U.S. online and through other wholesale partners.
From Sales Diminishing to Sexual Harassment
In a statement from Ian Grabiner, the CEO of Arcadia Group, the store closures were classified as a “tough but necessary” measure. Topshop’s sales and its image hadn’t been doing so well for a while. A few factors in the struggle of the brand were diminishing retail sales, a shift in consumer shopping habits, and increased competition from other stores, as well as additional sources of the company’s problems. In October of 2018 chairman Phillip Green faced allegations of sexual harassment, while making racist remarks and acting in an abusive manner toward employees. Although he denied these accusations, it didn’t stop customers from boycotting the brand. These allegations were also the reason behind Beyonce dissolving her partnership with the brand.
Could this be the overdue death of fast fashion?
The shopping mall staple Forever 21 is preparing to file for bankruptcy due the decrease in sales. This will help the Los Angeles based retailer to recapitalize the business and cut under-performing locations. According to Forbes, an industry analyst estimated that sales dropped by 20% or 25% last year. Although Forever 21 brought in a team of advisors to help restructure debt, as well as held talks to raise additional financing, bankruptcy filing is looking more and more likely.
Slave Labor in Exchange for Cheap Clothing
Although it may be heartbreaking for consumers to wake up in a fashion world where Forever 21 no longer exists, some consumers may argue that this is all for the best. Like other fast fashion stores, Forever 21 is bad for workers, the environment, and fashion itself. According to an article written by the Los Angeles Times in 2016, Forever 21 clothes were being made by factory workers in Southern California who were paid as little as $4 an hour. Stores such as Forever 21, TJ Maxx & H&M, whose main business goal is to sell the latest trends at dirt-cheap prices are well known for relying on virtual slave labor just to maintain their ability to sell cheap clothing. On this type of wage it’s almost impossible for workers to have money left over every month after just the bare necessities, such as rent, food, car insurance and gas.
First Bankruptcy, and Now a Lawsuit
As if preparing to file for bankruptcy wasn’t already enough, the retailer is also being sued by pop star Ariana Grande. The pop singer filed a lawsuit against Forever 21 for allegedly using a look-alike model without her consent. According to the lawsuit, last November Forever 21 reached out to her representatives to suggest an endorsement deal that would be centered on social media, but Grande’s representatives ultimately declined. This didn’t stop Forever 21 from posting from their Instagram account, snapshots from “7 Rings” and advertisements in which the “look-alike model” is dressed similarly to Grande in the video. In one of their posts, the model wore a hairpiece with two pink puff balls, with the caption “Gee thanks, just bought it” and asked users to “shop our favorite trend.” The lawsuit stated that it was clear that Forever 21’s intent was to suggest to their followers that Grande endorsed Forever 21, its products, and was affiliated with Forever 21.
The Turnaround Effect of Charlotte Russe
Back in February, Charlotte Russe filed for Chapter 11 bankruptcy and closed nearly 100 stores. According to the mall-based retailer their reasons behind filing included suffering from a dramatic decrease in sales and in-store traffic, as well as struggling with the burden of maintaining a large brick and mortar presence. But the company hoped to emerge from bankruptcy with a new owner and a lighter balance sheet. Fashion retailers must stay on board with the latest styles, trends, and influences to stay ahead, but the company failed to do so. The retailer shifted too far towards fashion basics and away from trendy clothes, which affected their online business. In efforts to help turn things around the new buyer plans to save money by closing stores and instead develop more content for online and social media to engage core shoppers.
How Retailers Can Avoid Being the Next to File for Bankruptcy
Retailers that don’t understand the changing shopping behavior are going to be at a loss. Company leaders need to start improving stores, adapting to technology and tackling competition head-on to stay at the top of the game. Technology has empowered startup brands to market directly to their target audiences through the web. Before retailers could depend solely on kids hanging out at the mall but now you can find customers through Instagram and other social media platforms. It’s essential for fast fashion retailers to stay on board with the latest technology and social platforms, in order to connect with their customers and ultimately succeed. Brands that focus on innovation and great customer experience will continue to attract and retain customers. Retailers should have an exceptional online presence because consumers look for information about businesses online. You want to make sure that you’re easy to locate, that Google listing provides accurate information about you, that your reviews reflect the service you provide, and be well informed about what customers are saying about you on social channels. This will help you determine how customers perceive and experience your brand. Digital marketing is necessary for any business to succeed, especially now in the digital era we live in.
References
https://www.businessinsider.com/topshop-closes-all-us-stores-2019-5
https://www.cnn.com/2019/02/04/investing/charlotte-russe-bankruptcy-retail/index.html