If This Is The Apocalypse, Where Are The Zombies?

The last few years of retail have been described by the likes of Business Insider, CNBC, and Fortune Magazine as ‘The Retail Apocalypse’. So for a while I’ve been thinking, cool but where are the Zombies! It seems we are now starting to see them. Retail Zombies are dead businesses that should have probably have remained dead (mostly because they didn’t understand their customer, they have too much competition or they don’t have a competitive advantage) but for some strange reason have been revived not quite to life in order to haunt retail for another day, month, year or so.

Obviously I’m being dramatic, but it seems that we’re now in the stage where these Zombies are starting to emerge.  Here’s my guide on how to spot a Zombie….

Firstly, they never quite die…

Zombies are neither dead or live, so they can’t technically be killed unless you cut off their head (so the movies tell us). The same seems to be true for Zombie retail once revived they never quite manage to die, yet they’re never really alive either - at least not as alive as they were back in their hey day. They exist in this in-between world of near immortality (but not in the good way). 

For this one, let’s take a trip down memory to 2015 when American electronics retailer RadioShack filed for Chapter 11 Bankruptcy Protection. RadioShack, started in 1921 had at one point in time been the single largest seller of consumer telecommunications products in the world (that was in 1998). 7 years later, they entered their first Chapter 11, exiting as Standard General offered US$160m to buy the brand and it’s 1,734 stores. They hoped to turn around the business by rebranding the stores….then less than a year after their acquisition their CEO and CFO stepped down. Two years later they filed for Chapter 11 again (showing that you can’t keep a good Zombie down), however they used this more like a Chapter 7 and liquidated inventory and supplies. They closed all but 70 of their corporate owned stores - initially - and sued Sprint (Telecommunications Service Provider in the US) claiming it had sabotaged it’s cobranded locations. Standard General then auctioned off the RadioShack name and IP for US$15 to Kensington Capital Holdings (FYI there was only one bidder). In October 2017 (8 months after filing their second Chapter 11) they exited bankruptcy with 28 stores, ecommerce site and warehouse. For those wondering, the brand still lives on today. Their most recent move was in 2018 to partner with Hobby town US opening 100 express stores. 

Moral of this story you can’t keep a good Zombie down (but you can’t really expect it to be a success either)

Secondly, they haunt in groups…

If we’ve learnt anything from Zombie movies it’s that they need to be in a crowd - rarely is a Zombie spotted by itself. This makes them both hard to escape and easy to spot. The same is true of Retail Zombies, there’s normally a couple of them sitting in the same category that have been all brought back to life around the same time.

I’m sure we can all think of a couple recent examples of this but I want to draw your attention to the denim category to see Zombie retail in action.

As a category denim has been under an immense range of pressure by athleisure (on one side as women’s Yoga Pants outsold Denim for the first time in 2017) the other end we’ve had the democratisation of denim with the likes of Zara, DDS etc entering the category. There is an abundance of options for the consumer, and the middle to mid-premium denim retailers are no longer the best answer. So it’s no surprise brands in the category like G-Star (who filed for Chapter 11 in the US, and second administration in Australia), Jeans West (administration in 2020), True Religion (filed for it’s second Chapter 11 within 3 years in 2020), Lucky Brand Jeans (Chapter 11 in 2020), and Diesel US (Chapter 11 in 2019) have all gone under. Before we go further, you could argue there were already two Zombies in this group in the form of G-Star and True Religion who have both been brought back to life a couple of times.I want to pull out the newest potential Zombie in this group which is Lucky Brand Jeans, who was taken out of Chapter 11 by SPARC (which is a JV with Authentic Brand Group and Simons Property Group) for US$140M this year. Joining it’s gang of Zombies in Denim-Land.

Finally, they’re only mission is to feed...on money

When I say feed, I should be more explicit - feed on money. Very rarely does a Zombie retailer want more in this life than to rebuild what they lost, and this becomes an obsession with profit, revenue etc. often at the cost of the culture and people that had made the business a success to start with. Their customers can feel this shift as it becomes a business that no longer wants to get to know them (have you ever seen a Zombie have a conversation). To quote Starbucks founder Howard Schultz 'Everywhere we go as consumers, we’re getting people who don’t want to reach into our hearts or know who we are; they want to reach into our wallets and get some money.’ Very often Zombies retailers are taken over by modern day Victor Frankinstein’s who can see their missed opportunity (their potential) - however very often this missed opportunity is entirely about money - or an excel spread sheet hypothesis - as an input not as an output of a brilliant decision. So decisions are short-term like cost cutting, discounting, expanding categories and deal making. Instead of being laid to rest, or truely (and transformationally) revived to life (think Restoration Hardware) ; this motivation has the business chasing anything that walks past it. 

I’ll leave this article here for exactly what I’m talking about - published in 2015 titled ‘7 retail brands that survived Chapter 11’. Needless to say most of them ended up back there or living in the 'in between’.

My hope for the coming years is that we allow Zombies to rest (as I was recently reminded you can’t cure a Zombie, you can only kill it); and that when businesses are bought the owners make the transformational decisions needed to in order for it to rejoin the living (think Apple).