Aug 31, 2009

Where the (Retail) World is Going?

In his column Consumed for the New York Times Sunday Magazine, Rob Walker offers us a glimpse of our business future as seen by private-equity. It is a rather unsettling world of The Pure Brand. No assets, no employees. Just a website, a handful of trademarks, and hopefully millions of loyal shoppers.

Of course, as Walker’s article indirectly points out, private equity is uninterested in actually building such a brand. Their preference is to ride the brand down post-bankruptcy. Walker focuses on Linens ‘n Things, which has been “reopened” on the Web by its new PE co-owners, Gordon Brothers and Hilco Consumer Capital, who picked up just the name and site for $1 million. Prior to that, of course, LNT had built its brands by spending $ billions on stores, advertising, infrastructure, and staff over several decades. The residual of that considerable effort is a brand people continue to recognize, visions of domestic goods-laden store floors still stuck in their heads. Over time, those memories will fade however, and the question is whether Web-based brand-building can noticeably slow this inevitable deterioration.

Walker sums up with a quote from Gordon Brothers’ Paul Venezia:

“The economy is cleansing business right now.” The new Linens ’n Things, Venezia argues, is a model of efficiency, offering competitive prices and freeing business from the cumbersome liabilities that come with big-box leases, pricey brand-building campaigns — or a work force. “It really reflects,” he says, “where the world is going.”

Meantime, Smith & Hawken is also liquidating its stores and inventory. But S&H has already taken its site off the Internet and, as far as we know, has no plans to reopen as an asset-less venue. Maybe someone will try to resuscitate it as a sleeper brand someday.

Virtual/online or oblivion. Are those really the only two paths left to struggling retailers?

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