Even if the prospects for retail brands’ future success are bleak, they retain certain valuable features, including the intellectual property they have built over time. The challenge is figuring out how to continue making money off familiar brand names, designs, jingles, and trademarks, even after the retailer can no longer operate in a conventional sense.
Enter a new investor, called Retail Ecommerce Ventures, or REV. The foundational business plan for the venture is to purchase distressed retail companies, on the brink of bankruptcy, then close all their physical stores while leveraging, improving, and building their online operations. Thus far, REV has purchased six brands, including Pier 1 Imports, Dress Barn, Linens ‘n Things, and Modell’s Sporting Goods, converting each of these once-popular retailers into exclusively online shops.
The domain names, social media pages, and other mobile and ecommerce channels remain in place, so a consumer searching online for a blouse at Dress Barn will still be able to find it, as expected. But in addition to keeping that element consistent, REV pumps up social media efforts for each label, determined to drive more consumers to mobile and ecommerce channels to find the funky international décor they love at Pier 1 Imports or the running shorts that they know fit them well at Modell’s.
To decide whether to purchase these struggling brands and their intellectual property, REV applies several criteria. Notably, it has to anticipate that the remaining retail brand can generate at least $10 million in weekly revenue. It looks at the existing customer base and whether shoppers appear dedicated and loyal to the brand, such that they are likely to keep buying from it. Furthermore, the purchase price for these properties must be low enough; some retailers struggling to survive simply are not distressed enough to lower their prices to the point that REV believes it can turn a profit. Thus for example, it chose not to invest in Forever 21, American Apparel, or Barnes & Noble.
But for the companies in which it has invested, REV looks like a lifeline. They get to remain in existence, with a least some jobs still intact. And for Dress Barn, the changeover has meant a twofold increase in revenue in just one quarter.
Discussion Questions:
- Why does REV acquire existing retailers instead of creating new ones?
- What are the advantages and disadvantages of operating a familiar retailer entirely on an online platform?
Source: Aisha Al-Muslim, “Pair of Entrepreneurs Aim to Refashion Zombie Retailers into Online Powerhouses,” The Wall Street Journal, August 25, 2020