Goodbye Neiman Marcus, J. Crew, and what’s sure to be a whole lot more of really irrelevant brands that are filing for bankruptcy this week.
Other than being thirty years younger and 100k poorer than their target demographic, I have nothing personally against these brands. These brands fall into and onto the list of particularly bone-headed large corporations that mismanage their businesses so severely that they inexplicably can’t even continue to operate any longer.
If you haven’t read the details on these big-box giants crumbling crying coronavirus and quitting, I’ll spare you the time. Neiman Marcus’s CEO stated “we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”
Yah buddy, join the club.
‘Inexorable pressure’ sounds like a cake walk compared to what small businesses have been going through each day since before the COVID-19 Crisis began.
“Restructuring” “Downsizing” “Consolidating”
The euphemisms describing this “unprecedented time” for people and businesses alike will continue to pop-up and will soften the ego blow to a certain degree, but the real damages will remain the same for all businesses (and their employees) big and small. The difference for those of us still scratching, clawing and fighting to stay alive, versus those that are throwing in the towel after 6 weeks of stay at home orders, is the ability to adapt.
Unpacking the Coronavirus ‘pivot’ for businesses
Blame it on the “macro-economic headwinds caused by COVID-19” or buckle up and get ready for the real version of life. If your business doesn’t have a really good reason to exist, be prepared to be obsolete. In case you hadn’t heard, the e-commerce economy isn’t just rising, it’s here and it has been for some time. Retailers with massive store presences are not becoming obsolete, they ARE obsolete. This shift was no fault of the coronavirus that caused this, it’s been an inevitability for over a decade.
So how surprised is anyone that some of the nation’s oldest luxury clothing brands who have been selling the same way, to the same people and possibly even the same products for over a century failed to see the impending downfall?
So how bad is it really for retailers filing for Chapter 11 bankruptcy?
If you’re needing a little refresher on the forms of bankruptcy, the short version is, all these companies (so far) have filed for Chapter 11 bankruptcy. In a nutshell, that basically means they were extremely poor at managing their money and have thrown their hands in the air proclaiming they are finally admitting their financial shortcomings and are asking to be “reorganized” so they can fix their financial woes. This type of bankruptcy as opposed to the one where they fire sale all assets like a multi-family yard sale), is largely based on the future viability of the company.
“One of the biggest determinants in whether a company should liquidate or attempt to restructure is simply whether it has a reason to exist,” says Melissa Kibler, a senior managing director at Mackinac Partners who works as an accountant on bankruptcy-induced reorganizations.
Future viability is something small businesses owners know all too well and strive to maintain each and every day.
How do you determine business viability?
If you Google Chapter 11 bankruptcy, your browser will be filled with examples of dozens of examples of Chapter 11’s that became Chapter 22’s or 33’s meaning they didn’t learn their lesson, were still not viable and therefore repeated their mistakes again and again filing for Chapter 11 2 and 3 times. Although rather comical, this makes the whole concept of viability a bit of a loose term and the companies themselves an actual jokes of business.
You’ll also find a significant number of Chapter 11’s that took their second lease on business as a joke, did nothing and promptly had to file for fire-sale bankruptcy (Chapter 7). Not exactly what I would call viable.
So simply put, business viability means you fill a need an actual want or need for an audience that will pay money for your product or service. The only “new” qualifier is that said audience also needs to be able to purchase your goods. Seems pretty simple, right?
How do you ensure your business is viable for the future (and any extreme curveballs mother nature has to throw at you?)
Since day 1, one of the core philosophies at CleverFunnel has been to Evolve or Die. In the times of social distancing, no public… anything, and an extreme and sudden shift in buyer-behavior, never more has this been a mantra to live by. The ability of a business to recognize changing consumer trends and adapt means life or death. As I mentioned earlier, this wasn’t exactly an asteroid crashing into Earth in a matter of seconds. For these brick and mortar retailers that refused to transition, find themselves between a rock and a place in federal courts having their assets divided up.
With the list of retailers being ranked and scored based on their likelihood to fold growing everyday, it’s easy to understand why some are on the list and why some are not. Aside from a few exceptions of industries that were actually impacted more adversely that the rest, the answer is simple. E-commerce is not the future, it is the present. Any retailer that was too blinded by their luxury wears and physicals store walls to see that, is as dead as the dinosaurs.
Here’s the tips smart companies are doing to outlive the virus strain that has brought the World to its knees.
- Get data-knowledgeable. Use this time to gain a firm understanding of your customers and your future customers and use this challenging time to innovate to reach them in new ways. Resting on your laurels is a surefire way to end up extinct.
- Get your business online. If for whatever reason you were resisting e-commerce or digital marketing before, get over it. Online surfing and purchases are higher than they’ve ever been. Get your name out there that your goods and products are for sale, that they’re just as good as ever, and available to anyone with an Internet connection.
- Get lean, get agile and outsmart the coronavirus. If you’d turned into a slow moving hard to maneuver cruise ship (may they also RIP), now’s the time to right your course and get your business on the fast-track to innovation.
If you’re a staunch follower of the blog (thanks, mom!), you know that we’ve called attention to the ludicracy of these long standing and outdated practices in businesses before. In 2018 there seemed to be a slew of CMO firings, followed by what seemed to be incredibly more strategic CGO hirings. Just two years ago, it seemed there may be hope and these behemoth companies may have learned their collective lessons and wisened up, but sadly this Coovf Crisis has shown that is not the case.
In closing, if you can’t keep it together and pivot appropriately in a short economic downturn, it’s time to get out.