Meet The Gurus Turning Failing Stores Into Online Powerhouses
Normally, that might have been the end of those brands, but instead, both were bought by a company, Retail Ecommerce Ventures, that relaunched them as online-only stores. REV’s modus operandi is exactly that: “We transform well-known distressed retail brands into e-commerce success stories,” their website proclaims.
Retail stores have been shuttering in record numbers over the last couple of years, but moving operations online is easier said than done, and can come with trade-offs, experts say.
Dressbarn and Pier 1 are the first stores REV relaunched online and, according to Dressbarn and Pier 1 CEO Shayan Zadeh, they are already seeing promising sales growth.
Zadeh said following the September relaunch of Pier 1, it has had “back-to-back months of 100%-plus” sales growth through November. At Dressbarn, which relaunched in January, sales growth was up 50% in Q3, Zadeh said.
“There's a huge amount of loyalty [among customers of these brands], but they're struggling as a business because the brick-and-mortar piece is actually holding them back,” he said.
Zadeh said that in many cases, Dressbarn and Pier 1 were on the hook for decades-long leases for unprofitable stores, and beholden to the constraints of a physical store when it came to offering products to customers.
This year to date, companies have announced they will close more than 11,000 stores across the country, or nearly 150M SF of retail space, CoStar said. According to Coresight Research, which tracks store closures, there have been roughly 8,400 closures so far in 2020.
But just removing the physical location from the equation does not eliminate all the underlying problems with a brand.
“There’s not an inherent problem with physical retail stores,” GlobalData Retail Managing Director Neal Saunders said. “The problem is always with retailers that aren’t providing what customers want or have lost their way.”
Both brands were troubled before REV. Dressbarn “has not been operating at an acceptable level of profitability in today’s retail environment," Dressbarn Chief Financial Officer Steven Taylor said in a May 2019 statement announcing the closure of the chain’s stores. Pier 1 filed for bankruptcy in February.
Moving a struggling company online makes sense in that it can make the business model more profitable. “But there’s still the issue of what these brands are providing to customers,” Saunders said.
Maintaining the existing customer base has been a big part of the work in relaunching Pier 1. The company has held regular webinars with customers, answering questions and talking about the switch to online, “so that it's not just a name and a completely detached experience,” Zadeh said.
Other changes have been heavily focused on the e-commerce shopper experience. Zadeh said the team that helped transition and maintain Dressbarn and Pier 1 “has decades of experience doing e-commerce, and good digital sales and digital marketing experience.”
“You can’t just take what was there and repeat it, because if you do that, you're going to get the same results,” Zadeh said. “And that hasn't been a positive outcome.”
Though Dressbarn and Pier 1 are off to a solid start in their new forms, it’s still fairly unusual for stores that have closed all their physical locations to relaunch in an online-only format. Some of the prominent examples are Stein Mart, whose IP REV bought earlier this month, and RadioShack, which REV also owns.
“Each one gets more efficient,” Zadeh said.