A Decade of Bankruptcy, Online Shopping, and Corporate Perishment
The decade has ended, and nostalgia is at the top of our social media pages and the YouTube trending page. The warm, yet sorrowful feeling of what once was is brought to life with throwback videos and shoutouts to the toys, apps, shows, and music that had filled our younger days with entertainment.
However, does one ever take the time to review the businesses that left the streets and roads of our neighborhoods and cities? Many of us do not seem to realize when a company declares bankruptcy or simply disappears due to problems within the establishment itself. In a poll answered by 69 students in our school community, 81.9% of respondents said they do not keep up with the news surrounding the business world and are usually unaware when businesses fail.
According to a Business Insider survey, 60% of millennials prefer to shop online and 79% or 8 out of 10 Americans now shop online as found in a study by Pew Research displaying the big move to shopping over the Internet.
There have been many companies that have met their downfalls over the decade; however, some big names that have surfaced include Forever 21, Toys R. Us, Quiznos, Brookstone, Sbarro, and Radioshack.
In 1981, Forever 21’s founders married couple Do Won “Don” Chan and Jin Sook Chan arrived in Los Angeles from South Korea. They had no money or college degree with them and could speak little English, but they took up small jobs and proceeded to save up money to buy their own boutique. Don Chan said in an interview with Business Insider that he had realized while working at the gas station, he “noticed the people who drove the nicest cars were in the garment business.” In 1984, with $11,000 in their savings, the Chans bought a 900 sq ft store and gave it the name Fashion 21, creating a system in which they used wholesale closeouts or clearout sales from big corporations to purchase their clothes, selling them at a discount. This idea worked out very nicely for the Chans as in the first year of their store they made over $700,000. Confident in their success, the Chans decided to open new stores throughout America, adding a new one every six months. This helped expand their customer diversity as before they were only attracting Koreans from Los Angeles, and soon they changed their name to Forever 21. Life seemed good for the Chans as they continued to open store after store until they had 481 mall locations by 2015, gaining over 4.4 billion dollars in revenue each year. The stores had quickly become popular due to their styles no other store seemed to carry, and their limited edition fashion, as well as cheap prices, kept bring in customers. However, things would only go downhill from there.
According to an analysis from Business Insider, the first problem that appeared was their quick expansion. They rapidly increased their number of stores even having several locations take over the store above, adding more levels and thus more items to purchase. But as online shopping began to popularize, fewer shoppers began to prefer physical stores over purchasing their clothing online. Forever 21 took too long to take their business online, doing so after its competitors had already created theirs. Their fashion became too much like their competitors, and as Zara, Gap, and H&M gained more customers, shoppers decided their styles were more unique than Forever 21’s cliche styles. They were also charged with several cases of copyright by multiple companies such as Gucci, Anthropologie, and Adidas. These are most likely the true causes of their downfall as according to a study done by Forbes, their sales dropped by 20-25% in 2018. In September of 2019, they filed for bankruptcy closing many stores in and out of the U.S., and many knew of this with 71% of our study body saying they had known.
The bankruptcies of Quiznos and Sbarro deal more closely with competition as while Quiznos had to compete with other sandwich giants such as Subway and Jimmy Johns, Sbarro had to deal with the even bigger pizza companies such as Dominos, Papa Johns, and Pizza Hut. Both companies were usually found in airports, train stations, and rest stops as a quick bite to eat. However, while one might assume these locations would grant these companies buckets of revenue due to the enormous customer base, it can be assumed customers proceeded to lose interest in their products when comparing them to other options they had at the location. These options include businesses that have become more popular over the past decade such as Chick-Fil-A and Dominos. Thus, the places continued to lose money until both filed for chapter 11 bankruptcy (which allows a company to require time to restructure their debts and get a fresh start) Sbarro in 2011 and Quiznos exactly five days later. When asked about whether students knew about these places’ bankruptcies, no students knew of Sbarro’s downfall and only 7.2% of students knew solely about Quiznos. 88.4% of respondents said they hadn’t heard of either company’s bankruptcies.
As technology advances, big creators such as Apple, Amazon, and Microsoft continue to increase their profits and their stock grows. However, for sellers such as Best Buy and Radioshack, in-store electronic sales are becoming less popular as many customers choose to purchase online.
Radioshack declared its second bankruptcy in May of 2017 after trying to work with phone company Sprint to help Radioshack better compete in the growing technological market. However, things went sour and, according to an article by Investopedia, eventually the tech seller realized the drop in customers preferring to shop in physical stores was due to Amazon’s increase in sales and they realized in order to compete they had to do the same. Thus, the company decided to move to solely online sales, and not many people knew of this with the majority of students saying they hadn’t noticed the move to the Internet. Brookstone had a similar issue in which fewer customers began showing up to their stores, and they eventually realized the ones who did wouldn’t usually purchase much. Due to this, the tech company sold off all its mall locations and moved their business online as well. Fewer students knew of this with 73.9% of responses to the survey saying they hadn’t known of its financial issues. However, students knew of Toys R. Us’ bankruptcy at 94.2% perhaps because the toy store was such a big part of our childhood.
When interviewing freshman Emmie Vajda about a local sushi business near her house named Miso Men and its closing, she concluded the reason was that the location was not easily found by the public. When asked about how to solve that issue, she answered, “I think maybe advertise itself more because I don’t think a lot of people knew about it.” While this method can help a restaurant, it is harder for other companies because of the huge switch to online shopping. For those of our school who wish to start their own business or take up one that will be passed on to you, be aware of your location, advertise yourself, create a website, innovate ways to keep your business alive and from the downfalls many have already faced. For you are the future of our economy.