As you’ve likely heard – even if you’ve only been partially paying attention to the news – Lord & Taylor and Men’s Warehouse are the latest retailers to file for bankruptcy protection. This brings the current tally to 28. According to Business Insider, “more major retailers and restaurant chains have now filed for bankruptcy in the first seven months of 2020 than all of 2019.”
Many of these companies were already in compromised positions. They were already experiencing financial troubles like declining sales, high debt, and costly real estate leases. And some were slow to respond to the concatenation of fast fashion, online shopping and a shift in what’s deemed “professional attire.”
But COVID-19 was the tipping point.
There are lessons here for you and me from the travails of these companies.
Before I delve into these lessons, let me be very, very clear: This is not about blaming the victim!
That’s not how I roll, in general. Likewise, no one could have predicted the confluence of events that have led us here. So, talking about problems that have been exacerbated by coronavirus is not to blame the victim.
Lessons to take to heart
All of us had some vulnerability in our lives (and careers/businesses) exposed when COVID-19 hit. And whether the problem (or if you prefer “challenge”) you encountered came to light immediately or some time thereafter, the problem that you now see (or feel), isn’t new.
Thus, it invites an important question: Is the problem you see (or feel) the real problem?
Define the problem
For example, almost all the retailers specified the role of declining sales as a major contributing factor to their predicament. But, what’s the reason behind their declining sales?
Is this something you ever geek out about? If so, what’s your two-cents?
Here’s mine: I, for one, believe that many of the clothing retailers declaring bankruptcy right now came to prominence in the 80s and 90s when mall shopping converged with “corporate america’s” dress code – which was very different from today’s business casual attire.
For men, business casual is more than just not wearing ties with their suits. Similarly for women; it’s not just about wearing a dress or shirt that reveals one’s shoulders. (Gosh, I remember when the “power suit” for women was a gray suit, with a pink or white button down blouse…)
The shift in how people dress for work is not limited to the “look.” It also reflects a shift in the mindset that goes with – especially with regards to workplace hierarchy.
Your two-cents and mine may make for great mental fodder. But, we’ll never really know what decisions and choices these companies got “wrong.” Speculation is what it is…
However, I hope you get my points here: Declining sales isn’t the only cause for the financial strain experienced by these companies, and those declines didn’t start in March. Plus, declining sales is a lagging indicator of something else that was going on in their business.
Once you really define the problem, it’s time to get into action. Often, this involves scenario planning that covers a multitude of possible next steps and outcomes. Some next steps alleviate the short-term pressure caused by the problem; others tackle the long-term nature of the problem.
For the 2020 retailers that declared bankruptcy, the best path forward may look like a complete liquidation, reorganizing operations and paring down their retail locations, or securing a buyer. The decision to file for financial protection from their creditors – whether Chapter 7 or Chapter 11 – gives them the necessary breathing room to figure this out.
Snarky side note: I know there’s a difference between personal and business debt. The latter is often used to finance R&D, operations and growth. However, I’m always amazed at the grace extended to corporations when they declare bankruptcy. Whereas, individuals and small business owners are villianized for being in debt in the first place, and not being responsible, in the second, if their debt reaches a point of overwhelm.
Of those you’re contemplating (or have put into action already), do you view them as purely short-term solutions, long-term, or a hybrid?
Don’t waste it
Culturally, we are often encouraged to view our problems not as burdens, but as opportunities. But let’s face it, that is easier said than done. At least initially.
When you feel like your back is up against a wall, your immediate response is more like, “oh, crap!” Not, “this is an opportunity.” Particularly when the problem bubbles up to the surface and takes you by surprise.
For some of the 2020 retailers that have declared bankruptcy, they are, indeed, trying to hang on looking for an opportunity to be part of whatever is this next wave of how we work and live – and dress for both. Some will revamp and make it; many will not.
However, the people involved in the decisions and choices leading up to the bankruptcy and with whatever comes next will end up somewhere – they will either remain with the surviving iteration of the company or go elsewhere. And hopefully, they will take heed and not waste the insight gained from their experience.
Hopefully, they will learn, grow, improve and adapt. The same is true for you and me.
At the moment, maybe it’s too soon and raw for you to reflect and document it. But when the time is right be sure to do this.
From Problem to Innovation
You’ve heard the saying, “necessity is the mother of invention,” right? Well, I agree!
And in case you didn’t know this about me, I do have a pollyannaish side. So keep that in mind when you read what I’m about to say: problems can be a good thing.
As a culture, I think we need to shift from the perspective that says having problems is a sign of failure. Yes, some problems can lead to failure (e.g., bankruptcy). But let’s not conflate the two.
Because some problems can lead to innovation. And if you’re one of those people who dislikes the word “innovation,” replace it with “creativity.”
I raise my hand high to say that the vulnerability COVID-19 exposed in my business led to something amazing – to something I hadn’t considered before March 12th. It’s created a whole new business vertical. My business is the better for it*, and so am I. (*The revelation, not coronavirus.)
How about for you? What has necessity birthed in your life (and business or career)?
More often than not, a crisis doesn’t cause a problem. It brings to your attention (and mine) a problem that was already present – but that you previously dismissed or discounted. And now that you see it more clearly, one of your biggest challenges is to not get stuck in feeling bad about what you didn’t acknowledge or do anything about.
You may not have given the problem much attention before. But now that it has yours, you have the power to shape what comes next.