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Zombie Retailers are Making a Bid for a Second Life

Well, that was fast.

It’s only been a matter of months since the Bon-Ton Stores filed for bankruptcy, and already the retailer has found a second life thanks to new owners. And it may not be the only retail chain to rise from the dead this fall. Toys R Us, which shuttered the last of its stores in June, could re-emerge if its lenders are able to breathe new life into the IP.

The question, though, is are these zombie retailers headed toward a horror show or a happy ending?

And the answer—at least for now—depends on who you ask.

“With Bon-Ton, I don’t know why anyone would bother. The problem was it didn’t have a point of view and difference and very little custom in what they were doing,” said Neil Saunders, managing director of retail for financial services firm GlobalData.

Not only is Saunders skeptical that anyone needs Bon-Ton to survive, he questions the way in which the new owners seem to be approaching the business, calling it “haphazard.” Thus far the chain, which includes a variety of nameplates, such as Carson’s, Herberger’s and Boston Store, is online only but it is slated to open stores as well with an assortment that will be “testing everything from art to liquor,” according to new Bon-Ton president Jordan Voloshin.

While Saunders sees the move to resurrect the store names in this way as “opportunistic,” Ted Gavin, managing director of consultancy Gavin/Solmonese, has a different perspective.

Gavin acknowledges that Bon-Ton was in many ways “a tired old brand,” but he says it was a go-to for underserved communities. “Because of where it was located in rural adjacent locations, it had a strong consumer following, and it had longstanding relationships that were positive with the trade,” he said, noting that the idea of adding variety to the assortment could be a good one for the typical Bon-Ton shopper. “The good news about being a little removed from urban centers and being more rural adjacent is it might be the solution for that type of store and location to have a little bit of everything.”

According to textile and apparel consultant Rob Greenspan, vendors will be happy to see Bon-Ton re-emerge because it will give them one more place to sell their goods. That said, Greenspan believes their enthusiasm will come with one caveat: “The vendors won’t have a problem selling to them but the question is, will they be creditworthy enough to allow vendors to be able to sell their receivables to the factoring community or be backed by insurance?”

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If Bon-Ton can’t help mitigate the retailers’ risk in this way, vendors are going to be less interested in working with the retail group, Greenspan said. And for those willing to, the terms will be very specific. “If Bon-Ton can’t get credit in the factoring community or in the insurance market, then they’ll either have to pay deposits up front, pay COD or pay CBD for the goods, and that makes it difficult for them to get the goods,” he said.

Securing goods is just one of the major hurdles between the now defunct Toys R Us and a possible TRU 2.0.

The owners could face backlash from the vendor community over how the bankruptcy was handled, Gavin said. “The lenders who are trying to make a go of this, they’re the ones who said we’re going to pay ourselves and stiff the trade vendors,” he said. “Anyone can turn up at the toy market, but it’s going to take a lot more to convince the trade that these lenders are serious about repairing these relationships.”

In fact, TRU did show up at the toy market in Dallas this week, or at least the company mascot, Geoffrey the Giraffe, made an appearance. While it seemed the stunt was meant to announce the launch a wholesale endeavor, ultimately it stirred up bad feelings for some.

“Geoffrey being here just reminded us about how much money they still owe everybody,” Beaver Raymond, co-founder of toy manufacturer Marshmallow Fun Co., told The Dallas Morning News.

Further, USA Today reported that the CEO of MGA Entertainment, makers of the Bratz dolls and L.O.L. Surprise toy, has already said he will not sell to the new iteration of the retail chain.

Gavin said the variety of outlets selling toys could work against TRU in the trade as well as with consumers. As long as the major toy manufacturers have other stores to sell, they have less incentive to try to work things out. On the consumer side, he wonders why anyone would make a special trip to an off-mall location, where the chain typically had been situated, when you can shop a store in the mall—or better yet simply grab your laptop from home.

Both Saunders and Greenspan are more optimistic about TRU’s fate, given they both say the bankruptcy left a void in the market. Even so, Greenspan said the new owners will have to re-evaluate the number stores they really need.

The most immediate question, though, is if the toy destination can pull off a comeback in time for the holidays. “It seems the clock is ticking for them,” Greenspan said, adding if the plan is to license the IP, licensing deals take months to put together.

In the meantime, the company is reportedly working on pulling together pop-ups inside select big-box stores to capitalize on the critical fourth-quarter sales period.

For a full rollout, Gavin said TRU will need “an immense amount of cash,” much of it the company may have to front if vendors are still feeling stung following the bankruptcy proceedings. Beyond inventory, he said the chain has “a tremendous amount of public outreach to do to get public sentiment back in their favor.”

Ultimately, both retailers could find support because it’s in the best interest of manufacturers and importers to help them stay afloat. “They needed the wholesale business to survive,” Greenspan said. “You can’t keep losing major retailers and expect to have a business.”