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Beyond Bankruptcy: How Failed Stores Come Back Online

August 5, 2017
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 A great way to look at the difference in costs for brick and mortar vs. online. Most new millenial brands start with online and the direct to consumer pricing brings home the margins. Forget about bankruptcy for a moment – Doesn’t this make sense?

Ann Kasper

Investors snapped up Wet Seal, American Apparel and The Limited, betting fickle consumers who long ago stopped visiting their shops would flock to new online-only storefronts.

Companies like Onestop Internet Inc., which handles orders for dozens of websites out of a warehouse in Compton, Calif., make it easier for former brick-and-mortar chains to transition to online-only fashion labels.

Selling apparel online can be less costly, according to Onestop. For a pair of premium jeans, for example, the cost of fulfillment operations, technology systems, shipping and free returns is less per item than brick-and-mortar costs including rent, payroll and distribution, the company says.

But a successful transition requires racing against the clock. A once-hot brand like American Apparel can fetch tens of millions of dollars in a bankruptcy auction, but its value quickly drops after stores close. New owners must rush to line up new designers and manufacturers, and set up distribution networks geared toward shipping to homes before shoppers move on.

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