Ardenberg, BAS Group (e.g., Dixons), DA, Houtbrox, La Ligna, La Place, Macintosh Retail Group (e.g., Scapino), McGregor, Miss Etam, Mitra, MS Mode, Paradigit and Unlimited Sports Group (Perry Sport, Aktiesport). What do these retail chains have in common?
Yes, indeed, all of them have gone bankrupt in the past two years, but all of them have also restarted operations with a smaller footprint of more profitable stores, usually within months after going bankrupt. In fact, more than two-thirds of the retail chains that have gone bankrupt in the Netherlands since 2015 have turned around their operations and re-entered the market with a smaller store footprint.
The economics behind this phenomenon are clear. Retail chains that have a large number of stores typically see different profitability levels across the store network, driven by size and demographics of the catchment area, location in the high street, in-store execution, and store-specific cost structures (e.g., variations in rent per square meter). Over time, revenue is moving online, either shifting to the chain’s own, usually less profitable, online channel or leaking away to pure-play competitors. The stores’ cost structures have remained relatively constant, resulting in an increase in the number of unprofitable stores. In fact, we estimate that between 20 and 40 percent of stores in a regional or national retail company in the Netherlands currently are losing money after accounting for corporate overhead.