This article was originally published in Retail Dive by Caroline Jansen
March 6, 2023 | LINK
11 Digitally Native Retailers at Risk of Bankruptcy
These companies were meant to be disruptors to the industry. But as macroeconomic pressures intensify and capital gets harder to find, they may be put to their biggest test.
The e-commerce darlings that were meant to save retail may soon find themselves in bankruptcy court. Already this year Forma Brands — the parent company to beauty brands Morphe, Bad Habit, Jaclyn Cosmetics and Playa Beauty — filed for Chapter 11. Aside from bankruptcy, digitally native retailers have needed to close stores and lay off staff as a way to cut costs amid economic pressure.
“These business models were supposed to be the major disruptors. And were the major disruptors for a long time. But if you add the inflationary challenges — which means their costs are going up and upwards in their supply chain, costs are going up — and you add to that that they are not bricks and mortar so everything is done by shipping, and you throw in multi-year supply chain disruptions, that’s a real tough combination,” said James Gellert, CEO of financial analysis firm RapidRatings.
E-commerce brands such as Blue Apron, The RealReal, and Wayfair were once supposed to shake up the industry—today they are flatlining. Why? According to our Chairman & CEO James Gellert, one part of the problem is current macroeconomic conditions. Inflationary pressures, a red-hot labor market, ongoing supply chain disruptions, and increasing costs of capital are causing immense stress on the online-retail industry. The other is an issue that has pre-dated the pandemic: a lack of brand loyalty and an inability to sustain a customer base.
“Those retail models are powerful in that they have diversified offerings, and they are not overweighted to consumer preference for one individual brand. But the flip side of that is that there is no brand loyalty to them specifically,” Gellert said.
Our ratings system captured the downfall of the e-commerce brands before the warning signs were there. RapidRatings is the only company that flags the financial health deterioration for both public and private companies. We have the ability to flag deterioration for your third party partners, suppliers, and vendors before disruption hits.
Interested in learning more? Talk to us today.