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The economic effects of coronavirus have wreaked havoc on global commerce, turning once bustling malls into ghost towns, and thriving stores into vacant shells. But one business’s downfall is another’s opportunity. From the ashes of the retail brands decimated by 2020, the opportunity has arisen, phoenix-like, to pivot into online commerce.
Many of the stores being revamped as online emporiums are not doing so of their own volition, it should be noted; the impetus is coming from investment firms that specialize in restructuring. One of these is Retail Ecommerce Ventures (REV), a startup that sees dollars where others see danger.
Rebuilding Retailers Brick by Brick
It’s no secret that one of the biggest beneficiaries of coronavirus, from a purely business perspective, has been ecommerce – and the biggest loser is its walk-in counterparts. In 2020, the Amazons (NASDAQ:AMZN) and Walmarts (NYSE:WMT) have gotten bigger, and the mom & pop outlets and chain stores have gotten fewer and further between. If it wasn’t the lockdown and social distancing put on these businesses, it was riots across the US that have left a trail of broken glass and shattered dreams.
But for the brick-and-mortar brands whose luster has faded and profits diminished, it’s not the end of the line. A handful of investment firms, like REV, are breathing new life into distressed retailers, first by snapping up the assets, which often consist of little more than some IP and a lot of debt, and then relaunching them as nimbler ecommerce ventures, without the millstone of high staffing costs and fixed rent.
“It’s unclear how far a business model based on reanimating ailing retailers might go,” notes NBC, detailing the phenomenon, “but Retail Ecommerce Ventures and other firms circling bankruptcy companies are bullish.”
From Debt to Digital
Dressbarn, Pier 1 Imports, and Modell's Sporting Goods are among the brands to have been saved from the jaws of death and given the kiss of life by Retail Ecommerce Ventures. The most recent acquisition, Modell’s Sporting Goods, was acquired for only $3.7 million by the Florida investment firm founded by Tai Lopez and Alex Mehr. The deal was pocket change for REV, which also acquired Pier 1 for a reported $31 million.
Courtesy of Retail Ecommerce Ventures (REV)
REV CEO Alex Mehr can afford to speculate on distressed real estate, having sold Zoosk, the dating app he co-founded, for $300 million in 2019. With Lopez, the two have made it their business to rescue flagging businesses – but their deals come with certain conditions attached. For one thing, a dramatic downsizing of personnel is certain to follow, but that is to be expected; without the need to staff shop floors, human resources can be reduced to the bare bones.
One of its acquisitions, Dressbarn, had over 9,000 staff when REV stepped in; it’s now an ecommerce brand with just 30 employees. Not all takeovers entail such drastic cuts, but for these businesses to become profitable, ruthless decisions must be made – and Lopez and Mehr have no qualms about making them.
As malls brace for another gloomy quarter, ecommerce keeps on trucking, as digital eats physical and online replaces in-store. For investors like REV, the acceleration of internet shopping is a trend to be surfed to its logical conclusion. That means snapping up more big brands and giving them a second shot at glory, this time with footfall replaced by clicks.