Discount department store Syms and its subsidiary Filene's Basement have filed for Chapter 11 Bankruptcy protection, according to petitions filed in Delaware yesterday. The retailer, which reportedly employs about 2,450 people, plans to close all 46 of its stores, located mostly in the eastern U.S. states.
So what role did the success of Gilt Groupe and other startup retail sites play in the downfall of these large retail institutions?
In a statement, CEO Marcy Syms noted that increased competition from other department stores that were offering the same brands at similar discounts, and a growing number of private discount retailers placed an increasing amount of pressure on the Syms and Filene's Basement stores. She also cited that there was less overstock merchandise to be purchased since the economic downturn, since companies were keeping a tighter inventory.
Michael Tesler, a partner at Retail Concepts in Norwell, Mass., said that the rise of flash sale sites like Gilt Groupe "have been generating a lot of excitement, energy and buying power in the off-price industry." Tesler notes that also within the last 10 years, "luxury retailers like Saks and Nordstrom have created their own 'basement' stores with the very same merchandise that Syms and Filene's Basement used to purchase from them at the end of a season. That merchandise is what made Syms and Filene's Basement unique, but they didn't have that anymore."
Tesler, a former merchandising executive with Filene's and Filene's Basement, says another factor in the downfall was that "they [Syms] were using the same system that the store was founded on in 1959. They made no updates and were completely rooted in the past."
This is the third round of bankruptcy filings for Filene's, as Secaucus, N.J.-based Syms acquired the retailer out of bankruptcy in the spring of 2009 for $62.4 million, in an attempt to save the struggling chain. Syms offered deep discounts of surplus goods, while Filene's Basement, founded in 1909 by William Filene, had become famous for its "Running of the Brides" event, in which hundreds of customers would line up to purchase deeply discounted bridal gowns.
Both stores will run a liquidation process through January 2012, after which a schedule of store closings will be established.