No, seriously, these stores aren’t closing
Retailers try to figure out best way to clarify for customers
We’re not them.
That’s the message some retailers desperately need to communicate to customers, the media and business partners when companies with similar names face a threat of going out of business.
Chains with past connections to recently bankrupt retailers like Sears and Gymboree are learning that lesson the hard way.
When Gymboree filed for Chapter 11 bankruptcy protection for the first time in 2017, some customers, vendors and suppliers confused Gymboree Play & Music with the clothing retailer. Many thought the kids’ classes company was closing, even though it was actually expanding after Gymboree sold it off in 2016.
Even telecommunications companies confused the two.
They “shut off some people’s phones,” Danny Softness, Gymboree Play & Music’s North America CEO, said in an interview. “We had customers who didn’t really understand the difference between the two companies. We even had landlords who didn’t understand the difference, and utilities who didn’t understand the difference. Nor should they.”
After all, he said, “how often do you go through a bankruptcy with your name, but it’s not you?”
Twice, it turns out. At least for Gymboree Play & Music, which is now grappling with the fallout from January’s announcement that its former parent company had filed for bankruptcy again with plans to close all of its namesake stores. In the latest development, Gymboree’s retail brand will be sold out of bankruptcy to rival Children’s Place.
As Gymboree’s second bankruptcy hit, Gymboree Play & Music was ready to communicate the good news that it is adding more than 100 new locations annually to its roster of more than 800.
“We were unprepared last time for how fast the news hit the market,” Softness said. “We learned our lessons.”
The company decided it was important to get ahead of the media coverage with a public relations and marketing
blitz to educate the public through outreach to customers, news outlets, social media and family bloggers.
That plan helped soothe Renee Hanson of Oceanside, California, who takes her 18-month-old son to play at Gymboree Play & Music.
“My initial response to hearing of the shutdown (was) I was confused as to whether the gyms were closing down as well,” Hanson said.
But a mass email from Softness “thankfully” soon confirmed “that the gyms and clothing stores are run separately and that the gyms are actually doing well and flourishing with many, many new gyms opening up in the near future,” she said.
5,000 store closures
The type of publicity crisis facing Gymboree Play & Music could grow more common. In 2018, retailers announced more than 5,000 store closures covering about 147 million square feet of floor space, according to real-estate data firm CoStar Group.
One of the latest soundalike victims is Sears Hometown and Outlet Stores, which was formerly part of Sears Holdings but spun off as its own publicly traded company in 2012.
Sears Hometown and Outlet Stores – which has about 761 locations, including independent dealers and franchisees – is facing collateral damage from October’s Chapter 11 bankruptcy of the Sears department store chain.
With the closure of hundreds of Sears stores, Sears Hometown and Outlet Stores is grappling with “the possible perceptions of our vendors, suppliers, lenders … and customers” that “the company’s ability to operate its businesses” have been significantly affected, according to a recent corporate statement.
For the seller of tools and appliances, it’s especially hard to communicate the facts to the public because the company remains open yet has various contracts with Sears that could be affected by the bankruptcy, including the supply of Kenmore appliances.
Sears Hometown & Outlet Stores did not respond to a request seeking comment.
It’s important for chains to conduct proactive outreach but to choose their wording carefully, said University of Michigan business professor Erik Gordon, who teaches marketing classes and has worked with franchises on legal issues. “If you’re in that situation, you’ve got to spend some money letting people know that you are open for business and as good as ever,” he said. “You probably don’t say, ‘Hey, we’re not the bankrupt guys.’ The advice is to frame it positively: ‘Hey, having a record year.’”
For chains that sell products with warranties, like Sears Hometown and Outlet Stores, “it’s probably triply important for people to know you’re doing great because who wants to buy a washing machine if you’re afraid they’re closing?”
The name doesn’t say it all
Having a similar name as another retailer that goes bankrupt presents challenges. But it’s even worse when they have the exact same name.
That’s the case with dozens of stores throughout the country that have the name Mattress King.
Innovative Mattress Solutions, whose brands include stores named Mattress King in Alabama, filed for Chapter 11 bankruptcy protection in January. The company was expected to close some locations as it seeks a turnaround. Those headlines concerned Nate Grindle, CEO of a Tennesseebased chain of Mattress King locations.
It turns out that the Mattress King stores in Alabama and the Mattress King stores in Tennessee have the same name but no corporate ties.
Upon hearing the news of the Innovative Mattress Solutions bankruptcy, Grindle took action, reaching out to reporters and editors to clarify that Mattress King stores in Tennessee were unaffected. He also took steps to train his own employees on how to communicate with potentially confused customers.
Employees “are facing those questions,” he said. They must “comfortably and confidently know how to navigate through them.”
In the long run, retailers with similar names as other tarnished brands can consider changing their names altogether.
“I’m surprised – given the slow-motion train wreck that Sears is – that Sears Hometown and Outlet would want to have that Sears name,” Michigan’s Gordon said.
But with Gymboree Play & Music, ditching the brand could be shortsighted, he said. “There might be some brand equity, notwithstanding the bankruptcy, in Gymboree,” Gordon said. “People still might like that it’s Gymboree. So you have to think about that.”