Eric Steckling, Pitney Bowes Business Insight
As Americans and consumers, we have all witnessed the decline of countless national retailers in the past decade only to see them rise from the dead and live again. When a failed company is dismembered by bankruptcy court or investors, one intangible asset is generating interest; the company name. One question persists, if a brand failed to be successful in the retail arena, why would anyone want to invest in and perpetrate a brand that consumers have largely abandoned?
Each zombie puppeteer has different strategic reasons for acquiring the rights to failed corporate identities but one underlying theme prevails; brand equity. As a brand matures, customers become familiar with the company’s offerings, product assortment, pricing, ect. This “familiarity” coupled with millions of dollars spent annually on advertising can turn into loyalty and goodwill. This customer recognition is extremely expensive to create from scratch, which is why it is often appealing to resurrect a brand.
Once a $2 billion a year company, CompUSA succumbed to increased competition and torpid sales. Even though CompUSA closed most of its stores in 2007, consumers are largely still aware of the corporate name, identity and offerings. Acquired by Systemax in early 2008, arguably the most valuable piece of the company was the website and logo which is still used to sell merchandise online. The company is now reinvesting in their store network (see Retail 2.0: Brick vs. Click). After 60 years in business, Circuit City fell victim to the same perils as CompUSA. The $14 million Systemax paid for the company’s identity will probably top the price fetched by the company’s former 288,560 square foot headquarters recently returned to its lender. The building recently appraised for $46.2 million is listed for sale for $11 million.
When a retailer comes back to life with an internet only business model, name and reputation are by far the biggest assets they have to drive traffic and sales. With mitigated real estate, inventory and labor costs, online only retailers have much fewer expenses than their brick & mortar counterparts, allowing them to profit on much lower sales volumes. The next question is who is the next national retailer to close shop and serve your town from the sidelines of the internet? My guess: Blockbuster Video.
