"There's a reason why Esprit exists"
The wave of bankruptcies in the German fashion industry persists. Most recently, Esprit, a well-known fashion chain, filed for insolvency for its European holding company and seven other branches. This is the brand's second insolvency in just four years. During the COVID-19 pandemic, Esprit had already sought protection under German insolvency law, resulting in approximately one-third of its workforce being laid off and 100 stores being closed. Nevertheless, 1,500 employees are still working for the recently declared insolvent companies.
To help restructure Esprit, the fashion chain has hired insolvency experts Christian Gerloff and Christian Stoffler, who are renowned for their experience in the industry (Escada, Gerry Weber, Adler Modemärkte).
Christian Gerloff, one of the experts, explained the situation, saying: "Esprit is undergoing its second insolvency after the first was filed in 2020 during the pandemic. At that time, the aim was to restructure the company. However, there were further challenges, such as the war in Ukraine and inflation, which also affected Esprit. The brand also made some errors, including about its product focus, decision-making processes, speed, and efficiency. Ultimately, this led to Esprit having to file for bankruptcy again. We're hoping to take advantage of this opportunity to bring about a fundamental change."
Some of the problems at Esprit include external factors such as the coronavirus pandemic, which severely affected the bricks-and-mortar retail sector. Additionally, the war in Ukraine contributed to the reluctance to buy. Sales had been declining for some time, which suggested that the products may no longer be as popular with consumers. The fashion industry's tendency to rely on its "brand life" for longevity - always popular to a certain generation - had also played a part. Now, Esprit must reinvent itself and appeal to a new group of customers.
Gerloff recognized that hesitancy to take action sooner might have helped avoid the current situation. "You can always say that after the fact," he said. "Today, we must accept the situation as it is and try to salvage the brand and return Esprit to its former glory. There's a reason for its continued existence."
So, how does Esprit plan to recover? The company will examine its sales channels, including wholesale, retail (own stores), and online retail. Esprit will need a partner to help it survive this crisis, as it's evident that going it alone won't suffice.
The large number of fashion retailers going bankrupt reflects the dire state of the industry. Gerloff shared his opinion, saying, "The high number of insolvencies in this sector demonstrates just how critical the situation is. We have assisted many companies dealing with insolvency or crisis. There are consistent issues across the industry, with the challenging external circumstances playing a major role. There's a need to focus on products and adapt to digitalization, particularly online retail. Unfortunately, many bricks-and-mortar retailers have neglected their businesses, needing to rejuvenate their brick-and-mortar stores to create a more engaging shopping experience."
Thus, it's likely that more fashion retailers could face bankruptcy in the near future.
This text is informal, engaging, simple, and paraphrased.
Consolidation is expected in the coming years. Over the past three decades, numerous retailers have entered the market, spanning city centers, shopping malls, and outlet stores. This industry has witnessed an over-expansion period. However, physical stores and fashion brands will still be present decades from now. Online and brick-and-mortar shops will converge. While we're currently experiencing a challenging phase, it'll eventually come to an end. Despite claims of certain shopping districts' decline, I'm optimistic that they could experience renewed life in the next five years, with fresh concepts and innovative ideas emerging. We just need to be patient. This transformation is bound to offer intriguing prospects for consumers.
(Rogatus Skanta interviewed Christian Gerloff. The conversation has been edited and streamlined for easier understanding.)
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Esprit, currently experiencing financial difficulties, is seeking to restructure through the hire of insolvency experts. Despite filing for insolvency twice within four years, the retail trade company hopes to make fundamental changes and appeal to a new customer base.
The retail trade sector is currently facing a high number of bankruptcies, with many fashion retailers struggling. This trend highlights the critical state of the industry and the need for stores to focus on products, adapt to digitalization, and create engaging shopping experiences.
Source: www.ntv.de
