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Where Did Payless Go Wrong?
The latest retailer to throw in the towel was Payless ShoeSource. The footwear company announced it would close all of its U.S. and Puerto Rico locations, while filing for bankruptcy in an attempt to sell its real estate.
Certainly, the chain’s demise could be attributed to online competition — Gymboree and Shopko have been forced to file for bankruptcy protection, while Toys “R” Us liquidated and shuttered its stores due to e-commerce growth.
In giving a brief history Payless, Tom Ryan with RetailWire noted that, when the company opened in the mid-1950s, it differentiated itself with a focus on affordable footwear. It was able to keep prices low by operating self-service stores with limited staffing.
In the mid-1970s, Payless differentiated itself once again, developing it own footwear and private-label brands. And, in 2011, its final year as a public company before going private through a leveraged buyout, the focus was on lower-income consumers; specifically, the sale of non-athletic footwear to women and their kids at prices averaging below $30 per pair.
However, Payless’ cost differentiation has eroded in the face of competition. Ryan pointed out that Walmart and Target continued “expanding and elevating their in-store offerings.” If that weren’t enough, off-price shoe retailers, such as Famous Footwear, DSW and Shoe Carnival also expanded. Unlike Payless’ private brand and low prices, these off-price sellers brought branded shoe labels to Payless’ value customers. In other words, why acquire a private-brand knockoff of a Reebok shoe, when you can buy the real thing for approximately the same price?
While Payless filed for bankruptcy in April 2017 and emerged a few months later with $400 million less debt, a former employee told Digiday that continued management turnover also weakened the company.
In other words, while blaming e-commerce for Payless’ demise is obvious, it seems as though a lack of differentiation, along with bricks-and-mortar competition, were also culprits.
Photo: Shawn Hill/Shutterstock.com
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