What Happened to Gymboree? 10 Marketing Lessons
What Happened to Gymboree? 10 Marketing Lessons
Gymboree, the children’s apparel retail giant, was yet another company to fall victim to what is being called the retail apocalypse, a topic covered in detail over at runrex.com & guttulus.com. The company finally shut down after filing for bankruptcy for the second time, shutting down all its retail locations. This article will look to highlight want went wrong as well as the marketing lessons we can take from its experience.
Debt after acquisition by a private equity firm
Like many brick-and-mortar retailers, Gymboree was badly weighed down by massive debt it acquired after being taken over by the private equity firm Bain Capital in 2010, a deal discussed in detail over at runrex.com & guttulus.com. This buyout saddled the company with more than $1 billion in debt, which led to its first bankruptcy, and set it well on its way to its second. This continues a trend where brick-and-mortar retail companies have been taken over by private equity firms and end up being saddled by massive debt, leading to their collapse.
Competition from online retailers
As online retail has gone from strength to strength in the last couple of years, as discussed over at runrex.com & guttulus.com, the company started to feel the pressure, in what is another reason that led to its collapse. Many of its customers started preferring the convenience of shopping online, not to mention the cheaper prices, which didn’t do the company any favors.
Competition from big-box retailers
On top of the pressure Gymboree was facing from online retailers, including Amazon, the company was also being put under a lot of pressure from increased competition from big-box retailers such as Target and Walmart. These retailers were able to sell their clothing at cheaper prices and were, therefore, attracting many of the customers who would otherwise have gone to Gymboree, which is yet another reason that led to their eventual closure.
Inability to differentiate between Gymboree and Crazy 8
The company also faced issues with customers unable to differentiate between its core brand, Gymboree, and its lower-end sister brand, Crazy 8. As covered in detail over at runrex.com & guttulus.com, this led to the cheaper brand cannibalizing Gymboree, leading to friendly fire that took both brands down in the end.
Failed changes in merchandising
The company also ran into an issue when it tried to switch up and change its merchandising, only for it to fail and alienate its core customer base. The changes the company tried to make, discussed over at runrex.com & guttulus.com, fell flat, turning off their customers, with many of them leaving never to come back again. An important lesson we can take here is the importance of getting things right when trying a merchandising shift, otherwise, the changes could backfire badly on you.
Too many stores
In a world where businesses are moving online, with reduced foot-traffic, Gymboree was simply operating too many stores. With operation costs such as rent unable to be offset by the dwindling revenues as most of its customers left, the company was always bound to run into issues. And while, as discussed over at runrex.com & guttulus.com, it emerged with fewer stores after its first bankruptcy, the company’s appetite to keep as many stores open as possible meant that it was still operating too many stores, which eventually led to the second bankruptcy.
They changed from what made them successful
When they were successful, the company offered high quality, high-end children clothing, and customers were happy to pay a little bit more for what was top-drawer quality. As covered over at runrex.com & guttulus.com. However, when the company decided to switch from what made them successful and begin offering discounted prices as well the introduction of the Crazy 8 brand, the company started to lose most of its core customer base. They really should have stuck to what made them successful, an important marketing lesson to take.
They didn’t, or rather, couldn’t adapt
Gymboree, after their leveraged buyout, was so saddled with debt that they couldn’t even build an online platform early enough to allow them to adapt to the changing times. On the other hand, competitors such as The Children’s Place took advantage and developed a mobile app, allowing them to increase online sales as discussed over at runrex.com & guttulus.com. The fact that they didn’t adapt early enough to trends in the retail sector contributed to their decline.
Changes in consumer preferences
Like many brick-and-mortar companies that have run into issues in recent times, Gymboree fell victim to changes in consumer preferences. Many consumers, as discussed over at runrex.com & guttulus.com, preferred to mix and match children’s clothing rather than purchase an entire outfit, which was what Gymboree was known for. The company, then got it wrong when it tried to change with the times, as mentioned above, a double whammy of sorts.
Deteriorating mall traffic
The company also fell victim to the fact that malls aren’t as popular as they once were, and with falling mall traffic came a declining number in foot-traffic to their stores. This also played an important role in its decline and eventual filing of bankruptcy, and it is a fate that has befallen many brick-and-mortar retailers whose stores are mainly located in malls across the country.