Shut It Down – 12 Ways CPG Brands Can Rescue Themselves from Store Closings
Picture the scenario: You've been diligently shipping your products to your leading retailer, just as you've done for years. Then, seemingly out of nowhere, you discover via social media the shocking news that the retailer has suddenly shuttered its doors.
It's a chilling realization. Regrettably, this nightmare became a stark reality for numerous brands when both Foxtrot and Dom's Kitchen abruptly closed their operations and shuttered all 35 stores on April 23, 2024.
Unfortunately, this is not a unique situation. This year, several specialty retailers catering to premium products have declared bankruptcy. For example, Boisson, an e-commerce platform and brick-and-mortar that sold non-alcoholic spirits, beers, wines, and mixology supplies, also announced its Chapter 11 filing and closed all eight of its retail locations closed in April.
Nicolas Bodkins, founder of Boisson, commented on the situation in a LinkedIn post that could shed light on other recent closings.
"No one should consider this anything other than what it is: a failed venture-backed startup that grew too quickly, made mistakes, and wasn't able to find capital fast enough to continue to build three businesses at the same time — bricks-and-mortar retail, e-commerce, and wholesale import/distribution — which, in hindsight, proved to be impossibly hard to execute," he wrote.
Similarly, Neighborhood Goods ceased operations in January. Billed as the department store of the future, Neighborhood Goods had four retail locations and sold many emerging brands.
History often repeats itself, but that doesn't provide much comfort when dealing with the shock of an account closing.
After the Foxtrot and Dom's Kitchen announcement, we hosted an open forum for founders and supporters to discuss the stunning news, brainstorm the next steps, and discuss lessons from these sudden store closings that business owners can implement to improve their future positions. Here are some of the takeaways:
1. Trust Your Gut - If something seems off with a retailer (communication delays, invoices are taking longer to get paid, etc...), it might be a sign that change is on the horizon. An account, as prestigious as it might be, may not be worth the hassle of getting paid when things go wrong.
2. Reclaim Product - To follow up on point one, it might be time to get your inventory before an unexpected closing if your Spidey senses go off. Daniela Covian, founder of jewelry brand Daniela Janette, and Jennie Yoon, founder of jewelry brand Kinn, detailed their experience with Neighborhood Goods and how they secured their inventory in an Inc. article.
3. Communicate to Your Stakeholders - Honesty is always the best policy. If a critical account disappears, inform investors, vendors, and consumers about the situation. People want to help and provide advice (sometimes unsolicited) and can serve as advocates on your behalf.
4. Connect With Others in the Same Position – There's power in numbers. Also, during times of crisis, it helps to talk with other people who are going through the same thing. Entrepreneurship can be incredibly lonely, providing an opportunity to form a community can help your mental health and further your cause.
5. Discuss Options with Your Distributor - Pod Foods, a wholesale distributor with numerous Foxtrot warehouses, emailed its brands after the closing about how to handle the remaining inventory designated for Foxtrot in their warehouse. Additionally, their Chief Merchandising Officer, Peter Gialantzis, wrote on LinkedIn about other specialty stores that could assist.
6. Put Pressure on Investors - A quick PitchBook or Crunchbase search will provide the names of investors. Foxtrot raised almost $186M, with Monogram Capital Partners and Revolution's Rise of the Rest Seed Fund as the most recent investors. Boisson raised almost $35M, with Convivialite Ventures and Connect Ventures as the most recent investors. Reaching out to the investors might provide some answers about the closing or a plan for brands to recoup losses, especially when the startup’s staff is not responding to outreach. There’s always a risk that nothing will happen and that e-mails or calls will be ignored. Additionally, there’s no guarantee that investors will get a return on their investment either. According to FindLaw, under Chapter 7, a company goes out of business entirely and sells the remaining assets (or liquidates). The proceeds are used to pay back debts to investors and creditors. If the remaining assets don’t equal the amount owed to investors, there’s no way to recoup those funds.
7. Reach out to Impacted Employees – Employees are often kept in the dark, especially those who regularly interact with your brand. A sudden closing also means that these people are out of jobs. Regina Trillo, founder of Nemi Snacks and 2022 Enthuse Foundation Pitch Competition Winner, said, "I'm just very concerned about the staff. I'm concerned because it was a very sudden and abrupt way of ending." She connected with a few on LinkedIn and offered to support however she could. A class action lawsuit has been filed against Foxtrot and Dom's Kitchen, according to an article on blockclubchicago.org.
8. Use Your Voice - Share your experience with the public through social media platforms or via reporters. If you are owed money, be persistent and keep it on top of people's minds. Amie Kesler, the founder of Carolyn's Krisps, shared her story with Shayna Harris of Forbes and posted it candidly on Instagram.
9. Consult a Lawyer - Bankruptcy and closures are complicated legal matters. Contact a lawyer to understand your rights and what steps can be taken to recoup unpaid invoices and/or products.
10. Contact the Local Chamber of Commerce and Government Officials—Regional stores are community staples vital to the local economy. Allies for Community Business, a nonprofit supporting entrepreneurs, created a questionnaire to learn the impact that Dom's Kitchen and Foxtrot's closings will have on businesses. The link is https://loom.ly/2IC-0uc.
11. Ask for Help - Asking for help is courageous, not a sign of weakness. Garrett Gerstenberger, founder of High Desert Print Company, posted on LinkedIn how Foxtrot owes him $100K in unpaid invoices. His post went viral, and a few days later, he wrote, “I have a social media aversion and often don't find value in posting. However, I am blown away and grateful for the digital community of strangers who have reached out, shared, and offered their unwavering support. Community is key, and this is all real. Incredible; I love you all."
12. Check In with Other Accounts - See how their business is going and how one retailer's closing would impact them. Other accounts might be able to pick up the extra inventory or offer other ways to help. Andale Market, a bodega-like store in Chicago, organized a pop-up shop on its patio for brands impacted by Foxtrot and Dom's Kitchen's closing.
Bottom Line: It is a gut punch for all those involved when any business closes, especially when it's sudden. While it could feel catastrophic now (especially if it's not the first time around), following the blueprint created from past occurrences and exploring solutions that can open new doors will help minimize the impact on your CPG brand.