Trouble for Retailers As Amazon has grown over the years, many retail chains went out of business, unable to compete in the new retail world. Chains such as Toys-R-Us, Blockbuster Video, Borders Bookstores, Sports Authority and Radio Shack were mostly replaced by web suppliers who could deliver larger varieties at lower costs, and at amazing speeds. Other chains went bankrupt, but managed to stay afloat at least for the time being. This was the retail world before Covid-19, which knocked many retailers out of business for good. Until 2020, the larger natural food chains were mostly immune to this type of trouble. Retailers such as Whole Foods Market, Sprouts, Natural Grocers and Fresh Thyme continued to grow and take market share from independents. Then over-expansion, debt and failing profits moved in to really affect these organic grocers. In early 2020, three major natural chains fell hard and fast. Fairway was a successful New York chain with 15 volume stores and over $600 Million in sales, but too much debt forced it to go Chapter 11 in May 2016 and again in January 2020. Earth Fare, based in Asheville NC, had 50 stores at its peak, but, suddenly and without notice, closed all stores in January 2020. Some stores did re-open under the same name, but it’s hard for a retailer to overcome the stigma of being bankrupt. Then Lucky’s Market announced it would close 32 stores and keep seven open with a different ownership group. Lucky’s had been partners with Kroger to grow stores, but that marriage fell apart after too many losses and Lucky was also forced to declare bankruptcy in January 2020. What a bad month for the natural foods channel! The biggest chain to fall was GNC, which declared bankruptcy in June 2020. GNC’s first store opened in 1935 and it grew to become the dominant vitamin retailer with over 8,000 stores worldwide. But many stores were located in losing mall locations with high rents, causing GNC to sell 40% of shares to the Chinese Harbin Pharmaceutical Group in 2018. Covid-19 was the final knock-out blow as GNC couldn’t weather the storm that no one could have predicted. The retailer may come out of bankruptcy leaner and stronger, but only time will tell. The most obvious lesson from almost all failing businesses is to stay out of debt. Investor money must look irresistible up front, but it’s a common theme and biblical directive to avoid debt. “If you have nothing with which to pay, even your bed will be taken from under you!” (Proverbs 22:27) NOW Tests Amazon-only Brands Generic brands are winning on Amazon and it’s not always good. In our industry, we started noticing many vitamin brands that we had never heard of landing in top-spot search locations on Amazon. Many pseudo-brands launched “Sponsored” products, which are paid advertisements. These new marketers understood how to win on Amazon, with slick claims, paid search terms and optimized content. They are able to gain a profit despite amazingly low, actually too low, prices. 2018-2020 129
