Vendor Business Strategies to Offset Impact of Retail Bankruptcies

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Retail failures are hardest on small businesses that serve big brands. Here's how to mitigate some of the risks.

Even before the COVID-19 pandemic rattled the retail industry, the sector was on the ropes for a variety of reasons — mostly having to do with how and where shoppers shop.

For secured lenders of bankrupt businesses, there’s a good chance they’ll get some, if not all, of their money back as the company reorganizes. For unsecured debt such as money owed to a supplier, it’s a different story. If the vendor is big enough, it’s possible for the parties to negotiate an agreement and new terms — especially if that brand or retailer depends on that vendor to drive sales.

John Doyle, managing director of Deloitte Financial Advisory Services LLP, told WWD that with “all of the uncertainty in the market, vendors and providers need to manage service and relationships while placing a notable focus on their financial health and debt levels.” “In the wake of the numerous retail bankruptcies being announced, the credit markets are undergoing dramatic changes and many of them have had to significantly restrict their coverage, causing a void in this specialized market,” Michael Stanley, managing director at Rosenthal & Rosenthal told WWD. “This tightening of the credit market has triggered a resurgence of factoring requests.

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