Retail companies are having some serious struggles in 2017, and this has huge ramifications for gift card holders. By March, 2017, 9 major retail companies had already filed for Chapter 11 Bankruptcy. For comparison, in 2016, only 9 major retailers declared bankruptcy throughout the entire year.
Since March, the retail landscape has become even more dire. There have been 19+ retail bankruptcies in 2017 so far, and the number continues to grow. If this trend continues, 2017 could have the highest rates of bankruptcy since the 2007-08 Financial Crisis.
The most recent company to declare bankruptcy is Toys R’ Us – one of the oldest toy retailers in the world. They filed for Chapter 11 bankruptcy and debt restructuring in mid-September. This restructuring is designed to restructure over $5 billion in debt – the largest ever bankruptcy declared by a specialty retailer.
Though the company claims that they will continue operations as normal, and gift cards will be honored at the 1,600 stores, this is still a tumultuous time in the world of gift cards.
Most major retailers sell gift cards. Whether they sell gift cards online or sell gift cards in stores, the vast majority of gift cards sold in the US are to brick-and-mortar stores – and that’s where most people plan to redeem them.
Given the struggles that retail stores are facing this year, it’s important to understand how to use gift cards properly in order to avoid losing them during a bankruptcy – and potentially losing hundreds of dollars.
In this article, EJ Gift Cards will take a look at what’s causing this retail crisis. We’ll also discuss some of the bankrupted companies, and list other retail chains which may be at risk of future financial insolvency.
Finally, we’ll discuss steps that gift card consumers can take to avoid losing money when retailers go bankrupt. From selling gift cards online to avoiding the purchase of gift cards from at-risk companies, we’ll discuss the ways you can protect yourself.
So read on, and learn how to navigate the complex world of retail bankruptcies in 2017.
Why Are Retailers Struggling?
To understand why so many retail companies that sell gift cards are struggling, we can look at a variety of factors. Here are just a few of the reasons that retailers are having serious financial difficulties in 2017.
- Stiff Online Competition – Online retailers like Amazon continue to dominate in the digital space. Though many stores like Walmart, Target, and others now offer comprehensive online shopping opportunities, they lack the variety and ease-of-use of gigantic, online-based stores like Amazon. In April, Amazon posted record profits for eight consecutive quarters – placing them miles ahead of most other retail businesses.
- Less Foot Traffic In Stores – Many stores rely on high levels of foot traffic to sell products. Once you’re in a store, salespeople can upsell you on a variety of products. But today, fewer people are going to stores and malls. People are no longer viewing shopping as a hobby or recreational activity – and retail stores are feeling that pinch.
- Traditional Retailers Don’t Have Everything Customers Want – Even the largest retail stores don’t have the product selection that a store like Amazon has. We’ve all had the experience of visiting a brick-and-mortar store – only to find out they don’t carry the product we need.
That’s frustrating, especially when you waste time looking for a product, or driving to the store. That’s just one more reason that online marketplaces are beating out retail stores.
- Retail Stores Grew Too Quickly – There’s another reason that retail chains are closing so many stores, even if they’re profiting. There are simply too many stores in America. According to The Atlantic, the number of malls outpaced population growth by 2:1 from the 1970s-2000s.
This means that our “shopping space per capita” is the highest in the world – 40% higher than Canada, 5x higher than the UK, and 10x higher than Germany. This unsustainable growth has led to too many retail stores – and in turn, financial struggles for many retail chains.
- Consumers Are Spending Less On Physical Objects – According to The Atlantic, fewer consumers are spending money on retail. Instead, many consumers are increasing their food and beverage spending. Consumers are shifting from shopping as a hobby, and spending that money on specialty foods and beverages, as well as social occasions.
For all of these reasons, and more, quite a few retail companies are struggling in 2017. Let’s discuss which companies have declared bankruptcy now.
What Companies Have Declared Bankruptcy In 2017?
For a full list of current retail bankruptcies, see this article, which will be updated as more stores file for Chapter 11 bankruptcy protection. Below, we’ll discuss the largest retailers that have already declared bankruptcy in 2017.
- HH Gregg – After a long struggle for profitability, electronics and furniture retailer filed for bankruptcy on March 6, 2017 and liquidated its assets on April 7, 2017.
- RadioShack – For years, RadioShack struggled to find its footing in the modern world of electronics. On March 8, the company declared bankruptcy for the second time, and closed hundreds of stores around the nation.
- Payless – Shoe retailer Payless entered bankruptcy on April 4, 2017. Recently, the company announced plans to shutter approximately 20% of its stores, totaling 800 locations. The company is still in business, but further financial issues could result in a total collapse.
- Wet Seal – Mall retail standby Wet Seal announced its bankruptcy in February, 2017, and shuttered all of its stores. After being purchased by a private investment company, it’s set to reopen as an online-only company sometime this fall.
- Toys R’ Us – Toys R’ Us is the latest major retailer to declare bankruptcy. Seeking to restructure over $5 billion in debt, the retailer says it has no plans to close stores, especially during the upcoming holiday season.
While there are many smaller companies that have declared bankruptcy, these are the most important closures of 2017. However, there are quite a few other companies that are struggling – and could face bankruptcy in the future. Let’s take a look at these now.
What Other Struggling Companies Are Closing Stores?
Just because a company is closing some stores doesn’t necessarily mean they’re at a bankruptcy risk. But the following companies have shown some serious financial issues in the past – and if things don’t turn around, they could easily be next to declare bankruptcy.
- Sears – Sears announced the closure of 43 additional stores this summer, in an attempt to reduce overhead and return to profitability. This will reduce the total number of stores to 1,140 – less than half of the number it operated in 2012. The company has acknowledged that a failure to turn things around could easily result in bankruptcy.
- JC Penney – JC Penney recently closed 138 stores around the US in the spring of 2017. After long struggles for profitability, JC Penney could very easily be the next victim in the latest wave of retail bankruptcies.
- Macy’s – After struggling during the 2016 holiday season, Macy’s closed over 100 stores across the country, and their profits continue to plunge.
- KMart – KMart, operated by Sears, faces similar difficulties. 150-180 Kmart stores will be closed this year alone, and the company has failed to be profitable for years.
- Abercrombie & Fitch – This clothing retailer has struggled to find its footing in 2017, and has closed 60 more stores this year alone. Sales are continuing to slow down due to a recent rebrand, so further financial difficulties could easily plague this retailer, and cause bankruptcy.
For a full list of at-risk retailers, take a look at this list from Time Magazine, which outlines 20+ retailers who have been struggling to turn a profit.
What Can I Do To Protect Myself From Losing Money On Gift Cards?
Any retailer that sells gift cards is under no obligation to redeem gift cards when they declare bankruptcy. Retailers have to ask bankruptcy courts for permission to accept gift cards and continue to sell gift cards.
In addition, a “liquidation date” will often be set for gift cards by a bankruptcy court. If the card isn’t spent by this date, it will be valueless. However, these dates are often not well-known – resulting in the loss of gift card value.
While you may be able to file a claim post-bankruptcy, doing so can be time consuming and difficult – and you still may only get a fraction of the value of your card.
Because of all this, the best way to protect yourself from losing money on gift cards is to be proactive about your gift card habits. Here are some good ways to do that.
- Spend Gift Cards ASAP – If you get a gift card, you should try to spend it soon as you can, especially if it’s to a retailer that’s known for having financial difficulties. Gift cards are not the same as cash. If the retailer that sells gift cards goes out of business, you risk losing out on the value of your card.
So don’t sit on unused gift cards – and consider selling gift cards online if you don’t need them at all. You’ll get cash for them – and you won’t be at risk of losing out if a company declares bankruptcy.
- Track The Gift Cards You Have – Take photos of your gift cards, write them down in a logbook, and keep them in a central location in your home, wallet, or purse. By tracking all of the gift cards you have, you can easily understand which ones are risky – and spend those first.
- Always Get Rid Of Unused Gift Cards – If you have a gift card that you know you’re not going to spend, holding onto it is pointless. Consider selling gift cards you don’t want online, or to people you know. You can also consider donating your gift card to charity, or “regifting it” to someone else.
- Keep An Eye On At-Risk Companies – The above information about at-risk companies is sure to be handy when you decide to buy gift cards or sell gift cards. If you tend to use a lot of gift cards – whether it’s because you’re buying them at a discount or simply enjoy using them – make sure you keep a close eye on any companies that may be at risk of bankruptcy.
- Always Keep Proof Of Your Gift Card – Even if you do get unlucky, and a retailer that sells gift cards declares bankruptcy, you may still have options as long as you can prove you possess a gift card from the company.
For example, a 2011 Sharper Image lawsuit rewarded gift card holders with reimbursement for the full value of their gift cards – as long as they could prove possession of a valid gift card. So consider taking a picture or photocopying a gift card to a bankrupt retailer – you never know when it might pay off in the future.
By following these simple tips, you can avoid falling victim to the next wave of bankruptcies, and you won’t be stuck with useless gift cards.
Interested In Selling Gift Cards Online? Contact EJ Gift Cards Today!
Selling gift cards online is a great way to get rid of unwanted gift cards, especially if you have any gift cards to at-risk businesses. So if you’re interested in selling gift cards online for cash, visit EJ Gift Cards today!
So visit EJ Gift Cards now, and see how you can sell your gift cards online for cash today – and turn a tidy profit in the process!