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Dead Brick & Mortar Stores Thriving through Web, Branding

Photo: Nick Ut/AP

Companies in bankruptcy protection want to come up with as much money as they can, so they’ll take whatever they can get for their assets.

Q: So it’s good for the ailing retailers. But why would other companies want to buy up these brands?

A: The allure is all in the name and how consumers feel about the brand, said New York-based retail consultant Walter Loeb. Circuit City, for example, is a brand that’s been around for decades and that people trust, he said.

“There is value in the brand,” Loeb said. “People are buying it up and hope to have customers come to them based on the recognition.”

Also, it’s an easy, inexpensive way to get into the retail business, by operating solely online and having a set of customers who already know the name, he said.

Q: But if a company has gone bankrupt, aren’t consumers leery of its brand name?

A: Even if a company suffered through the slumping sales and other woes that led to a bankruptcy, experts say some consumers will still have a connection to its brands and could decide to make a purchase again – though they may not be repeat customers if the experience isn’t what they’re used to.

Q: Can consumers trust these new phantom retailers?

A: They need to do research and look at policies for returns and warranties, since they may not be the same as under the old ownership, said Edgar Dworsky, a consumer advocate and founder of ConsumerWorld.Org, based in Somerville, Mass. Companies aren’t required to say on these sites how the ownership has changed, though he said they sometimes do in fine print, like a link on Circuit City’s main page saying it is under new ownership.

The bottom line? Don’t assume it’s business as usual.

“It’s very easy for consumers to be misled,” he said. "They may have a very positive image of a famous brand that they’ve known for years and all of a sudden somebody else is really behind that brand, with or without the same quality and policies.

Q: How common is this, and will we see it happening more?

A: Take a look online and you’ll see it’s pretty common in this day of heavy Internet use, ailing retailers and consumers who are hesitant to spend.

The trend has been going on for a few years. Famed department store chain Montgomery Ward went out of business in 2001, but five years later its brand name was brought back online by catalog marketer Direct Marketing Services Inc., where it sells tableware, tents and home decor.

Also, a few defunct retailers – like Mervyns LLC, Bombay Co. and KB Toys – still maintain Web sites, mostly to collect customers’ e-mail addresses for upcoming offers, events or other information. Some of the sites are hinting that they’ll relaunch their businesses in some form.

© 2009, YellowBrix, Inc._