Teen Clothing Retailer rue21 to Close 400 Stores, File for Bankruptcy

Crisis

Another Retailer Faces Closures 

rue21 is set to close approximately 400 of its 1,179 stores as it files for Chapter 11 Bankruptcy.

The retail clothing store joins a growing list of formerly successful brick-and-mortar retail stores that have fallen on hard times.

Sears, JCPenny, Macy’s, and many other large companies that used to dominate the shopping sector have seen their businesses dwindle due to e-commerce eating away at their market share. Shoppers have been increasingly turning away from physical store giants and instead opting for online companies like Amazon to help fulfill their shopping needs.

The move was said to be done in order to “better align the size of its footprint with market realities, and focus on its hundreds of highly performing locations. rue21 may evaluate additional store closings as it continues to manage its real estate lease portfolio,” according to a statement made in the press release following the declaration of the bankruptcy.

The U.S. is hardly alone in the online seller revolution. Alibaba, an e-commerce platform, registered over $1.0 billion in sales in less than five minutes during China’s Singles’ Day festival this year. In total, the company made over $17.0 billion worth of sales on that day.

This represents a further move across the world towards the online marketplace. Platforms like Amazon, eBay, and Alibaba continue to grow year over year, while many retailers see themselves falling behind and unable to beat the convenience and variety provided by the online shopping portals.

With rue21’s massive closings, thousands of jobs are going to be lost as malls and the smaller communities they service are continually battered by these losses.

In smaller communities and more rural areas, malls and big box retail stores can often be a large source of employment for less-educated and younger people. As they fall, however, these communities often find themselves with a larger pool of unemployed residents, leading to weaker tax revenues and overall a poorer community.

This has led to industry-wide searching for a way to stem the tide of customer flight towards online options.

Sources:

rue21 To Reduce Debt And Focus On Best Performing Stores Throught Chapter 11 Reorganization With Creditor Support And New Capital,” rue21, May 15, 2017.

Alibaba posts record Singles’ Day sales, but growth slows,” Reuters, November 11, 2016.

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