Out for Scotch & Soda
The next fashion chain is closing in Germany
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A few weeks after the fashion retailer Esprit went out of business, the next chain closed. According to the insolvency administrator, the rights holder had no interest in selling to an investor. Almost 300 people will probably lose their jobs. However, there is a small spark of hope.
The fashion brand Scotch & Soda will cease business operations in its almost 40 branches in Germany at the end of August. Around 290 people will lose their jobs, as the provisional insolvency administrator, Holger Rhode, announced. In most stores, next Saturday will be the last day of sales. About five branches could possibly stay open longer to sell the remaining goods.
The employees were informed on Tuesday, said insolvency expert Rhode. Most employees are scheduled to be laid off in September. The rights holder of the brand and goods, a private equity fund based in the USA, had no interest in transferring both to a new investor or agreeing on a corresponding license, it said.
According to Rhode, discussions are ongoing with a fashion chain store. This involves a possible takeover of locations and personnel. An investor would then have to come to an agreement with the landlords of the properties, said Rhode. Half of the chain's branches are located in Baden-Württemberg and North Rhine-Westphalia.
The German branch of the Dutch fashion brand, Scotch & Soda Retail GmbH, filed for insolvency at the district court in Düsseldorf in June. According to its own information, the company recently generated annual sales of 25 million euros in Germany. The parent company in the Netherlands, which was also insolvent, had recently ceased operations.
At the beginning of the month, Esprit announced that it would close all branches in Germany and wind down operations by the end of the year. Around 1,300 employees lose their jobs. Business outside of Europe is not affected by this. The group's main company, Esprit Holding, is based in Hong Kong. However, Germany was the most important market.
Internet instead of branches
The fashion industry is going through difficult times; recently there was a wave of bankruptcies. The department store group Galeria Karstadt Kaufhof, the Düsseldorf fashion retailer Peek & Cloppenburg and the fashion manufacturer Gerry Weber, among others, filed for bankruptcy. Retailers have long been suffering from consumers' reluctance to buy. According to a recently published Idealo survey, consumers save more when buying clothing than on other consumer goods.
Retail sales of textiles, clothing and shoes were recently slightly higher than in 2019. However, many retailers earn significantly less due to the significantly increased costs for energy, personnel and rent.
What makes matters worse is that more and more consumers are buying online rather than in stores. Asian providers such as Shein and Temu are increasing the pressure with their cheap offers and are displacing part of the entry-level price segment. The online boom has subsided, but the share has established itself at a high level, especially in fashion and clothing. This industry accounts for 20 billion euros, or almost a quarter of all online sales in Germany, as figures in the online monitor recently published by the trade association show. The online share of the overall market for fashion and clothing is more than 40 percent – more than in any other area. Stationary sales, on the other hand, have fallen by around 17 percent since 2019.
In stationary retail, less sales are generated in the same space, says expert Marco Atzberger from the EHI Retail Institute. Large suppliers such as Zara and H&M therefore began to reduce the number of their stores years ago. “Other providers reacted later or are unable to react quickly due to ongoing rental agreements.” This leads to difficulties and bankruptcies for well-known brands, for example Esprit.
