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Wet Seal, The Limited Shutdowns Keep VC-Backed Mall Retailers Cautious

Wet Seal, The Limited Shutdowns Keep VC-Backed Mall Retailers Cautious

Wet Seal will be closing all its 170+ stores after parent company Versa Capital failed to find a buyer for the brand, only a few weeks after The Limited shuttered its doors. But while another mall-based retailer biting the dust isn’t exactly shocking news, Wet Seal's dilemma is notable since the company already tried to bounce back after filing for bankruptcy in 2015.

With venture capital firms owning both the Wet Seal and The Limited brands, it’s clear that having financial backing doesn’t always solve the operational and logistical issues these retailers often encounter. As American Apparel, Aéropostale and other struggling mall-based brands search to boost revenue, they still must optimize their omnichannel fulfillment experiences to become brands that can meet shoppers at all points of their journeys. They still must prioritize order management and supply chain capabilities to extend their offerings into an “endless aisle.”

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Versa Capital acquired Wet Seal in April 2015 for $7.5 million in cash, but the brand never recovered from its initial downswing. American Apparel and Aéropostale went down similar roads, with the former filing for bankruptcy twice before Gildan Activewear won the rights to the American Apparel brand for $88 million in an auction. Aéropostale was ready to liquidate its business before a consortium of mall operators including Simon Property Group and General Property Group made a winning bid of $243 million for the company.

Wet Seal and The Limited's troubles offer warnings to other recently acquired retailers. Even with cash infusions, brands like Aéropostale still face stiff competition from fast fashion brands that release cheaper, newer items on an accelerated schedule. While Aéropostale tightened up and repositioned its merchandising when it filed for bankruptcy in May, it has still been playing catch-up with more nimble competitors.

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