Retailers aim to pick up business from defunct, dying rivals

Toys R Us and Bon-Ton may be gone but they haven't been forgotten.

Companies like Target and online mattress company Casper are creating playbooks to pick up market share that those and other defunct or dying retailers left behind.

Casper, for instance, is teaming up with department stores like Nordstrom to introduce pop-up mattress shops in areas where Mattress Firm, which filed for Chapter 11 bankruptcy in October, had locations. And Kohl's has been mapping out where retailers like Bon-Ton and Sears shuttered stores so it can target those customers with specific ads.

Kohl's is also adding more beauty products, which had been an area of expertise for Bon-Ton, the York, Pennsylvania-based department store chain that closed the last of its stores in August. Kohl's believes one-third of its store base is benefiting from department store closings, up from one quarter a year ago.

Target CEO Brian Cornell estimated up to $100 billion in market share that's now up for grabs — about double what he foresaw just a year ago. In response, the company is accelerating its store remodels in areas where bankrupt retailers once had stores. Target has devoted extra space at 500 of its stores for bigger toys like electric cars, playhouses and musical instruments as well as adding nearly 200 more products. About half of those locations are about five miles from former Toys R Us stores.

"We regularly look at retailers on the Moody's credit watch list," Cornell told reporters last month. "We think about strategies market by market."

In 2018, there have been roughly 30 retailers that have filed for bankruptcy, including household names like Sears Holdings Corp., Mattress Firm, and David's Bridal. That compares with 41 last year — the highest since 2011, according to S&P Global Market Intelligence, a research firm. Both Toys R Us and Bon-Ton liquidated this past summer just months after trying to reorganize in bankruptcy court.

In 2008, 440 retailers filed for bankruptcy, the highest number since S&P started tracking the data.

The rampant closures don't tell the entire story. In fact, according to research firm IHL Group, 2018 will see a net growth of more than 3,800 stores, with 12,664 stores opening this year and 8,828 shuttering. And the closings represent a concentration of retailers. This year, 16 retailers represent 66 percent of the closings, compared with 48 percent last year.

The National Retail Federation expects holiday retail sales to increase as much as 4.8 percent over 2017. The sales growth marks a slowdown from last year's 5.3 percent but remains healthy.

Retailers should be cautious about targeting shoppers from defunct retailers, says Craig Johnson, president of Customer Growth Partners, a retail consultancy.

"The trick is capitalizing on the opportunity without going overboard," he said. For retailers like Bon-Ton and Sears, "people who were still shopping there were older and spending less."

Sears has long ceded territory in plenty of areas like toys and clothing. Its last bastion: appliances and home improvement, both areas that home improvement retailer Lowe's is targeting.

Lowe's CEO Marvin Ellison told AP he estimates about $2.5 billion to $3 billion up for grabs in appliances; for home improvement, that figure is anywhere from $600 million to a billion dollars. Lowe's has been expanding its appliances, and started stocking up on Craftsman tools, which Ellison thinks has attracted Sears shoppers.

Still, even as retailers scramble to fill the hole, in many cases that won't be enough. Take Toys R Us, which had a constant supply of hot products throughout the year, not just for the holidays.

"No one is going to be able to fill the Toys R Us void," said Isaac Larian, CEO of MGA Entertainment, the maker of the highly popular LOL toys. His overall global business has tripled, but at Little Tikes, known for its large size toys like cook kitchen sets and toy cars, business is down 11 percent, leaving its factory in Hudson, Ohio, often idle.

"I'm looking at everything possible to find other ways to fill that factory," he added.

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