Online retailers are threatened with bankruptcy because consumers are tightening their belts. Demand is falling. Raising capital is becoming a Herculean task. Against this backdrop, online retailers are battling insolvency and bankruptcy. This is also affecting the pandemic-related D2C high-flyers. High inflation, falling demand and bloated inventories are increasing the pressure on margins and liquidity.  

E-commerce and retail are an industry with companies that are not all on a solid footing. The economic stimulus packages are falling away, consumers are coming under pressure from inflation. The capital markets are failing to provide refinancing and working capital is expensive. Operationally weaker players are struggling, even if they have been riding a wave of high demand and a calm advertising environment.

In times of crisis, e-commerce companies need liquidity above all else. Liquid funds provide security: 

• Delivery of goods by suppliers

• Transportation of pre-packed orders by last-mile carriers 

• Payment of salaries and social security contributions for employees

Industry analysts such as Jochen Krisch argued that e-commerce operators should use the boom times to raise sufficient capital for tougher times.

And the research also shows that the main causes of companies in difficulties are interrupted supply chains and liquidity bottlenecks.

Bell mail order

Insolvency of the Klingel Group, May 2023

The Klingel Group, known for its diversified catalog mail order business, has now officially filed for insolvency. After years of acquiring catalog mail order companies in difficulties, including Alba Moda from the Otto Group and the well-known brands Conleys and Impressionen, the financial burden could no longer be borne. The parent company, K-Mail Order GmbH & Co. KG, has initiated insolvency proceedings under its own responsibility.

The Hamburg subsidiaries, Impressionen Versand GmbH and Schneider GmbH & Co. KG, are also involved in similar proceedings. The insolvency of Klingel and its subsidiaries affects around 1,800 employees who work for these three companies.

"Difficult market conditions" were cited as the reasons for Klingel's insolvency. Particular emphasis was placed on the general reluctance to spend since the outbreak of the war in Ukraine, significantly increased costs and high inflation. Furthermore, the high liquidity tie-up in the warehouse due to supply chain delays during the coronavirus pandemic played a significant role in the financial difficulties.

The insolvency administrator's press release provides interesting insights. It refers to an extensive IT backend conversion that the group has undertaken. An outdated mainframe solution was replaced by a modern system landscape. LinkedIn research shows that external consultants were involved in this process.

Although critics often claim that such changes should have been made later or not at all, the press release emphasizes the need for IT optimization. The so-called "technical debt" - technical debt caused by outdated or inefficient systems - becomes so great with certain changes in the front end and customer approach that an update is unavoidable.

Continuing to optimize IT processes is therefore a decisive factor for restructuring. The insolvency of the Klingel Group underlines the need for companies to constantly keep their IT infrastructure up to date in order to remain competitive and ensure their financial stability.

Ahlers AG

Ahlers insolvency, May 2023

Ahlers, a well-known manufacturer of men's fashion, has filed for insolvency due to impending payment problems. This is a further blow to the German fashion industry, which is already struggling with economic challenges. Ahlers has filed for insolvency for the parent company and seven subsidiaries at Bielefeld Local Court. Foreign companies are currently not affected.

The reasons cited for this step are the consequences of the coronavirus pandemic, disrupted supply chains, purchasing restraint, high inflation and other insolvencies in the retail sector.

Despite well-known brands such as Baldessarini, Pierre Cardin and Pioneer, Ahlers' sales revenues fell from 207 million euros before corona to 171 million euros in the fiscal year 2021/22. Around 1,700 employees currently work at Ahlers, 400 of whom are employed in the affected companies.

Wayfair 

Wayfair has made losses for most of its existence. The coronavirus boom years were an exception. In 2020, Wayfair generated an operating profit of more than 360 million US dollars. 

In August 2022, Wayfair then had to cut 5% of all jobs. In the second quarter of 2022 alone, the company recorded a 15% drop in sales compared to the previous year. Internationally, the decline was even 35 percent. 

Although losses were limited in Q3/2022 , they continued: net sales in the United States fell by 6% year-on-year to USD 2.4 billion. International net sales also fell by 24% to USD 0.4 billion compared to the same quarter of the previous year. At constant exchange rates, growth in international net sales amounted to minus 22.6%. 

The number of active customers also fell by 22.6% year-on-year to 22.6 million. Wayfair recorded an operating loss of USD 372 million in the quarter under review, compared with an operating loss of USD 70 million in the prior-year quarter.

For analysts, Wayfair's path to profitability is of key importance after the company suddenly became profitable during the pandemic and has slipped back into the red in recent quarters. 

Keller Sports 

Keller Sports insolvency, December 2022 - discontinuation of business operations, March 2023

The former high-flyer of the German e-commerce scene has also been insolvent since December 2022: Keller Sports. Over the years, the founding brothers Moritz and Jakob Keller have launched numerous initiatives, from their own store system and order management system to a dozen country stores, a gym broker and the Smiles loyalty program. The restructuring is to take place under self-administration. Apparently, despite the boom in home training, the figures were not rosy even in coronavirus times, as several sources report.     

Diapers.com 

Windeln.de has been known in the e-commerce scene for years as a problem and restructuring case. Here, for example, it is worth researching the articles at Exciting Commerce. The constant headline is "Windeln.de as a restructuring case, puts its last shareholders to flight, collapses to € 82 million, has to play tricks when raising capital" etc. 

In recent years, Windeln.de has been supported primarily by its business in China, not least because of the milk powder scandal there, where companies from Europe were able to score points with high trust. 

Surf4Shoes

The majority shareholder in the online platform was the HR Group, which in turn owned Reno until October 2022. Reno is a system wholesaler and one of the largest providers of shoes in Europe. According to Surf4Shoes, it specialized in shoes in the mid-price segment. The last annual turnover is said to have amounted to 30 million euros. The ratings for the operational handling on relevant rating portals had already fallen sharply in advance.

The HR Group is thus withdrawing from traditional retail and focusing on logistics and system solutions for the retail sector. 

Missguided 

The British fast fashion online company had to file for insolvency in May 2022. The retail group Frasers Group acquired Missguided out of insolvency for around 24 million euros.

Missguided had run into difficulties due to supply chain problems, exploding costs and falling demand. Founder and CEO Nitin Passi first resigned and has since been brought back on board by Frasers. 

Made.com 

First no more orders were accepted, then Made.com filed for insolvency. 

Similar to Wayfair, Westwing & Co, Made.com was also affected by the particular weakness of the Home & Living segment. There were also particular challenges in the operating model, which ultimately accelerated the insolvency. The company's early success was based on a just-in-time model in which the goods were only delivered by the manufacturers once they had been ordered. Instead of building market power and working with just a handful of suppliers, the company worked with more than 200 factories. But this model meant that manufacturers did not prioritize Made.com when the pandemic hit and the supply chain was massively disrupted. More recently, Made.com has changed course and committed massive funds to ensure its warehouses are well stocked. But the timing was wrong, as consumers were saving when the cost of living crisis hit.

Made.com was already looking for investors and rescuers and was acquired by Next immediately after filing for insolvency. Next will continue business operations from 2023. Over 500 jobs were lost and many customers had to write off their pre-ordered goods and money already paid. According to reports, however, Next will not continue the entire business operations, but will primarily take over the brand and front ends. 

Watchmaster

A dramatic insolvency for the online watch retailer. During a robbery, half of the watches in stock with a total estimated value of EUR 10 million were stolen. Although Watchmaster was insured, it only received back the purchase value of the watches. However, the interim investments in marketing etc. were significantly higher, so that the company had to file for insolvency.  

Raccoon shipping

The online store for sustainable and socially responsible products is cutting 40 administrative jobs due to a sharp drop in demand caused by war, inflation and energy prices. In addition, a store in Karlsruhe will be closed at the beginning of 2023. Neuhandeln writes: "These job cuts are now necessary in order to adjust expenditure to turnover and to avoid jeopardizing the continued existence of the mail-order company from Freiburg."