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Sports Authority Files Chapter 11 Bankruptcy: Lessons for Small Businesses

Business Bankruptcy / Business Finances / Sticky Situations

Just last month, the nation’s former largest retailer of sports apparel and equipment filed for Chapter 11 bankruptcy protection. What can small business owners learn from Sports Authority’s failed business plan? After all, if the retail giant that owns the naming rights for Denver’s Mile High Stadium can’t make it, what hope is there for small businesses?

Most people believe Sports Authority’s problems stem from its failure to successfully shift from a bricks-and-mortar model to online merchandising. When private equity firm Leonard Green & Partners bought out Sports Authority nearly 10 years ago, conventional wisdom held that retail growth was driven by adding new locations to promote customer convenience. And that was the plan Sports Authority implemented.

Contrast that with Amazon, the new retail giant, which boasts the ultimate in customer convenience. Unsaddled by the old-school business mentality, Amazon flies forward at breakneck speed. It is already making same-day deliveries in many locations, and its widely publicized Prime Air project plans to make deliveries in 30 minutes or less.

What does this mean for you?

It is best to have online services and marketing built into your business plan from day one. American consumers, more than ever, expect to point, click, and order. If you are a retailer and can’t provide a significant online customer experience, you’re already behind the curve. Getting caught up needs to be your top priority.

And, if you provide a service, bringing your work online may be your next area of focus. If so, contact us so we can help you navigate the legal terrain of protecting yourself and your business when doing so.

Businesses which fail to incorporate online service at a meaningful, fundamental level will fail in the current American economy. Certainly, Sports Authority provides an online platform for its customers; however, its main mode of delivery is, and has always been, its stores.

If you own or lease a business location near a Sports Authority store or if you supply goods to Sports Authority, you will be directly impacted by their chapter 11 filing. Foot traffic will be significantly reduced in malls and other areas adjacent to Sports Authority stores, many of which will be closing down. And if you have been fortunate enough to supply goods to the company, you need to contact counsel immediately to determine how to best protect your interests.

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