After Chapter 11 bankruptcy, beloved retailer fights to survive

Some types of retailers build an emotional connection to their customers.

In some cases, that's based on merchandise and the environment the company creates. Ollie's Bargain Outlet literally has such a deep connection with its customers that they have a name, "Ollie's Army."

This group of loyalists doesn't just shop at the chain, they serve as its de facto marketing arm. When Ollie's (OLLI) opens a new location, it's an event. Loyal customers come to support the new store and bring friends and family to see it.

Related: Popular brewery, beer brand files Chapter 11 bankruptcy

That's a model few retailers can copy as it's hard to create passion around a retail brand. It's not unprecedented, however, as Chick-fil-A, Shake Shack, and other growing fast-food chains have sometimes captured that magic. In addition, certain types of retailers like comic book stores, vinyl record shops, and bookstores often have passionate followings simply because people have an emotional connection to the product.

Bookstores tend to become a community hub for people who like books. Local bookstores tend to attract a clientele that shares a love of reading which makes them destination shopping.

That's why despite about half of all book sales being digital, the number of bookstores in the United States climbed by 0.5% in 2023. In fact, the number of bookstores in the country has grown by that same amount, on average every year from 2018 to 2023, according to data from Ibis World.  

Bookstore chain tries to make it through bankruptcy

People who love books generally enjoy spending time in bookstores, but that does not always translate to them spending money. In some cases, people browse bookstores to find what they might buy digitally from Amazon.

That's why larger chains like Books-a-Million and Barnes & Noble have coffee shops and sell all sorts of items that aren't books. They know they will be attracting customers but they're not sure if those people will buy books so they need something else to sell them.

Local bookstores may offer coffee, but in many cases, they're basically just selling books. That's a tough model which makes staying afloat difficult. 

In October one regional bookstore chain, Tattered Cover, filed for reorganization under Chapter 11 Subchapter V in the U.S. Bankruptcy Court for the District of Colorado. The company "owes more than $1 million to publishers, as well as more than $375,000 to Colorado's Office of the State Auditor for abandoned gift cards," Publisher's Weekly reported.

At the time of the filing, the Colorado chain closed three of its stores and filed a plan with the court that included $1 million in funding to keep it afloat. 

Restructuring for long-term viability requires managers to make very difficult business decisions that affect people and business partners, and we intend to do what we can to minimize these impacts," CEO Brad Dempsey shared.

Tattered Cover moves forward

At the time of the filing, Dempsey remained hopeful that the chain would be able to keep its four remaining locations open. The future of those stores remains a question even as Dempsey delivered some good news to fans of the chain.

"By June, the company plans to have resolved about $3.4 million in unsecured debt, repair its relationship with vendors, and restructure operations to become a smaller, more modern, and financially sustainable business. The company said it is weighing several cost-cutting measures, including evaluating its current lease terms and exploring whether to keep its four existing retail stores or move to less costly locations," Denverite reported.

And, while the bankruptcy court still needs to sign off on the chain's plans, it does appear to be moving toward being able to emerge from Chapter 11 bankruptcy.

All online orders are being filled and the company's gift cards remain valid. A fifth location at Denver's Airport has not faced any changes in operation as it uses the Tattered Cover name under a licensing agreement and is operated by Hudson Bookstores.

At least 27 workers lost their jobs when the three locations were closed.