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Kate Spade, Gap, C. Wonder: Explaining the Recent Retail Clusterfuck

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Photo: Getty Images
Photo: Getty Images

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January's proven a dire month for mid-range brands. Over the past few days, Gap not only axed its Piperlime division, it also eliminated Rebekka Bay's role as the brand's creative director. Meanwhile, Kate Spade just announced it would close all Kate Spade Saturday stores. Roughly three weeks ago, C. Wonder confirmed that it, too, was shutting down and immediately started liquidating all locations.

This domino effect feels similar to the glut of teen retailers that went belly up two months ago, except it was easy to sing a swan song for Delia*s and give a passing wave to Deb. They had clearly passed their expiration dates. C. Wonder, on the other hand, was just three years old and Kate Spade Saturday launched two years ago, which by comparison makes Piperlime's launch in 2006 look ancient. These brands didn't have the excuse of finicky teens and belated 'we-should-probably-get-on-this-Instagram-thing' mentality to fall back on. So what happened?

According to retail analyst Kelly Tackett, the timing of these closures is strategic. "Retailers tend to wait until after the holidays to see if they can actually jumpstart sales during that holiday season," Tackett told Racked. "When those sales don't materialize, we tend to see a lot of store closings or outright bankruptcies as retailers try to figure out what to do next."

The youngest of the group, Kate Spade Saturday, launched online in March 2013 with sweeping plans for global expansion. The New York Daily News described the brand as a direct competitor to C. Wonder and optimistic analysts forecasted that together, Kate Spade and Kate Spade Saturday, "could be bigger than J.Crew." The Saturday brand opened brick-and-mortar shops in Tokyo before branching out to the US with giant touch-screen storefronts. Just last month, the brand announced a home goods collaboration with West Elm. It seemed that business was chugging along like normal.

Kate Spade representatives weren't available to comment for this article but according to the official release, every Saturday store will shut down by the end of the first half of 2015. The online shop will stay open while the stores are shuttered but ultimately will close as well, and the Saturday brand will be reorganized under the Kate Spade name as a casual weekend line. Bloomberg's Kim Bhasin attributed the fall to a non-existent customer base. "The new line didn't resonate with the traditional Kate Spade shopper and the company had to build a base of younger consumers from scratch—a tough task," Bhasin writes. Tackett pointed out that it was way too easy to compare the merchandise to Kate Spade's namesake line and pick out the faults. "The quality was not as high as the original Kate Spade brand," Tackett says. "So that comparison was there and it didn't favor Kate Spade Saturday."

Kate Spade CEO Craig A. Leavitt told analysts during the initial announcement that the closures were necessary to keep the company on track to reach its long-term goal of becoming a $4 billion business. "Prioritization is critical and these decisions were not made lightly," Leavitt explained. "...We will not tolerate continuing losses of this magnitude in any part of our business."

In Piperlime's case, it never reached the momentum it needed to achieve mainstream success. As parent company Gap detailed in the release announcing the closure, Piperlime's entire business accounted for less than 1% of Gap's total revenue. When asked for comment, Piperlime reiterated to Racked that the decision was made in order to focus on Gap's larger brands, as well as digital and global expansion.

It wasn't as if the brand lacked time to grow. Piperlime launched in October 2006 as an online shoe store but eventually expanded to include bags, womenswear, and menswear. Despite designer collaborations and one lone brick-and-mortar store in New York City, the brands it carried—Dolce Vita, J Brand, Kate Spade—could always be found elsewhere with better presentation. Five months ago, Piperlime finally got a long overdue site redesign and launched an in-house label modeled by Chrissy Teigen, but it just wasn't enough to generate the sales the brand needed. On top of shuttering Piperlime, Gap cut Rebekka Bay loose, doing away with the role of creative director within the company. It's a position that, in the case of Jenna Lyons for J.Crew and Marissa Webb for Banana Republic, has been essential to marketing a sense of cool to customers.

And then there's C. Wonder. When Chris Burch launched the cheap, preppy retailer in late 2011, it launched critical is-it-or-isn't-it-a-Tory-Burch knockoff comparisons and was hit with a few lawsuits. Burch admitted to Mashable in 2013 that he probably should have launched C. Wonder online first before rolling out a slew of brick-and-mortar stores, but he was always optimistic about the brand's success. He had an obsessive commitment to customer service (Fashionista writer Dhani Mau once wrote that she was scared of C. Wonder and Burch reached out to personally escort her around a store); just a year before closure, Burch told Forbes all about his plans to open up to 300 C. Wonder stores in the next three years (the brand never operated more than 32 locations).

As of this morning, Jones New York announced it would be closing all stores and discontinuing its wholesale operations. Tackett is willing to bet that there could be more closures in the future. "It's a tough time to be an apparel retailer and having just good product isn't enough," she says. "It has to be clearly differentiated. The customer experience has to be stellar and it has to be a good value for the money. I'm not necessarily saying that things have to be a low price point, but they have to be worth something to merit the price points."