Bankruptcy is the worst thing that could happen to a business. In the case of Soft Surroundings, which filed for Chapter 11 bankruptcy proceedings, the retailer now has to shut its stores as its creditors try to recoup some of their investment. What led to this disastrous downfall? Let’s take a look at what happened.

Chapter 11 Bankruptcy Isn’t The End

While a lot of people might think that when a company goes bankrupt, it’s the end of its operations, that’s not necessarily the case. That’s where Chapter 11 comes in.

Source: Unsplah/Artem Beliaikin

Chapter 11 bankruptcy, also known as a reorganization bankruptcy, allows the company to keep operating normally, except it has to follow a strict recovery plan while meeting obligations.

Not The First Big Name Bankruptcy

Businesses declare bankruptcy all the time. Some of the biggest names that used to dominate marketplaces a mere decade ago filed for bankruptcy. Some names even live on.

Source: Flickr/Nicholas Eckhart

A good example is Bed, Bath, and Beyond, which was acquired by after declaring bankruptcy. The name lives on to this day as a brand, thanks to its owners.

New Iterations Look Nothing Like The Originals

While the names of several of these companies that closed for bankruptcy and then reopened afterward are the same, the operations and practices in the business are distinctly different.

Source: Flickr/Shinya Suzuki

This is primarily because the company’s filing came from its inability to make a profit. New owners will implement new practices to ensure the business turns a profit.

Selling Soft Surroundings On

As Soft Surroundings has entered bankruptcy proceedings, another company has swooped in to buy the retailer. Coldwater Creek has submitted a bid to take over the retailer’s operations.

Source: Flickr/Simon_sees

Coldwater Creek hasn’t come out and said that it would close any of Soft Surroundings stores, but the statement that the brand will resume direct-to-customer and e-commerce sales suggests it will be an online-only brand.

Originally a Catalog Business

Before exploding into popularity, Soft Surroundings was actually conceived as a catalog business. They would list their products on catalogs and do direct-to-consumer sales.

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The new route that Coldwater Creek intends for the brand may see it resuming operations as a direct-to-consumer brand, but instead of catalogs, it will be listed on online storefronts.

A Significant Presence In Some Places

Soft Surroundings actually started selling out of brick-and-mortar stores around 2005. When the brand was at its height, over seventy stores were operating throughout the country.

Source: Flickr/Paul Sableman

Unfortunately, COVID-19 caused significant closures because of a lack of sales and logistical problems. At the time of its bankruptcy, the brand had 44 stores in 24 states.

Final Shutdown of Brick-and-Mortar Stores

When the company filed bankruptcy and Coldwater Creek acquired them, the parent store made it known that it would close the brick-and-mortar storefronts it got with Soft Surroundings.

Source: Flickr/Nicholas Eckhart

Today, the last of those stores have closed, taking Soft Surroundings out of the brick-and-mortar storefront business. Coldwater Creek insists it’s doing this as part of its restructuring.

Whatever Doesn’t Work Must Be Changed

Businesses are primarily focused on the profits of their shareholders. When Coldwater Creek took over operations, they wanted to involve both the shareholders and other stakeholders in their decisions.

Source: Flickr/Christine

Folding the retail outlets allowed the company to focus on alternative profitability methods for the brand. Coldwater Creek will keep the brand but will look for better ways to market it to customers.

Coldwater Creek Is Also Online-Only

Coldwater Creek also used to be a brick-and-mortar business, but they closed their last physical store in 2020 after the COVID pandemic drove down sales.

Source: Flickr/Karin Beil

Instead, the brand pivoted and grew as an online-only brand. Less overhead to maintain stores and staff meant they could offer more reasonably priced products.

Will The Quality of Soft Surroundings Be Affected?

According to Coldwater Creek, none of the current production processes for Soft Surroundings will be altered since they’re trying to keep their existing customer base.

Source: Flickr/Artem Beliaikin

While the brand wasn’t profitable as a brick-and-mortar location, Coldwater Creek intends to keep it as a significant retail brand. The existing customers are crucial to its success in that role.

Potential For More Widespread Sales

Moving to an online-only brand has some marked upsides for Soft Surroundings. Before, the catchment area for its sales was limited to wherever it operated a store.

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Online, the buyer base is much larger, allowing a larger volume of customers to get access to the brand’s products. This could spawn new customers who would eventually become loyal because of the brand’s quality.

A New Approach to Business

When a company goes into bankruptcy, changes must be made to ensure that it remains profitable enough to pay off its creditors. Soft Surroundings still owes a lot of other businesses.

Source: Flickr/Daniel Foster

With a broader potential customer base and good marketing, the company could potentially meet its obligations without sacrificing quality. Giving up its real-world locations was part of that goal.

Other Types of Bankruptcy

There are several types of bankruptcy in the US, and businesses need to choose which one to file to avoid putting themselves in the worst possible position. Only some of the types of bankruptcy apply to corporations.

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Businesses can file for Chapter 7 bankruptcy, where their assets are liquidated to pay their creditors, instead of Chapter 11 bankruptcy. However, Chapter 7 erases the company, and it can never be used as a brand name again.

Is This The End of Soft Surroundings?

The Soft Surroundings millions of Americans knew and loved will still be around, although it won’t have its own brand-dedicated store anymore. Reorganization means that Coldwater Creek will still operate the business as an online-only option for buyers. The quality of the products should remain the same.

Source: Flickr/Jeffrey Beall

On the other hand, the Soft Surroundings that many of us know is gone and will never come back. Reorganization will change how the company does business and how it develops and distributes new products in the future. Depending on your point of view, this could be either a good or a bad thing. Only time will tell us for sure.

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