Steve & Barry's: What Went Wrong

I've been fascinated by the rapid rise and even faster decline of Steve & Barry's, the discount clothing chain that recently declared bankruptcy for the second time in three months -- and is now shutting down for good.

The chain is liquidating its merchandise, although I didn't find any real bargains during a recent trip to the Burbank location. That's because the liquidators -- sneaky as they are -- have decided to knock 30% off a higher price point than the $8.98 that all Steve & Barry's merchandise had been selling for.

Yep -- $8.98. That may explain why Steve & Barry's collapsed so quickly. The profit margins are either razor-thin, or not there at all, with those kind of prices. It's rumored that Steve & Barry's basically survived off of the shopping malls that provided incentives to the stores in bringing them in.

The chain also expanded too soon and too fast. We wrote about Steve & Barry's arrival to Burbank last year.. but even then it seemed strange that the store could survive on so little.

Now here's your answer: It couldn't. That's a shame -- in these tough economic times, a bargain clothier like Steve & Barry's should thrive. Instead, the store will soon cease to exist.

Here's more from Business Week:

Yet Steve & Barry’s is a retail casualty. Design couldn’t save the day for this chain. Aggressive growth, instead, seemed to be the company’s goal—and perhaps its downfall. It’s bankrupt. While growth is what every business strives for, obviously, when is enough enough? Could Steve & Barry’s still be doing well, if it didn’t push for opening nearly 300 stores — almost ten times the number of stores it had five years ago — in such a relatively short time? If the company had focused more on design and quality at super-low prices, which seemed to be a priority, instead of the number of stores, perhaps it could have found itself in a different position today. One that would offer cash-strapped consumers fun, well-designed clothing at prices they could afford during the toughest of times, and would allow them to profit from the mass desire for cool apparel at bare-bones prices. Now those customers will be shopping at their competitors’ stores instead.

Steve & Barry's stores were also located at the Beverly Connection and in Santa Monica, among other spots.