WEBVTT 00:00:00.000 --> 00:00:02.480 Welcome back to the Deep Dive. I want to start 00:00:02.480 --> 00:00:04.639 today with a question that feels a little bit 00:00:04.639 --> 00:00:06.799 like a riddle. Oh, I like riddles. Okay, good. 00:00:07.179 --> 00:00:09.720 When you think of the concept of American empire, 00:00:10.000 --> 00:00:11.880 and I don't mean, you know, a political empire, 00:00:12.000 --> 00:00:14.199 I mean an economic one, the kind that really 00:00:14.199 --> 00:00:17.600 defines how we live, what comes to mind, you 00:00:17.600 --> 00:00:20.199 probably think of the big sweeping monopolists, 00:00:20.219 --> 00:00:22.780 right? Sure. Yeah, immediately you think of Carnegie 00:00:22.780 --> 00:00:27.399 and Steele. Or Rockefeller and oil. Exactly. 00:00:27.420 --> 00:00:29.559 Or if we're looking at the modern era, maybe 00:00:29.559 --> 00:00:32.520 Bezos and Amazon or the guys in Silicon Valley, 00:00:32.640 --> 00:00:34.799 the people who changed the actual infrastructure. 00:00:35.179 --> 00:00:38.619 Titans. That's what we look at. But today, I 00:00:38.619 --> 00:00:40.960 want to make an argument that the truest reflection 00:00:40.960 --> 00:00:43.479 of the American economic roller coaster over 00:00:43.479 --> 00:00:45.859 the last century, I'm talking the humble rise, 00:00:46.039 --> 00:00:49.119 the massive debt -fueled explosion, and then 00:00:49.119 --> 00:00:51.880 the sudden digital disintegration isn't found 00:00:51.880 --> 00:00:54.439 in a steel mill. Okay. And it's not in a server 00:00:54.439 --> 00:00:56.520 farm in California. It's found in a little hat 00:00:56.520 --> 00:00:59.060 shop in York, Pennsylvania. A hat shop. That 00:00:59.060 --> 00:01:01.659 sounds improbable, to say the least. A hat shop. 00:01:01.799 --> 00:01:04.319 It does, doesn't it? But we are talking about 00:01:04.319 --> 00:01:07.439 the Bonton. Now, depending on where you grew 00:01:07.439 --> 00:01:11.019 up, that name either unlocks this very specific 00:01:11.019 --> 00:01:13.739 sensory memory, you know, the smell of perfume 00:01:13.739 --> 00:01:15.780 counters, back -to -school shopping with your 00:01:15.780 --> 00:01:18.480 mom, the squeak of sneakers on a mall floor. 00:01:18.719 --> 00:01:21.859 I can smell it right now. Right. Or... It means 00:01:21.859 --> 00:01:24.540 absolutely nothing to you. And that divide is 00:01:24.540 --> 00:01:26.420 actually crucial to the story we're telling today 00:01:26.420 --> 00:01:29.500 because the bond con is the perfect case study 00:01:29.500 --> 00:01:32.180 of a regional power player. It wasn't Walmart. 00:01:32.319 --> 00:01:34.299 It wasn't trying to be everything to everyone 00:01:34.299 --> 00:01:37.180 everywhere. It was trying to be something to 00:01:37.180 --> 00:01:39.439 someone in a very specific part of the country. 00:01:39.640 --> 00:01:41.560 And we've pulled everything for this. The historical 00:01:41.560 --> 00:01:43.659 records, the financial filings, the bankruptcy 00:01:43.659 --> 00:01:46.200 court documents, the Wikipedia archives to piece 00:01:46.200 --> 00:01:48.379 it all together. And honestly, it reads less 00:01:48.379 --> 00:01:51.420 like a business biography and more. Like a tragedy. 00:01:51.560 --> 00:01:53.659 It really does. It's a story about ambition, 00:01:53.840 --> 00:01:57.099 about family legacy, the massive explosion of 00:01:57.099 --> 00:02:00.019 consumer culture in the 20th century. And then 00:02:00.019 --> 00:02:03.140 the very sharp, very painful reality of how the 00:02:03.140 --> 00:02:05.879 retail world changed. So our mission today is 00:02:05.879 --> 00:02:08.520 to trace this very specific, almost haunting 00:02:08.520 --> 00:02:12.780 trajectory. We need to figure out how a single 00:02:12.780 --> 00:02:15.259 room millinery, I mean, literally a one room 00:02:15.259 --> 00:02:18.400 store selling hats and dry goods in Pennsylvania. 00:02:18.879 --> 00:02:21.680 How did that grow into a billion -dollar retail 00:02:21.680 --> 00:02:25.139 empire that held the keys to nearly every famous 00:02:25.139 --> 00:02:27.539 regional department store name in the Midwest, 00:02:27.800 --> 00:02:31.060 only to just vanish? Well, vanish from the physical 00:02:31.060 --> 00:02:33.099 world, at least. As we'll see, it didn't entirely 00:02:33.099 --> 00:02:36.699 disappear. It just migrated. It became a ghost. 00:02:36.879 --> 00:02:39.240 A corporate ghost story. I like that. But before 00:02:39.240 --> 00:02:41.800 we get to the ghosts and the bankruptcies, we 00:02:41.800 --> 00:02:43.439 have to understand the life. We have to look 00:02:43.439 --> 00:02:45.300 at the birth. So let's set the scene. We are 00:02:45.300 --> 00:02:47.680 traveling back to the very end of the 19th century. 00:02:47.960 --> 00:02:50.199 1898, a completely different world. We are in 00:02:50.199 --> 00:02:52.080 York, Pennsylvania. Now, for those who don't 00:02:52.080 --> 00:02:53.719 know York, this isn't Paris. This is not New 00:02:53.719 --> 00:02:56.039 York City. This is industrial Pennsylvania. It's 00:02:56.039 --> 00:02:58.520 gritty. It's hardworking. And here we have a 00:02:58.520 --> 00:03:01.740 father and son duo, Samuel Grumbacher and his 00:03:01.740 --> 00:03:04.360 son, Max. And they decide to open a store. But 00:03:04.360 --> 00:03:06.039 this isn't an apartment store yet. Not in the 00:03:06.039 --> 00:03:08.759 way we think of it at all. It was called S. Grumbacher 00:03:08.759 --> 00:03:11.759 and Son. Which is a very reliable, very literal 00:03:11.759 --> 00:03:13.620 name. Tells you what you need to know. Exactly. 00:03:14.319 --> 00:03:16.819 S. Grumbacher & Son. It tells you exactly who 00:03:16.819 --> 00:03:19.520 owns it. And it was a millinery and dry goods 00:03:19.520 --> 00:03:22.219 store. Millinery. So that's hats, primarily. 00:03:22.240 --> 00:03:25.039 That is hats. And fabric. I mean, you have to 00:03:25.039 --> 00:03:27.099 imagine the scale here. Just one single room 00:03:27.099 --> 00:03:30.460 on Market Street. No escalators. No bright lights 00:03:30.460 --> 00:03:32.979 at the cosmetic counters. Just floor -to -ceiling 00:03:32.979 --> 00:03:35.780 shelves of bolts of fabric and ladies' hats. 00:03:36.199 --> 00:03:39.580 It's incredibly humble. Yeah. But they obviously 00:03:39.580 --> 00:03:42.699 had ambitions beyond just that one room. Because 00:03:42.699 --> 00:03:44.840 pretty quickly, they decided that S. Grumbacher 00:03:44.840 --> 00:03:46.580 & Son wasn't going to cut it if they wanted to 00:03:46.580 --> 00:03:48.300 grow. No, you need a brand. You need something 00:03:48.300 --> 00:03:50.699 with a little more flair. And they found it. 00:03:50.780 --> 00:03:54.319 By 1902, so just four years later, they adopted 00:03:54.319 --> 00:03:57.680 the name Bonton. Bonton. It has a ring to it. 00:03:57.759 --> 00:03:59.319 But I looked into this, and it's a fascinating 00:03:59.319 --> 00:04:03.060 choice for 1902 industrial Pennsylvania. Where 00:04:03.060 --> 00:04:04.759 does that come from? It's an amazing choice. 00:04:04.939 --> 00:04:06.939 It is derived from a British term, actually, 00:04:07.039 --> 00:04:09.759 though it has French roots. Le bon temps effectively 00:04:09.759 --> 00:04:12.539 means good tone or good form. Good tone. Yeah, 00:04:12.620 --> 00:04:15.620 it connotes the elite, high society, the fashionable 00:04:15.620 --> 00:04:18.000 world. See, that is a brilliant psychological 00:04:18.000 --> 00:04:20.899 play. You're in York, Pennsylvania. You're surrounded 00:04:20.899 --> 00:04:23.480 by factories and industry. And you name your 00:04:23.480 --> 00:04:26.560 store The Elite. Yes. You're just selling a hat. 00:04:26.939 --> 00:04:28.899 You're selling a feeling. You're telling the 00:04:28.899 --> 00:04:32.139 customer, if you shop here, you have taste. You're 00:04:32.139 --> 00:04:35.139 sophisticated. Exactly. It's aspirational branding 00:04:35.139 --> 00:04:38.639 101, way before modern marketing textbooks even 00:04:38.639 --> 00:04:41.100 existed. Even if you're just in a small town, 00:04:41.160 --> 00:04:42.500 you want to feel like you're part of that high 00:04:42.500 --> 00:04:44.959 society. It was an incredibly smart move for 00:04:44.959 --> 00:04:46.639 the turn of the century. And it clearly worked, 00:04:46.720 --> 00:04:48.500 didn't it? Because they didn't stay in that one 00:04:48.500 --> 00:04:50.579 little room for very long. No, not at all. By 00:04:50.579 --> 00:04:53.560 that same year, 1902. The records show they had 00:04:53.560 --> 00:04:56.420 already expanded. They had locations in Trenton, 00:04:56.420 --> 00:04:59.339 New Jersey, and then just all across Pennsylvania, 00:04:59.420 --> 00:05:03.519 Carlisle, Lancaster, Lebanon, Altoona, East Liverpool. 00:05:03.879 --> 00:05:05.560 Whoa, hold on. Let's pause on the logistics of 00:05:05.560 --> 00:05:08.240 that for a second. This is 1902. We don't have 00:05:08.240 --> 00:05:10.319 interstate highways. We don't have the internet 00:05:10.319 --> 00:05:13.160 for inventory management. Expanding from York, 00:05:13.319 --> 00:05:17.959 PA, to Trenton, NJ. That is not a small feat 00:05:17.959 --> 00:05:20.389 for a four -year -old company. No, it's a huge 00:05:20.389 --> 00:05:22.769 undertaking. And it shows that the Grumbachers 00:05:22.769 --> 00:05:26.689 understood scale very early on. They weren't 00:05:26.689 --> 00:05:28.589 content with being the local shopkeeper where 00:05:28.589 --> 00:05:30.829 everyone knows your name. Right. They wanted 00:05:30.829 --> 00:05:32.949 a network. They were building a supply chain 00:05:32.949 --> 00:05:36.050 before that term was really in vogue. And then 00:05:36.050 --> 00:05:38.589 as we move through the early 20th century, the 00:05:38.589 --> 00:05:41.610 family dynamic seems to really solidify. They 00:05:41.610 --> 00:05:45.949 incorporate in 1929. Ooh, right before the crash. 00:05:46.269 --> 00:05:49.220 Talk about timing. Oof. Well, they survived it. 00:05:49.220 --> 00:05:51.279 They incorporated it as S. Grumbacher and Son, 00:05:51.399 --> 00:05:53.860 Inc. But the family succession piece is really 00:05:53.860 --> 00:05:56.240 interesting here. Max, the founder's son, he 00:05:56.240 --> 00:05:58.839 eventually brings his own son, Max Samuel, who 00:05:58.839 --> 00:06:02.300 went by MS into the fold in 1931. So we are on 00:06:02.300 --> 00:06:04.759 Generation 3 by the early 30s. And this is when 00:06:04.759 --> 00:06:06.879 it really becomes an institution. Yeah. But then 00:06:06.879 --> 00:06:09.879 tragedy strikes. Max, the co -founder, he dies 00:06:09.879 --> 00:06:12.600 in 1933. And that's such a pivotal moment for 00:06:12.600 --> 00:06:14.259 any family business. We see this all the time 00:06:14.259 --> 00:06:16.360 in history. The founder dies and the kids squabble 00:06:16.360 --> 00:06:18.319 or they sell it off or the whole thing just loses 00:06:18.319 --> 00:06:20.319 its vision. But that's not what happened here 00:06:20.319 --> 00:06:24.620 at all. No. His widow, Daisy, and her two sons, 00:06:24.860 --> 00:06:27.860 MS and Richard, they carried it on. They formed 00:06:27.860 --> 00:06:31.600 a partnership in 1936. It really cements the 00:06:31.600 --> 00:06:33.899 idea that this was a family empire. It wasn't 00:06:33.899 --> 00:06:37.079 some faceless corporation yet. It was the Grumbachers. 00:06:37.300 --> 00:06:39.480 I found this little nugget in the research that 00:06:39.480 --> 00:06:41.939 I absolutely loved. Because you know you've made 00:06:41.939 --> 00:06:43.500 it in American culture when you start getting 00:06:43.500 --> 00:06:45.279 referenced in pop culture. Right, that's the 00:06:45.279 --> 00:06:48.699 real test. And apparently, the Bon Ton was famous 00:06:48.699 --> 00:06:51.180 enough to be a destination on Fibber McGee and 00:06:51.180 --> 00:06:54.980 Molly. The classic radio show. No way! This show 00:06:54.980 --> 00:06:58.740 aired from 1935 to 1959. It was massive. It was 00:06:58.740 --> 00:07:01.139 like a primetime sitcom today. And there's a 00:07:01.139 --> 00:07:03.540 recurring bit where a character references going 00:07:03.540 --> 00:07:06.319 to the Bon Ton. That is hugely significant. It's 00:07:06.319 --> 00:07:08.379 like getting name dropped in a Marvel movie or 00:07:08.379 --> 00:07:10.319 a Taylor Swift song today. Totally. It means 00:07:10.319 --> 00:07:12.120 the writers assumed that a national audience 00:07:12.120 --> 00:07:14.300 would hear Bonton and immediately understand, 00:07:14.560 --> 00:07:17.439 okay, they're going to a fancy department store. 00:07:17.699 --> 00:07:20.439 It validates their status. They had successfully 00:07:20.439 --> 00:07:23.639 associated the name Bonton with that high society 00:07:23.639 --> 00:07:26.379 aspiration they planted all the way back in 1902. 00:07:26.970 --> 00:07:29.889 They had won the mindshare. But the real explosion, 00:07:30.089 --> 00:07:32.709 the thing that turns them from a successful regional 00:07:32.709 --> 00:07:36.550 chain into a dominant force, that happens after 00:07:36.550 --> 00:07:38.750 World War II. Right. So we come out of the Depression, 00:07:39.029 --> 00:07:42.550 we come out of the war, the GIs come home, suburbs 00:07:42.550 --> 00:07:45.610 are built, and the American consumer economy 00:07:45.610 --> 00:07:49.810 just, it explodes. This is the birth of the middle 00:07:49.810 --> 00:07:52.649 class as the economic engine of the world. And 00:07:52.649 --> 00:07:55.290 Bonton was positioned perfectly to serve them. 00:07:55.850 --> 00:07:58.029 This is where we see the birth of their defining 00:07:58.029 --> 00:08:01.610 strategy. We call it the adjacent strategy. Adjacent 00:08:01.610 --> 00:08:03.889 strategy. I want to unpack this because it sounds 00:08:03.889 --> 00:08:06.589 simple, but I feel like there's a real genius 00:08:06.589 --> 00:08:09.189 in the simplicity. What does that mean in practice? 00:08:09.819 --> 00:08:11.899 So imagine you're looking at a map. A lot of 00:08:11.899 --> 00:08:13.779 companies, when they want to expand, they look 00:08:13.779 --> 00:08:15.720 for the best market. They might say, oh, Los 00:08:15.720 --> 00:08:17.560 Angeles is booming. Let's open a store there, 00:08:17.680 --> 00:08:19.579 even if they are based in Pennsylvania. Right. 00:08:19.680 --> 00:08:22.180 Go where the money is. The big city. But Bonton 00:08:22.180 --> 00:08:25.019 didn't do that. They grew by creeping into the 00:08:25.019 --> 00:08:27.779 town next door. They expanded into areas that 00:08:27.779 --> 00:08:30.639 were geographically touching their existing footprint. 00:08:30.839 --> 00:08:32.620 It's like an inkblot spreading on a piece of 00:08:32.620 --> 00:08:37.649 paper. So slow and steady. More methodical. It's 00:08:37.649 --> 00:08:39.669 calculated. I mean, think about the logistics. 00:08:39.950 --> 00:08:42.509 If you open a store in the next town over, you 00:08:42.509 --> 00:08:44.870 can use the same delivery trucks. Oh, sure. Your 00:08:44.870 --> 00:08:47.350 district managers can drive there and be back 00:08:47.350 --> 00:08:49.889 home for dinner. Your radio ads in York might 00:08:49.889 --> 00:08:52.029 bleed over into Hanover, so you're already getting 00:08:52.029 --> 00:08:54.169 free marketing. It's incredibly efficient. That 00:08:54.169 --> 00:08:56.809 makes total sense. So walk us through how this 00:08:56.809 --> 00:09:00.059 looked in those post -war years. okay so in 1946 00:09:00.059 --> 00:09:03.159 they open a new store in hanover pennsylvania 00:09:03.159 --> 00:09:06.320 that's very close to york their home base then 00:09:06.320 --> 00:09:09.460 in 1948 they make their first move out of state 00:09:09.460 --> 00:09:12.799 in a while into Maryland by acquiring Eyerly's 00:09:12.799 --> 00:09:15.460 in Hagerstown. Acquiring Eyerly's. Okay, this 00:09:15.460 --> 00:09:17.419 is a key distinction. This is the first time 00:09:17.419 --> 00:09:19.480 we see them buying an existing business rather 00:09:19.480 --> 00:09:21.200 than just building a new store from scratch, 00:09:21.460 --> 00:09:23.899 right? Exactly. And that distinction is absolutely 00:09:23.899 --> 00:09:26.840 crucial to their future. Buying an existing store 00:09:26.840 --> 00:09:29.320 gives you the customer base, the location, and 00:09:29.320 --> 00:09:31.460 the staff immediately. It's a shortcut. It's 00:09:31.460 --> 00:09:33.220 a shortcut to loyalty. You don't have to convince 00:09:33.220 --> 00:09:35.539 people to shop at a new store. You just take 00:09:35.539 --> 00:09:37.600 over the store they already love. And they kept 00:09:37.600 --> 00:09:41.340 doing this. They did. 1957, they purchased McMeans 00:09:41.340 --> 00:09:44.519 in Lewistown, PA. And notice the patience here. 00:09:44.620 --> 00:09:47.200 This is what really strikes me. They buy McMeans, 00:09:47.200 --> 00:09:49.519 but they don't just slap the Bonton sign on it 00:09:49.519 --> 00:09:51.899 immediately. They don't. No, they run it as McMeans 00:09:51.899 --> 00:09:55.639 for 12 years. 12 years. They waited until 1969 00:09:55.639 --> 00:09:58.440 to change the name. Yes. They waited until they 00:09:58.440 --> 00:10:01.019 had earned the trust of the community, or maybe 00:10:01.019 --> 00:10:03.220 until the generational attachment to the old 00:10:03.220 --> 00:10:06.320 name faded a bit. Then they rebranded. It shows 00:10:06.320 --> 00:10:08.809 they weren't arrogant. They respected the local 00:10:08.809 --> 00:10:10.950 culture they were buying into. And we have to 00:10:10.950 --> 00:10:12.830 talk about the next generation of Grumbackers 00:10:12.830 --> 00:10:15.269 coming in around this time. Because in 1961, 00:10:15.649 --> 00:10:18.379 M. Thomas Grumbacker enters the scene. We call 00:10:18.379 --> 00:10:21.340 them Tim. Tim Grumbacher. Yeah. He is a massive 00:10:21.340 --> 00:10:23.360 figure in this story. He's the fourth generation. 00:10:23.500 --> 00:10:26.259 He comes in 61 and eventually becomes CEO in 00:10:26.259 --> 00:10:29.840 1985. He is the architect of the modern Bonton, 00:10:30.059 --> 00:10:32.600 the one that really became a giant. And under 00:10:32.600 --> 00:10:34.700 his watch, we see the big shift toward the shopping 00:10:34.700 --> 00:10:38.460 mall. The mall boom. The 1970s. This changed 00:10:38.460 --> 00:10:41.409 everything for American retail. Before this, 00:10:41.509 --> 00:10:44.149 department stores were these grand downtown destinations. 00:10:44.470 --> 00:10:46.590 You'd put on your Sunday best and go downtown. 00:10:46.950 --> 00:10:49.669 Right. But in the 70s, the action moved to the 00:10:49.669 --> 00:10:52.029 suburbs. The shopping center became the new town 00:10:52.029 --> 00:10:54.570 square. And the department store became the anchor. 00:10:55.289 --> 00:10:57.809 You know how malls always have those huge stores 00:10:57.809 --> 00:10:59.610 at the ends? Of course, the ones that are two 00:10:59.610 --> 00:11:01.490 stories tall and have their own entrances from 00:11:01.490 --> 00:11:03.629 the parking lot. Those are anchors, and their 00:11:03.629 --> 00:11:06.129 job is to draw people to the mall so they'll 00:11:06.129 --> 00:11:08.149 then walk past the Gap and the Pretzel Stand 00:11:08.149 --> 00:11:11.110 and everything in between. Bonton rode this wave 00:11:11.110 --> 00:11:15.049 hard. They opened 11 new stores in PA and West 00:11:15.049 --> 00:11:18.009 Virginia during the 70s, mostly as these big 00:11:18.009 --> 00:11:20.509 mall anchors. It feels like the golden age, doesn't 00:11:20.509 --> 00:11:22.529 it? The mall was the center of the universe, 00:11:22.750 --> 00:11:25.279 and Bonton was one of the kings. of that universe. 00:11:25.539 --> 00:11:28.460 It was. But then by the 1980s, the atmosphere 00:11:28.460 --> 00:11:31.340 started to change. The industry began to consolidate. 00:11:31.740 --> 00:11:33.980 It wasn't enough to just build new stores anymore. 00:11:34.039 --> 00:11:36.419 The market was getting saturated and the big 00:11:36.419 --> 00:11:38.980 fish were starting to eat the little fish. And 00:11:38.980 --> 00:11:42.460 Bonton, under Tim Grumbacher, decided they weren't 00:11:42.460 --> 00:11:44.220 going to be the little fish. No, they wanted 00:11:44.220 --> 00:11:46.559 to be the shark. They really did. They did. In 00:11:46.559 --> 00:11:49.279 the 80s, they established a division called Maxwell's. 00:11:49.360 --> 00:11:52.100 They acquired a chain called Ellis Good, which 00:11:52.100 --> 00:11:54.519 included the Fowler's department stores. But 00:11:54.519 --> 00:11:57.240 the big move, the one that really signaled their 00:11:57.240 --> 00:11:59.519 intent to dominate the entire region, was in 00:11:59.519 --> 00:12:03.240 1987. The Pomeroy's deal. Yes. They bought the 00:12:03.240 --> 00:12:06.480 11 -store Pomeroy's chain from Allied department 00:12:06.480 --> 00:12:09.899 stores. Allied. I mean, Allied was a huge national 00:12:09.899 --> 00:12:12.899 player. Buying from them must have been a statement. 00:12:13.000 --> 00:12:15.000 It was a massive statement. It was like a minor... 00:12:15.019 --> 00:12:17.059 league team buying a player from the Yankees. 00:12:17.220 --> 00:12:19.720 And strategically, think back to that adjacent 00:12:19.720 --> 00:12:23.700 strategy. This single deal allowed Bonton to 00:12:23.700 --> 00:12:26.200 enter seven new markets in Pennsylvania instantly. 00:12:26.559 --> 00:12:28.620 Boom. Just like that. Just like that. Instead 00:12:28.620 --> 00:12:31.559 of spending 10 years building seven stores, hiring 00:12:31.559 --> 00:12:34.519 seven managers, fighting for permits, you sign 00:12:34.519 --> 00:12:37.600 one check and you own the region. This is the 00:12:37.600 --> 00:12:40.080 adjacent strategy on steroids. So by the end 00:12:40.080 --> 00:12:42.220 of the 80s, they are a serious regional power. 00:12:42.340 --> 00:12:44.529 They own Pennsylvania. Yeah. But then we hit 00:12:44.529 --> 00:12:46.850 the 90s, and if the 80s were about consolidation, 00:12:47.210 --> 00:12:51.250 the 90s for Bonton seemed to be about, well, 00:12:51.409 --> 00:12:54.179 a frenzy. It's a shopping spree. There is no 00:12:54.179 --> 00:12:56.419 other way to put it. They started buying up other 00:12:56.419 --> 00:12:58.220 companies as if they were collecting baseball 00:12:58.220 --> 00:13:00.700 cards. Let's just look at the timeline here because 00:13:00.700 --> 00:13:04.559 it is breathless. 1991, they acquired J .W. Rhodes 00:13:04.559 --> 00:13:08.240 in Ithaca, New York. Right. 1992, they buy Watt 00:13:08.240 --> 00:13:11.120 & Shand in Lancaster. And Watt & Shand is a great 00:13:11.120 --> 00:13:13.120 example of their dominance. That was a beloved 00:13:13.120 --> 00:13:15.279 local institution in Lancaster. They had this 00:13:15.279 --> 00:13:18.139 beautiful downtown store and a big mall store 00:13:18.139 --> 00:13:21.200 at Park City Center. Vonton buys them and suddenly 00:13:21.200 --> 00:13:23.399 they... Own the Lancaster market. There's no 00:13:23.399 --> 00:13:26.220 major competition left. It's aggressive. 1993, 00:13:26.639 --> 00:13:29.019 they push into the New York metro area, Saratoga 00:13:29.019 --> 00:13:32.000 Springs. They buy Mailman's, another local competitor 00:13:32.000 --> 00:13:34.279 right in their backyard in York. It feels like 00:13:34.279 --> 00:13:36.820 they're just buying everything in sight. They're 00:13:36.820 --> 00:13:39.120 capturing market share by force. They're terrified 00:13:39.120 --> 00:13:41.620 of competitors like Macy's or someone coming 00:13:41.620 --> 00:13:43.779 in. So they just buy everyone first. But then 00:13:43.779 --> 00:13:47.179 comes 1994, the mega year. This is the big one. 00:13:47.549 --> 00:13:49.649 They purchased the Adam Meldrum and Anderson 00:13:49.649 --> 00:13:53.629 Company. AMNAs, based in Buffalo, New York. And 00:13:53.629 --> 00:13:56.850 this company was 127 years old. It had survived 00:13:56.850 --> 00:13:59.649 the Civil War. It was a true legacy brand, a 00:13:59.649 --> 00:14:03.490 Buffalo institution. And Bonton paid $42 .6 million 00:14:03.490 --> 00:14:06.490 for it. Whoa. Okay, let's pause on that number. 00:14:06.610 --> 00:14:10.750 $42 .6 million in 1994. If you adjust to that 00:14:10.750 --> 00:14:14.070 for inflation, that is over $80 million today. 00:14:14.590 --> 00:14:17.149 For a regional acquisition, that is a massive 00:14:17.149 --> 00:14:19.909 outlay of cash. It showed they were willing to 00:14:19.909 --> 00:14:22.769 spend very, very big to win. So what did they 00:14:22.769 --> 00:14:25.169 get for that $80 -plus million? They got a dominant 00:14:25.169 --> 00:14:27.649 position in the Buffalo market. But they also 00:14:27.649 --> 00:14:29.870 made a controversial move here, one that I think 00:14:29.870 --> 00:14:32.389 signals a real shift in their philosophy. Remember 00:14:32.389 --> 00:14:35.210 how they waited 12 years to rename McMeans? Right, 00:14:35.269 --> 00:14:37.309 the patient approach. With AMNAs, they didn't 00:14:37.309 --> 00:14:39.190 wait. They converted all the locations to the 00:14:39.190 --> 00:14:41.799 Bonton name. almost immediately. So they erased 00:14:41.799 --> 00:14:44.779 127 years of history overnight. Effectively, 00:14:44.779 --> 00:14:47.259 yes. And that's a huge risk. You're betting that 00:14:47.259 --> 00:14:49.360 the Bonton brand is strong enough to replace 00:14:49.360 --> 00:14:51.580 a local icon that people's great grandparents 00:14:51.580 --> 00:14:54.059 shopped at. How did that go over? In Buffalo, 00:14:54.220 --> 00:14:57.039 that ruffled a lot of feathers. It felt corporate. 00:14:57.120 --> 00:14:59.500 It felt like an invasion, like this company from 00:14:59.500 --> 00:15:01.539 Pennsylvania was coming in and telling them their 00:15:01.539 --> 00:15:03.639 history didn't matter. And they didn't even stop 00:15:03.639 --> 00:15:06.720 there in 94. They also bought chapels in Syracuse 00:15:06.720 --> 00:15:09.850 and Hesse's in Allentown. Hesse's is another 00:15:09.850 --> 00:15:12.009 tragedy for the retail historians out there. 00:15:12.070 --> 00:15:14.629 I mean, Hesse's was legendary. The flagship store 00:15:14.629 --> 00:15:16.789 in Allentown was famous for its patio restaurant, 00:15:16.990 --> 00:15:19.929 its wild celebrity fashion shows. It was pure 00:15:19.929 --> 00:15:22.830 glamour in the Lehigh Valley. Okay, so a real 00:15:22.830 --> 00:15:26.149 destination. A total destination. Bonton bought 00:15:26.149 --> 00:15:28.769 it, kept the flagship open for about two years. 00:15:28.929 --> 00:15:32.029 And then? Closed it in 1996. And then it was 00:15:32.029 --> 00:15:34.309 demolished. Ouch. That has to hurt the local 00:15:34.309 --> 00:15:36.370 community. You buy the town jewel and then you 00:15:36.370 --> 00:15:39.750 tear it down. It does. But from a cold, hard 00:15:39.750 --> 00:15:42.070 business perspective, they would argue the flagship 00:15:42.070 --> 00:15:44.750 was an oversized, inefficient relic in a dying 00:15:44.750 --> 00:15:47.690 downtown and the real value was in the mall locations. 00:15:48.009 --> 00:15:50.870 Sure. But emotionally, it severs a tie with the 00:15:50.870 --> 00:15:53.289 customer. It tells them, we care about efficiency, 00:15:53.570 --> 00:15:56.149 not your memories. So they're expanding aggressively 00:15:56.149 --> 00:15:58.389 into New York. They enter New England for the 00:15:58.389 --> 00:16:01.230 first time in 1998 with a store in Westfield, 00:16:01.289 --> 00:16:03.649 Massachusetts. They're growing, growing, growing. 00:16:04.230 --> 00:16:07.820 But as we enter the 2000s. The stakes get even 00:16:07.820 --> 00:16:10.340 higher. We're moving from millions of dollars 00:16:10.340 --> 00:16:14.580 to billions. And this is Section 4, the billion 00:16:14.580 --> 00:16:17.399 -dollar gamble. It really was a gamble, wasn't 00:16:17.399 --> 00:16:19.799 it? The biggest of their lives. And ultimately, 00:16:19.919 --> 00:16:21.740 it was the one that they lost. It all starts 00:16:21.740 --> 00:16:24.840 in 2003 with the Elder Bierman deal. Right. Elder 00:16:24.840 --> 00:16:27.279 Bierman was a chain based in Ohio and the lower 00:16:27.279 --> 00:16:31.039 Midwest. They had 68 stores. 68 stores. That's 00:16:31.039 --> 00:16:33.200 huge. That's not a local acquisition anymore. 00:16:33.360 --> 00:16:35.899 That's almost a merger of equals. It is. And 00:16:35.899 --> 00:16:38.460 the backstory is interesting. Elder Bierman was 00:16:38.460 --> 00:16:41.029 actually trying to go private. They had a deal 00:16:41.029 --> 00:16:43.309 on the table to sell to a private equity group. 00:16:43.450 --> 00:16:46.269 But Montan swooped in at the last minute and 00:16:46.269 --> 00:16:48.590 offered more cash. They outbid the privatization 00:16:48.590 --> 00:16:50.509 deal. They were that hungry for that Midwest 00:16:50.509 --> 00:16:52.750 territory. They wanted those stores badly. But 00:16:52.750 --> 00:16:54.230 there was a warning sign here, wasn't there? 00:16:54.269 --> 00:16:56.509 A little crack in the foundation. It came just 00:16:56.509 --> 00:16:59.429 one month after this massive deal in November 00:16:59.429 --> 00:17:04.329 of 2003. Yes. They reported a Q3 net loss of 00:17:04.329 --> 00:17:08.630 $1 .7 million. Now, I want to be fair here. Mergers 00:17:08.630 --> 00:17:10.890 are expensive. You have legal fees, integration 00:17:10.890 --> 00:17:13.390 costs, all that. So some turbulence is expected. 00:17:13.589 --> 00:17:16.089 Of course. But posting a loss immediately after 00:17:16.089 --> 00:17:18.789 a massive expansion puts immense pressure on 00:17:18.789 --> 00:17:21.769 you. You need those new stores to perform immediately 00:17:21.769 --> 00:17:24.089 to cover the debt you just took on. And instead 00:17:24.089 --> 00:17:26.650 of slowing down to digest that meal to make sure 00:17:26.650 --> 00:17:28.609 Elder Beerman was integrated and profitable, 00:17:28.910 --> 00:17:32.410 they went for an even bigger feast in 2005. The 00:17:32.410 --> 00:17:34.950 Saks Northern Department Store Group purchase. 00:17:35.250 --> 00:17:37.569 OK, lay this one on us because the numbers here 00:17:37.569 --> 00:17:40.450 are just. Staggering. The single deal effectively 00:17:40.450 --> 00:17:42.990 doubled the size of the company overnight. They 00:17:42.990 --> 00:17:47.289 paid $1 .1 billion. $1 .1 billion with a B. For 00:17:47.289 --> 00:17:49.789 a company that started in a one -room hat shop, 00:17:49.990 --> 00:17:52.910 that's the American dream and maybe the American 00:17:52.910 --> 00:17:55.599 nightmare. all rolled into one. It really is. 00:17:55.700 --> 00:17:58.799 They bought 142 stores from Saks. Now, to be 00:17:58.799 --> 00:18:01.240 clear, these weren't the fancy Saks Fifth Avenue 00:18:01.240 --> 00:18:03.460 luxury stores. Right. These were the regional 00:18:03.460 --> 00:18:05.660 department store chains that Saks had been collecting 00:18:05.660 --> 00:18:07.859 in its portfolio. We're talking about names that 00:18:07.859 --> 00:18:10.640 are just legendary in their own regions, like 00:18:10.640 --> 00:18:13.720 Carson Peavy Scott. Carson's, yes. Based in Chicago. 00:18:13.920 --> 00:18:17.660 A retail legend. Bergner's in Illinois. Boston 00:18:17.660 --> 00:18:20.599 Store in Wisconsin. Herberger's in the upper 00:18:20.599 --> 00:18:24.529 Midwest. Yonker's in Iowa. These are iconic names. 00:18:24.750 --> 00:18:27.269 If you grew up in Des Moines, Yonkers was the 00:18:27.269 --> 00:18:29.630 store. If you were in Milwaukee, it was the Boston 00:18:29.630 --> 00:18:31.470 store. It was part of the fabric of the city. 00:18:31.569 --> 00:18:33.529 They are. And this is where the strategy shifted 00:18:33.529 --> 00:18:35.789 again. Remember what they did with M &A's in 00:18:35.789 --> 00:18:38.509 Buffalo? Renamed them Bonton immediately. Right. 00:18:38.609 --> 00:18:41.490 But with this massive Saks deal, they didn't 00:18:41.490 --> 00:18:43.710 do that. They kept the local names. So if you 00:18:43.710 --> 00:18:46.109 were in Chicago, you still went to a store called 00:18:46.109 --> 00:18:48.650 Carson's. The sign on the building didn't change. 00:18:49.109 --> 00:18:51.869 But it was all owned and operated by Bonton back 00:18:51.869 --> 00:18:54.529 in York, Pennsylvania. Correct. Corporate headquarters 00:18:54.529 --> 00:18:57.630 stayed in York, but they moved the merchandising 00:18:57.630 --> 00:18:59.490 headquarters, the people deciding what clothes 00:18:59.490 --> 00:19:02.069 to sell to Milwaukee, which was the old Saks 00:19:02.069 --> 00:19:05.150 Northern group hub. So why keep the names this 00:19:05.150 --> 00:19:08.390 time? Why create this complicated house of brands 00:19:08.390 --> 00:19:10.549 structure? I think they learned their lesson 00:19:10.549 --> 00:19:13.029 from the 90s. They realized that a name like 00:19:13.029 --> 00:19:15.589 Carson Perry Scott had immense local equity. 00:19:15.710 --> 00:19:18.549 That name meant something deep to generations 00:19:18.549 --> 00:19:21.940 of Chicagoans. Turning a Carson's into a Bon 00:19:21.940 --> 00:19:24.680 Ton might just alienate the Chicago shopper who 00:19:24.680 --> 00:19:27.180 grew up with Carson's and had no idea what a 00:19:27.180 --> 00:19:29.519 Bon Ton even was. That makes sense. But it also 00:19:29.519 --> 00:19:31.759 creates a really confusing brand identity, doesn't 00:19:31.759 --> 00:19:34.019 it? From the inside, you're running a dozen different 00:19:34.019 --> 00:19:36.279 banners. It adds a ton of complexity. You have 00:19:36.279 --> 00:19:38.440 to manage marketing for all these different names, 00:19:38.519 --> 00:19:40.619 even if the back end supply chain is the same. 00:19:40.920 --> 00:19:43.480 But the bigger issue wasn't the names on the 00:19:43.480 --> 00:19:47.460 stores. It was... The money. The leverage. The 00:19:47.460 --> 00:19:51.319 debt. Exactly. To pay $1 .1 billion, they didn't 00:19:51.319 --> 00:19:52.839 write a check from their savings account. They 00:19:52.839 --> 00:19:54.900 borrowed it. They issued bonds. They took on 00:19:54.900 --> 00:19:57.400 massive, massive debt. And here is where the 00:19:57.400 --> 00:19:59.539 tragedy of timing comes in. Just look at the 00:19:59.539 --> 00:20:02.940 calendar. It's 2005, then 2006. They're still 00:20:02.940 --> 00:20:05.680 going. They buy four more stores, Parisian stores 00:20:05.680 --> 00:20:09.259 from another company, Belk. They are flying high. 00:20:09.480 --> 00:20:13.420 They feel invincible. And then... Great recession. 00:20:14.119 --> 00:20:17.920 It was catastrophic timing. I mean, you can't 00:20:17.920 --> 00:20:20.279 imagine a worse scenario. They just spent over 00:20:20.279 --> 00:20:22.380 a billion dollars leveraging themselves to the 00:20:22.380 --> 00:20:25.279 hilt to buy all these department stores, betting 00:20:25.279 --> 00:20:27.519 that the American consumer would keep spending 00:20:27.519 --> 00:20:29.680 money at the mall forever. And then the exact 00:20:29.680 --> 00:20:34.009 opposite happened. Credit froze completely and 00:20:34.009 --> 00:20:36.089 consumer spending fell off a cliff. Talk about 00:20:36.089 --> 00:20:38.130 a perfect storm. It's unbelievable. It was the 00:20:38.130 --> 00:20:40.829 poison pill. If they had stayed smaller, stayed 00:20:40.829 --> 00:20:43.549 regional, maybe they would still be here today. 00:20:43.630 --> 00:20:47.809 Maybe not. But the debt from that 2005 deal is 00:20:47.809 --> 00:20:50.269 what ultimately guaranteed their demise. There 00:20:50.269 --> 00:20:52.509 was no escaping it. And this leads us directly 00:20:52.509 --> 00:20:55.089 into the next phase. I call this the zombie phase, 00:20:55.289 --> 00:20:59.589 the slow stagnation. From 2011 to 2017, the numbers 00:20:59.589 --> 00:21:02.549 are, well, they're grim. Grim is polite. From 00:21:02.549 --> 00:21:05.190 2011 through 2017, the bond con did not post 00:21:05.190 --> 00:21:07.349 a single net profit. Wait, I just want to make 00:21:07.349 --> 00:21:09.369 sure the listener really hears that. Not one 00:21:09.369 --> 00:21:12.849 profitable year. For six straight years. Not 00:21:12.849 --> 00:21:15.529 one. Every single year. For six years, they were 00:21:15.529 --> 00:21:17.910 losing money. How do you even survive that? How 00:21:17.910 --> 00:21:20.049 do you keep the doors open for six years if you 00:21:20.049 --> 00:21:23.170 are consistently in the red? You survive on credit. 00:21:23.559 --> 00:21:26.099 You survive by refinancing your debt, kicking 00:21:26.099 --> 00:21:28.779 the can down the road. You survive by cutting 00:21:28.779 --> 00:21:32.079 costs everywhere you can, firing people, reducing 00:21:32.079 --> 00:21:34.740 inventory, deferring maintenance on the stores. 00:21:34.880 --> 00:21:36.519 So the stores start to look a little shabby. 00:21:36.599 --> 00:21:39.059 Exactly. The carpet gets worn, a light bulb burns 00:21:39.059 --> 00:21:41.980 out and doesn't get replaced. You are essentially 00:21:41.980 --> 00:21:44.819 a zombie company. You're just walking. You are 00:21:44.819 --> 00:21:46.880 working just to pay the interest on your loans. 00:21:47.099 --> 00:21:49.460 You aren't growing. You aren't innovating. You're 00:21:49.460 --> 00:21:51.940 just treading water while holding a very heavy 00:21:51.940 --> 00:21:54.440 rock. During this time, we see the old guard, 00:21:54.559 --> 00:21:56.400 the people who built the company, starting to 00:21:56.400 --> 00:21:59.240 leave. Yes. Mike Nemoir, a senior VP who had 00:21:59.240 --> 00:22:01.359 been there for 40 years. He retired in 2014. 00:22:01.859 --> 00:22:04.819 And then the big one, Tim Grumbacher. The architect. 00:22:05.200 --> 00:22:07.519 The man who pushed the adjacent strategy and 00:22:07.519 --> 00:22:10.519 built the empire. He retired in 2017. He had 00:22:10.519 --> 00:22:13.180 been on the board for 50 years and chairman for 00:22:13.180 --> 00:22:16.960 over 25. His wife, Debra Simon, succeeded him. 00:22:17.160 --> 00:22:19.880 But it really signaled the end of an era. The 00:22:19.880 --> 00:22:21.799 man who built the modern bantan was stepping 00:22:21.799 --> 00:22:24.279 away just as the walls were closing in. Now, 00:22:24.299 --> 00:22:27.059 to be fair, they did try to innovate during this 00:22:27.059 --> 00:22:28.640 time. It wasn't just them sitting there waiting 00:22:28.640 --> 00:22:31.480 to die. I read about this close -to -home initiative 00:22:31.480 --> 00:22:34.779 in 2016. It was a really interesting idea, actually. 00:22:34.819 --> 00:22:38.220 They launched these dedicated areas in 45 of 00:22:38.220 --> 00:22:41.119 their stores that featured merchandise from local 00:22:41.119 --> 00:22:44.500 designers and artisans. Hand -picked stuff, not 00:22:44.500 --> 00:22:46.400 mass -produced. It sounds like they were trying 00:22:46.400 --> 00:22:48.779 to be, well, not a department store. They were 00:22:48.779 --> 00:22:51.759 trying to be a boutique, to be more like Etsy. 00:22:51.799 --> 00:22:54.380 They were trying to fight the big box fatigue. 00:22:54.500 --> 00:22:57.259 People were getting tired of generic malls where 00:22:57.259 --> 00:22:59.740 every store looked the same no matter what state 00:22:59.740 --> 00:23:02.000 you were in. They wanted something authentic, 00:23:02.359 --> 00:23:04.940 something local. Bonton tried to give them that 00:23:04.940 --> 00:23:07.200 inside the department store. They even planned 00:23:07.200 --> 00:23:10.539 to expand it to 100 stores in 2017. It was a 00:23:10.539 --> 00:23:12.880 smart strategic attempt to differentiate themselves. 00:23:13.630 --> 00:23:15.609 But you have to look at the scale of the problem. 00:23:15.789 --> 00:23:18.049 When you are billions of dollars in debt and 00:23:18.049 --> 00:23:20.630 haven't made a profit in six years, is selling 00:23:20.630 --> 00:23:22.750 some locally made jewelry in a corner of the 00:23:22.750 --> 00:23:25.269 store enough to save the ship? Probably not. 00:23:25.450 --> 00:23:27.890 It feels like rearranging the deck chairs on 00:23:27.890 --> 00:23:30.589 the Titanic. A little bit, yeah. It was a good 00:23:30.589 --> 00:23:33.250 idea, but it was too little, too late. The structural 00:23:33.250 --> 00:23:35.710 damage from the debt was already done. And then 00:23:35.710 --> 00:23:39.950 the iceberg hits. Section 6. The Collapse. And 00:23:39.950 --> 00:23:42.950 it happened incredibly fast. Frighteningly fast. 00:23:43.170 --> 00:23:46.869 We're in December 2017. The holiday season? This 00:23:46.869 --> 00:23:48.769 should be the best time of year for retailers. 00:23:49.049 --> 00:23:50.849 This is when they make their year. It should 00:23:50.849 --> 00:23:53.970 be. But for Bonton, sales had already fallen 00:23:53.970 --> 00:23:57.430 6 % in Q2 and Q3 leading up to the holidays. 00:23:57.930 --> 00:24:01.450 And then the news broke. They revealed they could 00:24:01.450 --> 00:24:04.549 not make a $14 million interest payment due on 00:24:04.549 --> 00:24:08.720 December 15th. $14 million. Now, that sounds 00:24:08.720 --> 00:24:10.559 like a lot of money to me and you. But for a 00:24:10.559 --> 00:24:12.740 company that spent one point one billion dollars 00:24:12.740 --> 00:24:15.500 a decade earlier, missing a 14 million dollar 00:24:15.500 --> 00:24:17.220 payment, that sounds like they're completely 00:24:17.220 --> 00:24:20.220 dry. No cash left. They were running on fumes 00:24:20.220 --> 00:24:23.000 and the market reacted instantly. S &P downgraded 00:24:23.000 --> 00:24:25.319 their credit rating to selective default. What 00:24:25.319 --> 00:24:27.400 does that mean exactly in plain English? Selective 00:24:27.400 --> 00:24:29.640 default. It means the credit agencies are telling 00:24:29.640 --> 00:24:31.460 the world they are not paying some of their bills. 00:24:31.519 --> 00:24:33.930 Do not lend them money. More importantly, do 00:24:33.930 --> 00:24:36.650 not ship them goods on credit. Ah, that's the 00:24:36.650 --> 00:24:39.809 killer. It's the death knell. If suppliers, the 00:24:39.809 --> 00:24:41.410 people who make the clothes and the perfume, 00:24:41.549 --> 00:24:43.410 stop shipping you product because they don't 00:24:43.410 --> 00:24:45.430 think you can pay them, your shelves go empty. 00:24:45.750 --> 00:24:48.130 And if your shelves are empty, customers stop 00:24:48.130 --> 00:24:50.230 coming. It's a death spiral you can't get out 00:24:50.230 --> 00:24:54.170 of. So February 2018 rolls around. They announce 00:24:54.170 --> 00:24:58.259 they are closing 47 stores to optimize. This 00:24:58.259 --> 00:25:00.500 is standard bankruptcy playbook stuff. You try 00:25:00.500 --> 00:25:02.519 to shrink the footprint to save the core business. 00:25:02.859 --> 00:25:04.819 And then they officially file for Chapter 11. 00:25:05.220 --> 00:25:07.279 Now, I want to clarify something here for the 00:25:07.279 --> 00:25:10.460 listeners. Chapter 11 isn't necessarily the end 00:25:10.460 --> 00:25:12.359 of the company, right? No, and that's a very 00:25:12.359 --> 00:25:15.480 common misconception. Chapter 11 is reorganization 00:25:15.480 --> 00:25:17.920 bankruptcy. It means we want to stay in business. 00:25:17.980 --> 00:25:20.259 We just need the court to help us renegotiate 00:25:20.259 --> 00:25:22.619 and fix our debts. They didn't want to die. They 00:25:22.619 --> 00:25:24.759 wanted to restructure, shed some of that massive 00:25:24.759 --> 00:25:27.160 debt and keep operating the profitable stores. 00:25:27.440 --> 00:25:29.599 And for a moment, there was a glimmer of hope, 00:25:29.680 --> 00:25:33.019 right? In April 2018, there was a rescue attempt. 00:25:33.450 --> 00:25:36.109 There was, from Washington Prime Group and Namdar 00:25:36.109 --> 00:25:38.549 Realty Group. And it's interesting who they were. 00:25:38.630 --> 00:25:41.109 These are mall owners. Why would a mall owner 00:25:41.109 --> 00:25:43.130 want to buy a failing department store? Because 00:25:43.130 --> 00:25:45.390 they needed the anchor tenants. Think about it 00:25:45.390 --> 00:25:48.410 from their perspective. If Bantan closes, the 00:25:48.410 --> 00:25:51.109 malls have these giant, empty, two -story holes 00:25:51.109 --> 00:25:53.950 at their ends. Right. And a lot of times, the 00:25:53.950 --> 00:25:56.869 smaller stores, the gaps, the candle shops, have 00:25:56.869 --> 00:25:59.069 clauses in their leases that say, if the anchor 00:25:59.069 --> 00:26:01.910 store leaves, I can leave too, or I can pay half 00:26:01.910 --> 00:26:05.210 rent. It's called a co -tenancy clause. So the 00:26:05.210 --> 00:26:07.009 mall owners were trying to save themselves by 00:26:07.009 --> 00:26:09.529 saving Bonton. Exactly. They were trying to plug 00:26:09.529 --> 00:26:11.990 the huge hole in their own boat. So they made 00:26:11.990 --> 00:26:14.390 an offer. It looked like Bonton might actually 00:26:14.390 --> 00:26:17.250 survive in some smaller form, but it fell apart 00:26:17.250 --> 00:26:19.089 over something incredibly specific, something 00:26:19.089 --> 00:26:21.390 that, honestly, it makes me angry just reading 00:26:21.390 --> 00:26:24.289 about it. The work fee. A $500 ,000 work fee. 00:26:24.529 --> 00:26:27.309 Explain this. The deal that the mall owners proposed 00:26:27.309 --> 00:26:30.410 included a payment of $500 ,000 to the investors 00:26:30.410 --> 00:26:32.430 for the work related to putting the transaction 00:26:32.430 --> 00:26:34.910 together. A bankruptcy judge looked at this fee 00:26:34.910 --> 00:26:37.670 and said, no, I'm rejecting this payment. Wait, 00:26:37.769 --> 00:26:40.990 pause. I just want to process this. We have a 00:26:40.990 --> 00:26:43.990 multimillion dollar rescue deal for a retail 00:26:43.990 --> 00:26:47.029 chain with over 200 stores, thousands and thousands 00:26:47.029 --> 00:26:50.299 of jobs and a century of American history. And 00:26:50.299 --> 00:26:53.220 the entire deal failed because a judge said no 00:26:53.220 --> 00:26:55.720 to a half a million dollar fee. It was the deal 00:26:55.720 --> 00:26:58.140 breaker. The investors refused to waive the fee. 00:26:58.279 --> 00:27:00.279 The judge refused to approve it. And the deal 00:27:00.279 --> 00:27:04.160 collapsed just like that. That is just. It's 00:27:04.160 --> 00:27:06.799 heartbreaking. $500 ,000. That's the cost of 00:27:06.799 --> 00:27:09.039 a nice house in the suburbs. And it toppled a 00:27:09.039 --> 00:27:11.180 retail empire. It shows you how fragile the situation 00:27:11.180 --> 00:27:13.019 really was at the end. When you are that close 00:27:13.019 --> 00:27:15.799 to the edge, a stiff breeze or a small dispute 00:27:15.799 --> 00:27:18.539 over a fee is enough to push you over. And once 00:27:18.539 --> 00:27:20.819 that deal died... There were no other buyers 00:27:20.819 --> 00:27:22.960 who actually wanted to run the company. No. The 00:27:22.960 --> 00:27:24.819 only people left at the auction table were the 00:27:24.819 --> 00:27:26.579 liquidators. The vultures. The Great American 00:27:26.579 --> 00:27:29.059 Group and Tiger Capital Group. Their business 00:27:29.059 --> 00:27:31.339 is not running stores. It is selling everything 00:27:31.339 --> 00:27:33.660 inside them for pennies on the dollar and locking 00:27:33.660 --> 00:27:37.960 the doors for good. And they paid $775 .5 million. 00:27:38.480 --> 00:27:40.700 Which was just enough to pay off the secured 00:27:40.700 --> 00:27:43.339 creditors, the big banks. The court approved 00:27:43.339 --> 00:27:46.819 it. And the Chapter 11 reorganization officially 00:27:46.819 --> 00:27:49.819 converted to a Chapter 7. Which means liquidation. 00:27:49.940 --> 00:27:53.740 Total liquidation. All 267 stores, everything 00:27:53.740 --> 00:27:56.819 must go. The clothes, the racks, the mannequins, 00:27:56.819 --> 00:27:59.460 the shelves, the cash registers. August 30, 2018. 00:27:59.900 --> 00:28:02.519 The end of the physical road. All Pennsylvania 00:28:02.519 --> 00:28:05.960 locations closed. By the next day, the buildings 00:28:05.960 --> 00:28:09.680 were vacated. 120 years of history from that 00:28:09.680 --> 00:28:12.759 little hat shop in 1898 to a billion -dollar 00:28:12.759 --> 00:28:15.960 giant. Gone in a single summer. And here's where 00:28:15.960 --> 00:28:18.440 the story gets really weird and really modern. 00:28:18.759 --> 00:28:21.460 It wasn't totally gone. The buildings were empty, 00:28:21.579 --> 00:28:23.960 yes. The employees were all sent home. But the 00:28:23.960 --> 00:28:25.819 Bonton didn't die. It just went to the cloud. 00:28:26.140 --> 00:28:28.680 Section 7, the digital afterlife. This is the 00:28:28.680 --> 00:28:30.880 most modern and frankly kind of dystopian part 00:28:30.880 --> 00:28:32.420 of the whole story. So the stores are closed. 00:28:32.640 --> 00:28:35.200 The websites go dark. But they have a stay tuned 00:28:35.200 --> 00:28:37.259 message. And then the intellectual property, 00:28:37.420 --> 00:28:39.519 the IP, goes up for sale at the bankruptcy auction. 00:28:39.799 --> 00:28:42.279 Who buys the soul of Bonton? A tech holding company 00:28:42.279 --> 00:28:45.220 called CSC Generation. They own other online 00:28:45.220 --> 00:28:47.740 brands, things like Direct Buy. And how much 00:28:47.740 --> 00:28:49.940 do they pay for the Bonton brand? Let's just 00:28:49.940 --> 00:28:52.680 remember, Bonton themselves paid $1 .1 billion 00:28:52.680 --> 00:28:56.779 for the Sachs Group just 13 years earlier. CSC 00:28:56.779 --> 00:29:01.630 paid $900 ,000. $900 ,000. Not even a million 00:29:01.630 --> 00:29:03.910 dollars. Less than a million dollars. For the 00:29:03.910 --> 00:29:06.390 branding, the trademarks, the websites, and most 00:29:06.390 --> 00:29:09.369 importantly, the customer database. That is a 00:29:09.369 --> 00:29:11.470 destruction of value that is hard to comprehend. 00:29:11.849 --> 00:29:14.660 From billions to less than a million. It really 00:29:14.660 --> 00:29:16.579 highlights what the market thought the brand 00:29:16.579 --> 00:29:19.059 was worth without the actual stores. But here 00:29:19.059 --> 00:29:22.420 is the really fascinating detail. That $900 ,000 00:29:22.420 --> 00:29:25.880 wasn't the only IP sale. L 'Oreal USA, the beauty 00:29:25.880 --> 00:29:28.200 giant, separately bid on something else. What 00:29:28.200 --> 00:29:29.420 did they want? They didn't want the brand name? 00:29:29.559 --> 00:29:32.819 No, they paid $312 ,900 just for the data on 00:29:32.819 --> 00:29:34.799 the cosmetics and fragrance customers. Wait, 00:29:34.859 --> 00:29:36.940 get out of here. So the list of people who bought 00:29:36.940 --> 00:29:39.220 perfume and makeup at Bantan was worth a third 00:29:39.220 --> 00:29:41.960 of the entire value of the Bantan, Carsons, and 00:29:41.960 --> 00:29:45.059 Yonkers brands combined. Exactly. In the modern 00:29:45.059 --> 00:29:47.099 economy, the customer data, knowing that you 00:29:47.099 --> 00:29:49.619 buy Lancome night cream at 3 p .m. on a Tuesday, 00:29:49.799 --> 00:29:52.599 is almost as valuable as the 100 -year -old trademark. 00:29:52.880 --> 00:29:55.000 L 'Oreal didn't care about the stores. They wanted 00:29:55.000 --> 00:29:57.000 the emails. They wanted the direct line to the 00:29:57.000 --> 00:29:59.480 consumer. That is both chilling and brilliant 00:29:59.480 --> 00:30:01.940 at the same time. It's the reality of the data 00:30:01.940 --> 00:30:05.740 economy we live in. That database had 24 .5 million 00:30:05.740 --> 00:30:08.319 customer records. That was a real prize. So CSE 00:30:08.319 --> 00:30:10.680 buys a brand, they relaunch the websites, they're 00:30:10.680 --> 00:30:13.539 selling clothes, home goods, even TVs and appliances. 00:30:14.000 --> 00:30:16.500 And they even tried to open one physical store, 00:30:16.619 --> 00:30:19.559 right? In Illinois, in Evergreen Park. A concept 00:30:19.559 --> 00:30:23.299 store. A test. How'd that go? It opened and then 00:30:23.299 --> 00:30:25.900 COVID -19 hit a few months later. It closed permanently 00:30:25.900 --> 00:30:28.680 in October 2020. So the physical revival was 00:30:28.680 --> 00:30:31.619 dead on arrival. Pretty much. Then in 2021, the 00:30:31.619 --> 00:30:34.579 brand was sold again to a company called BrandX 00:30:34.579 --> 00:30:37.500 .com. BrandX. That sounds like a placeholder 00:30:37.500 --> 00:30:39.279 name you'd see in a movie script. It's a real 00:30:39.279 --> 00:30:42.180 company. Yeah. And they own the names now. Bergner's, 00:30:42.200 --> 00:30:45.720 Boston Store, Carson's, Elder Beerman, Herberger's, 00:30:45.720 --> 00:30:48.680 Yonkers. They're all just tabs on a website now. 00:30:48.759 --> 00:30:51.410 They exist only as you are. So if I go to Bonten 00:30:51.410 --> 00:30:53.990 .com today or Carsons .com, I can buy stuff. 00:30:54.230 --> 00:30:56.670 You can, but you have to understand what you're 00:30:56.670 --> 00:30:59.130 actually doing. You aren't buying from the Grumbacher 00:30:59.130 --> 00:31:01.509 family. You aren't buying from a merchant in 00:31:01.509 --> 00:31:03.769 Milwaukee who carefully selected that sweater 00:31:03.769 --> 00:31:06.930 for the fall season. No. You're buying from a 00:31:06.930 --> 00:31:09.690 digital holding company that plugs into a global 00:31:09.690 --> 00:31:13.039 supply chain. The name is just a skin. It's a 00:31:13.039 --> 00:31:15.460 logo they bought at a bankruptcy auction to put 00:31:15.460 --> 00:31:18.599 on top of a generic e -commerce platform. It's 00:31:18.599 --> 00:31:20.319 a ghost wearing the skin of the department store 00:31:20.319 --> 00:31:23.119 we grew up with. That is a very vivid and a very 00:31:23.119 --> 00:31:25.859 accurate way to put it. It's brand necromancy. 00:31:26.099 --> 00:31:28.640 They're resurrecting the dead for marketing purposes. 00:31:29.099 --> 00:31:31.099 So let's wrap this all up. Let's try to make 00:31:31.099 --> 00:31:33.740 sense of this journey. We've gone from a family 00:31:33.740 --> 00:31:37.519 hat shop in York to a generic website owned by 00:31:37.519 --> 00:31:39.819 a company called Brand X. I think if you connect 00:31:39.819 --> 00:31:41.980 this to the bigger picture, the story of Bond. 00:31:42.089 --> 00:31:44.650 is really the story of the 20th century American 00:31:44.650 --> 00:31:47.089 middle class and the retail that served it. It 00:31:47.089 --> 00:31:49.869 followed the people. It did. It started in the 00:31:49.869 --> 00:31:51.650 town center when that's where people lived and 00:31:51.650 --> 00:31:54.650 worked in the 1900s. It moved to the malls when 00:31:54.650 --> 00:31:58.130 the suburbs exploded in the 60s and 70s. It consolidated 00:31:58.130 --> 00:32:00.369 in the 80s and 90s when efficiency and scale 00:32:00.369 --> 00:32:03.210 became God. And it collapsed when debt and the 00:32:03.210 --> 00:32:05.269 Internet finally took over. It's a perfect mirror. 00:32:05.450 --> 00:32:08.410 It's also just such a stark lesson about the 00:32:08.410 --> 00:32:12.200 danger of debt. Absolutely. That $1 .1 billion 00:32:12.200 --> 00:32:15.259 purchase in 2005 was the turning point. It was 00:32:15.259 --> 00:32:17.740 the fatal decision. They bet the entire house 00:32:17.740 --> 00:32:19.460 right before the housing market crashed. Terrible 00:32:19.460 --> 00:32:21.980 luck. Terrible luck, but also hubris. If they 00:32:21.980 --> 00:32:23.460 had avoided that debt, maybe they could have 00:32:23.460 --> 00:32:25.819 shrunk gracefully. Maybe they'd still be a small, 00:32:25.839 --> 00:32:28.019 profitable regional chain in Pennsylvania and 00:32:28.019 --> 00:32:31.240 Ohio. But the debt took away all of their options. 00:32:31.579 --> 00:32:35.210 And now the only real value left is just... Data. 00:32:35.329 --> 00:32:39.150 24 .5 million customer records. 5 .6 million 00:32:39.150 --> 00:32:41.730 emails. That was the final asset. The buildings 00:32:41.730 --> 00:32:43.809 are empty or they've been converted into gyms 00:32:43.809 --> 00:32:46.430 or Amazon warehouses. But the list of names survives. 00:32:46.829 --> 00:32:48.529 It really makes you think about what a brand 00:32:48.529 --> 00:32:51.130 actually is. Is it the building? Is it the people 00:32:51.130 --> 00:32:53.490 who work there? Is it the memories you have of 00:32:53.490 --> 00:32:55.869 shopping there with your family? Or is it just 00:32:55.869 --> 00:32:58.750 the logo in the email list? In 2026, it seems 00:32:58.750 --> 00:33:01.680 it's mostly the latter. The logo and the list 00:33:01.680 --> 00:33:04.279 are what have value. So here is a final thought 00:33:04.279 --> 00:33:06.500 for you to chew on, listeners. The next time 00:33:06.500 --> 00:33:09.200 you see an ad pop up on your Instagram or Facebook 00:33:09.200 --> 00:33:14.240 for a Carson's or a Bonton or even a Toyser's, 00:33:14.240 --> 00:33:18.559 a Toyer, today. Just take a second. Ask yourself, 00:33:18.880 --> 00:33:21.519 are you buying from a trusted friend from your 00:33:21.519 --> 00:33:24.019 childhood? Or are you just interacting with a 00:33:24.019 --> 00:33:26.460 purchase database that knows you have a weakness 00:33:26.460 --> 00:33:28.980 for sales, wearing the costume of a memory you 00:33:28.980 --> 00:33:31.670 trust? That is the defining question of the digital 00:33:31.670 --> 00:33:34.130 retail age, isn't it? Who are you really buying 00:33:34.130 --> 00:33:36.269 from? Thank you for taking this deep dive with 00:33:36.269 --> 00:33:38.170 us. It's been a wild ride from York, Pennsylvania 00:33:38.170 --> 00:33:40.529 to the digital cloud. Indeed. Always a pleasure. 00:33:40.670 --> 00:33:42.970 We'll catch you on the next deep dive. Keep learning.