Here's a fun, frolicking, take-no-prisoners account of the rise and fall of Pier 1 Imports which has recently filed for bankruptcy and is unlikely to survive.
In light of the mass death and lockdowns to halt the spread of COVID-19 which inadvertently caused a hemorrhage of jobs and small businesses, now some big businesses are also falling despite their easy access to government largesse. It’s the end of an era: home goods and furniture titan Pier 1 Imports has ceased operations after 58 years in business.
In business-speak, the company is pretty much in hospice right now. The chain had already declared bankruptcy a few months ago, but normally when a company files for Chapter 11 bankruptcy, operations continue as usual while it gives them a chance to restructure their debts. At first their retail shops were just temporarily closed like many others are right now due to shutdown orders from various levels of government. Pier 1 had planned to permanently close a significant number of stores, but the pandemic forced things along to the point that they asked the bankruptcy court to discuss their complete liquidation (selling off all the business assets) in July. Think of Chapter 11 as treatment, but modifying Chapter 11 like this is going into hospice: they know the end is coming, but arrangements have been made.
So when it’s safe to go out to stores again, you can probably get some Pier 1 furniture for pennies on the dollar. At the time of publishing, they’re also still fulfilling online orders.
We dove into Pier 1’s history before, but now’s the time to contextualize that history. How did this titan come to be known, and what led to their fall aside from Great Depression’s second coming during a pandemic? Let’s find out in my new Fallen Titans series!
A History in Wholesale Liquidation and the Hippie Aesthetic
The first Pier 1 Imports shop opened in San Mateo, California in 1962. For those unfamiliar with California geography, that’s the Bay Area where it’s smack between San Francisco and San Jose. Before the Bay Area became known for a handful of tech billionaires turning San Francisco into an overpriced bedroom community for programmers and UX designers, it was teeming with art and burgeoning music scenes and youth cultures.
San Francisco and nearby cities and towns like Berkeley and Monterey became these meccas of the hippie movement. And if you wanted to get beads and headdresses for the love-in and the right accessories to deck out your VW bug or your swinging bachelor pad in Haight-Ashbury, you had to go to an actual store to buy these things, there was no Etsy, eBay, or millions of small domains hosted by Shopify and sundry. And Pier 1 did just that: they sold love beads, incense, ponchos, and other icons of the hippie aesthetic.
But there’s more to it than just opening a store selling hippie goods: Pier 1 Imports was first dubbed Cost Plus by Charles Tandy and Luther Henderson, the original owners. If those names don’t sound familiar, you like computers and radios? They were the progenitors of the Tandy Corporation, which later became Radio Shack, another fallen titan of American retail. So, Pier 1 Imports was not really that far behind from the Bay Area’s tech foothold after all.
Caption: The TRS80 home computer sold by Radio Shack when they were a giant in the 80s.
So these proto tech bros had the rights to the name Cost Plus, a wholesale liquidator for a rattan furniture store. The store owner was having credit problems and opened an outlet store specifically to dump off furniture at cut rates to get the loan sharks off his back. Tandy was impressed by his success and ingenuity, and offered Cost Plus a loan to start another outlet plus the rights to open new stores under the same name.
Tandy built a supply chain that took advantage of the strong US dollar and imports from Mexico, India, and Thailand, and soon expanded to 60 other countries. These textiles, housewares, and rattan furniture had a high markup but could still turn a profit even at liquidation prices through their outlet stores. With record numbers of Boomers moving out of their parents’ homes at young ages, they were furnishing their first or second homes and had money to spend.
Pier 1 differentiated themselves by carrying an eclectic variety of goods rather than sticking to one particular wheelhouse, like furniture, flatware, or specific types of home decorations. While Crate & Barrel was based on quality direct imports from Europe and copying how French stores would be more thematic than practical, Pier 1 focused on those hippie staples and finding things like mini suits of armor, glass paperweights claiming to contain Elvis’ hair, and loads and loads of blue, olive, and brown blown glass to make those lava lamp trips even more funkadelic was what kept people coming back for more.
From Incense and Peppermints to IPOs
By 1966, Pier 1 grew to 16 stores because their novelty items sold out so fast. Just three years before the Summer of Love and the iconic decade coming to a close, the company established corporate headquarters in Fort Worth, Texas. Even back then, it was cheaper to get a huge corporate office in Texas than California, and Silicon Valley actually produced silicon at the time!
Tandy grew the company very quickly, but was soon occupied by the growth of Radio Shack so Henderson stepped up and took 30 new investors to the plate, who bought Tandy out of Cost Plus so he could focus on Radio Shack. The name was changed to Pier 1 Imports, likely an homage to the San Francisco piers but also to properly reflect how most of the stores’ goods were imported. In a move that seemed like hoisting by their own petard, Cost Plus totally separated from Pier 1 and actually became one of its competitors.
Pier 1 Imports attained 42 stores by 1969, and demand for their quirky imports skyrocketed as the Summer of Love came to an abrupt end with the Tate-LaBianca murders. (Sorry, was watching Once Upon a Time in Hollywood again.) Sales were through the roof and rapid growth was pushed upon going public in 1970, being listed on NYSE in 1972. By the time Pier 1 Imports got listed on NYSE, it grew to 123 stores, including locations in Australia and England with stores in western Europe to follow. Boomers were massive in number and still loved that flower child aesthetic well into this gritty new decade, netting the company $68 million in gross sales in 1973. That’s almost $497 million in 2020; DAMN SON that’s a lot of serapes and love beads!
After all, this customer base was gargantuan and in search of “exotic” goods at cut rates. It was easy to move out and excitedly furnish your own place back then, my parents paid $70 a month for their first apartment in Brooklyn at the time. Wait, that’s $404 in today money. Excuse me while I go sob uncontrollably into a pillow.
Global Financial Instability and Losing Focus of the Customer
The very strategy that led to Pier 1 Imports’ meteoric rise was now biting them in the ass when exchange rates and inflation immediately killed off their chief competitive advantage. The foreign goods that cost so little to import were now far more expensive, plus department stores and competing home goods stores were now importing many of the same items.
The huge bloc of Boomers who thought they were revolutionary now had good jobs, disposable income, and wanted NICE stuff that was totally mainstream. Pier 1 just wasn’t keeping up with them: they could either cater to the younger end of the Boomer generation since it would be a while for Gen X’ers to be ready to furnish their first homes, or find ways to keep their die-hard customer base engaged.
They’re a public company with tons of investors who facilitated this, so they burn warehouses full of money on opening TONS of different stores: rug stores, art supply shops, outlet stores, fabric stores, and wholesaling these goods. Most of these efforts completely tanked while their chief retail stores now couldn’t replicate the traction they had in the late 1960s. However, there were now about 300 stores. Pier 1 merged with an investment company in 1979 to boost its available capital, a move that probably wouldn’t have been an option for most stores at the time but keep in mind, some of the original tech bros were behind this operation.
Robert Camp, who managed a chain of Pier 1 stores in Canada, joined the board of directors and drastically changed how the company operated based on his retail expertise. As the 80s emerged, outlet stores were opened, less profitable stores were closed, location became key, and the inventory went from Joan Baez and Willie Nelson to Leona Helmsley and Gordon Gekko.
Camp’s strategies were just what the company needed to get back on track and go back to their former glory!
So of course he was out of the picture when Intermark, a massive holding corporation, bought a majority interest in Pier 1, and hired the former president of Wickes Furniture who’d also worked with Jack Nicklaus to run MacGregor Golf Company.
But Pier 1 didn’t face the felling of the empire that private equity often brings…yet. This was a time when corporate capital firms actually gave a damn about turning sinking companies around!
Restructuring and Boom in the 90s
Clark Johnson, this new furniture chain management superstar, basically grabbed a pair of tweezers and started to pluck the living shit out of Pier 1’s balance sheet. What’s interesting is that one of the operations he discontinued with Pier 1’s mail order division, it was hemorrhaging millions of dollars! Compare that to how Ronco succeeded and adapted in the appliance market for decades because Ron Popeil aced mail ordering through his infomercials.
Subsidiary companies were thrown out the window, low-performing stores were closed, outlet stores refurbished, new managers hired, and the tech and marketing infrastructure was upgraded. Most of all though, Scott decided to put more emphasis back on the customer, namely focusing on loyalty. He remembered how the huge hippie contingent is what made Pier 1 what it was, then once the hippies sold out and became Wall Street traders, the store they once frequented didn’t adapt with them so they stopped shopping there.
Wait, but how come when my generation does this, we get eight million articles whining and crying nonstop about how we’re KILLING things? Oh, this explains the entitlement complex SO MUCH. The store changed FOR them!
So, Johnson commissioned an incredibly extensive study of the American home. How did these upwardly mobile Boomers buy casual home furnishings, and use them? What made them have fun while shopping? The study was ground-breaking because it revealed previously-unseen data about their target customer base, and this was used as a PR move for Pier 1 to re-establish them as a premium brand for the hippie turned yuppie. The study found that 86% of the homes’ inhabitants decorated their own homes (opposed to going with what was there when they moved in, or hiring a pro) and 57% believed their homes were nicer than they grew up in. Part of me is about to laugh-sob at that second one. I’ve lived in nothing but crapshacks of the northeast and I think most Millennials are dying inside at this question. Still, it generated a lot of publicity for Pier 1 Imports.
Johnson felt this effort was enough to kickstart an aggressive new expansion campaign, so they started new stores like crazy, attaining over 550 outlets by 1989. In turn, the average price tag quintupled from what it was in the early 80s. Then in 1988, the Pier 1 Preferred Customer Card was introduced. Store credit cards date back to the early 1900s with department stores and oil companies, so it wasn’t a totally newfangled idea. But the 80s were a time of decadence, and what better way to get into a dick-waving contest with that other junk bond salesman than to gloat about the 7-piece Naughahyde couch with a coke pouch in the armrest that you just bought on credit?
Sales skyrocketed to $517 million, $210 million of it pure profit. Mad with power, Johnson envisioned expanding to over $1 billion in sales with more than 1,000 stores and 10 million customers. Well, he had to cool his jets come the 90s after experiencing a swift kick in the margins when retail started getting more competitive. The focus shifted from growth to keeping operations stable.
Oh hey, remember how private equity always ruins EVERYTHING? Intermark, the massive holding company that initially saved Pier 1’s ass, was completely slaughtered in the stock market during the 1991 recession. Share price plummeted and they were forced to sell Pier 1, then Intermark declared bankruptcy and resurrected in 1993 as the Triton Group.
A Titan in the 90s That Flailed in the New Millennium
This left Pier 1 with a lot of debt and retail growth wasn’t so hot in the early 90s. As the decadence of the mid-80s became passe after so many people lost their shirts in the recession then NAFTA, the marketing team wanted to reposition Pier 1 as a place to discover quirky oddities.
The company pulled through this tumultuous time. Sales were surging in 1994 and Johnson revisited his aggressive growth plan, as unprofitable stores were closed but 48 new ones were opened with a big emphasis on coastal states plus Ohio and Texas. Then during the mid-90s, yet another financial firm screwed things up with a multi-million dollar trading loss that caused the CFO to seek legal action.
Furniture and kitchen goods proved to be Pier 1’s new wheelhouse, textiles only comprised about 13% which was a stark contrast to their origins. With gifts and random oddities making up the remaining portion of their sales, Johnson pushed the store within a store concept with Mexican Sears and international chains, creating The Pier in the UK. Johnson also placed a higher emphasis on customer experience in comparison to the competition. The brand became more upmarket and the economy hurtled into the dot-com boom then aided by the immense sales driven by the Pier 1 store credit card, Johnson achieved his goal of attaining over $1 billion in revenue in 1998 just prior to his retirement.
But what would things be like in this brave new world?
While Pier 1 had cemented their image as a place where Gen Xers who got that great first job out of college could go shopping for fancy new tumblers, suddenly they weren’t the only player on the upscale market. Crate & Barrel had similar origins as being the place where Boomers furnished their first apartments, but was now prestigious and aspirational. Pottery Barn rose up as well, and the first wave of dot-com vendors also began to offer home goods on their own websites. Discount chains like Big Lots, Value City, and Marshall’s that had a mix of trash and treasure were also presenting stiff competition.
So they did a rebrand with the “Get In Touch With Your Senses” campaign and hired Kirstie Alley as a spokesperson, who remembers those vaguely irritating “retail therapy” commercials?
There was this hilariously cringey push from a lot of brands to use “edgy” content to market to younger Gen Xers and older Millennials at the turn of the Millennium, and Pier 1 found itself in a strange spot once the Great Recession of 2008 permanently screwed millions of Millennials for years to come. Gen Xers were just as tech-savvy as their younger counterparts and had more options, but Millennials just weren’t buying home goods and new furniture as much as previous generations. It’s not doable when rent is triple your income and you live with six roommates or with your parents.
But in all the ceaseless headlines blaring about the dark council of elder Millennials who sacrificed Applebee’s, diamond rings, and golf courses on a marble altar with a sacramental blade made of student debt, Pier 1 had a tiny redemption arc. They admitted they fucked up.
If e-commerce seemed like a tiny and distant threat in 2003, it was now unavoidable after the recession. Broke Millennials preferred IKEA, which offered the option of its labyrinthine stores or buying from its entire catalog online. The rise of companies like Wayfair and West Elm also pushed Pier 1 further out as their now-bland product offerings and overwhelming store layouts simply held no appeal to Millennials who remembered it as a place where your cool cousin got a $100 vase for their Chelsea apartment that magically had Friends Rent Control. Ugh, the late 90s were a REALLY sucky time to have the name Rachel.
Throw in the katamari that is Amazon, and Pier 1 realized that the jig was up in their failure to adapt to Millennial tastes and needs, and the ever-changing e-commerce landscape. So Pier 1 attempted to pivot to online sales, but they already hit the iceberg. This time though? Mr. Andrews said “Screw this!” and reached for a lifeboat: bankruptcy court.
They held on until February 2020, when their Chapter 11 petition was filed. With only a month deadline to find a buyer– which just so happened to be right around the time the WHO declared COVID-19 a pandemic–it might’ve given them time to regroup and perhaps find yet another private equity firm that would likely run the company into the ground, but at least bail them out first. Nope, not this time.
Pier 1 planned to cut its number of stores in half, but now all of the stores are closing. COVID not only drastically altered retail stores, but millions of people have lost their jobs: it’s estimated 42% of those jobs aren’t coming back, and the US is experiencing an unemployment rate surpassing the Great Depression. 1 in 5 small businesses fear they will have to close permanently. That’s just not an economy where you can easily sell a $600 couch when you can find a comparable one at IKEA, Wayfair, or Amazon and get it faster and cheaper. People are having a hard time scrounging for food and rent and Bezos Bucks have become a secondary currency on social media, so people aren’t exactly flocking to Pier 1’s website to buy new glassware, a quirky basket, or holiday decorations when it’s not safe to throw parties.
The ultimate takeaway from this story of a fallen titan is that sometimes you just have to acknowledge when an era is ending, even if you don’t want it to.
People tend to love small businesses for being stalwart, but big faceless corporations can’t do that. You have to use those voluminous resources to actually compete instead of just ceaselessly crying about broke Millennials. At least Pier 1 Imports recognized it was time to go and better to quit before further hemorrhaging money, not wanting to test the waters of a deadly pandemic.
What’s just stunning is that so much of their success came from being loyal to Boomers, but Millennials are an even bigger cohort and they just NOPED right out of it. I guess that the Gen Xers who did well just weren’t nearly as numerous.
Given how often private equity firms ruin whatever they touch and how many modern tech-backed ventures into home goods tend to go horribly and hilariously wrong, it’s amazing that Pier 1 survived as long as it did and made those drastic shifts that kept it a thriving multi-million dollar company. But ironically, it was doing horribly with mail order in the 80s that made Pier 1’s pivot to the Internet clunkier and more difficult than it could’ve been, even though they thrived in the 90s thanks to a good economy, successful rebranding efforts, and shoppers still being reliant on the retail experience. But between failure to adapt to Millennial needs and increased competition, Pier 1 joined the late great Kenny Rogers, who we also lost this year, and decided it was time to fold em.
Personally, I don’t remember shopping much at Pier 1 growing up. I came from a TJ Maxx and Marshall’s kind of family, in addition to the plethora of gone-and-missed off-price stores galore splattered across the tristate area like Odd Job and Value City. But the few times we did go into a Pier 1 store, I always got overwhelmed by this feeling of wonder that was bottled up and corporatized because it was furnishings and fancy glassware for the new luxury condos springing up near the mall.
It was absolutely emblematic of selling to hippie Boomers and then the entire generation promptly selling out and being unable to relate to Millennials.