Temu or Management Failures? Why Did Depot Go Bankrupt?

Did online shopping kill Depot, or is there more to the story? - The bankruptcy of the home décor retailer Depot surprised many. While some customers scrambled to grab the last available products, a heated debate ignited: Was the rise of platforms like Temu responsible for Depot’s downfall, or was the problem elsewhere?

Depot gegen Temu: Killt der online Handel den stationären Handel? Depot ist insolvent — Illustration: Dall-e - Empty Branch

Temu or management error: Why did Depot go bankrupt? - The initial questions

One perspective argues that changing consumer behavior—particularly the boom of online platforms like Temu—has drained brick-and-mortar retailers. These platforms use AI-driven algorithms to influence shopping behavior, making it harder for traditional retailers to compete on price. Depot, it is argued, positioned itself too close to Temu without a sustainable strategy.

The opposing view is that Depot and Temu were not directly comparable and that Depot’s bankruptcy was the result of poor management decisions. Consumers didn’t necessarily switch from Depot to Temu; rather, the company collapsed due to economic challenges, high operating costs, and strategic missteps.

So, what’s the truth? We analyzed reports on Depot’s bankruptcy and compiled the key factors behind its failure.

Why Did Depot Go Bankrupt? An Analysis of the Key Factors

Depot filed for bankruptcy protection (Schutzschirmverfahren) on July 16, 2024, seeking to restructure under court supervision. Initially, the company planned to regain profitability through store closures and strategic adjustments, but the situation worsened.

1. Economic Challenges: A Hostile Market Environment

Like many other retailers, Depot struggled with rising costs and a weak economy:

Skyrocketing rent and operational expenses made several locations unprofitable. The company had already placed 90 stores under review in early 2024.
Shipping costs increased tenfold, making it more difficult to maintain attractive prices.
Rising interest rates made it harder for companies that had relied on cheap credit to stay afloat.

2. Competition: Online Platforms and Discount Chains

Depot faced fierce competition from two sources:

Online marketplaces like Temu and Shein captured price-sensitive customers by offering cheaper alternatives with AI-powered, personalized recommendations.
Brick-and-mortar discount chains like Action undercut Depot’s prices with budget-friendly offerings.

3. Internal Mistakes: Strategic and Operational Failures

Aside from external factors, Depot’s management made critical errors:

Excess inventory tied up capital as products sat unsold in warehouses.
Over-expansion and the buyback from Migros placed a financial strain on the company.
Product range adjustments came too late, with a 30% SKU reduction only happening in 2024—arguably, a delayed reaction to market trends.

4. Shifting Consumer Behavior

Consumer habits changed in several ways:

Post-pandemic spending habits shifted, reducing demand for decorative items.
High inflation led to cautious spending, especially on non-essential products like home accessories.

Did Temu Seal Depot’s Fate?

After analyzing the data, it’s clear that Temu was a contributing factor, but not the sole reason for Depot’s bankruptcy.

Temu accelerated the problem but didn’t create it.

Online marketplaces gained market share, but discount chains like Action also played a significant role.
Depot was too slow to adapt and failed to differentiate itself from online competitors.

Economic challenges and management failures were just as crucial.

High rents, rising costs, and lack of financial flexibility put Depot under pressure.
The Migros buyback and slow reaction to market trends worsened the situation.

What do customers think? An analysis of customer comments on the 20-Minuten article reveals a clear sentiment:

Comment analysis: Is Temu to blame for Depot's insolvency? — evAI Comment Analysis: Depot went bankrupt. Is Tame to blame?

Many saw Depot as an overpriced reseller of Chinese-made goods.
The price-performance ratio was not competitive. Customers asked, “Why should I pay three times more for the same product?”
The retail market is evolving, and Depot failed to keep up. Customers believe the problem was not just Temu but a broader industry shift.

Conclusion: Temu Didn’t Kill Depot—But Change Did

Depot didn’t collapse due to a single cause, but rather a combination of market changes, management mistakes, and economic pressure.

While online platforms like Temu have undeniably reshaped retail dynamics, Depot’s failure was not solely due to online competition. High costs, shifting consumer behavior, strategic missteps, and post-pandemic economic conditions all played a significant role.

Lessons for Retailers: How to Compete in the New Market

Differentiate through quality, service, and exclusivity.
Implement a strong omnichannel strategy.
Leverage AI & data-driven pricing models.
Focus on sustainability & transparency as a competitive advantage.

Quellen:

What Can the Retail Industry Learn from Depot’s Bankruptcy?

Depot’s bankruptcy highlights the urgent need for brick-and-mortar retailers to strategically realign in order to remain competitive. Companies that rely too heavily on traditional business models risk being overtaken by online competitors and shifting consumer habits. What steps should retailers take?

1. Differentiation Instead of Price Wars

Retailers cannot compete with Temu & Co. on price alone. Instead, they should leverage their unique strengths:

Quality products over mass-produced goods: Customers are willing to pay more for better materials and sustainable production.
Personalized service & experience shopping: A compelling in-store experience can be a decisive competitive advantage.
Exclusivity & brand collaborations: Retailers should offer products that are not easily available online.

2. Fully Implement an Omnichannel Strategy

Modern retail is hybrid—those relying solely on physical stores or e-commerce alone will struggle.

Key approaches include:

Click & Collect and Same-Day Delivery to bridge the gap between online and offline shopping.
Exclusive online deals to drive customers to purchase from the retailer’s own website.
Personalized digital communication to strengthen customer loyalty through targeted offers and interactions.

3. Cost Efficiency & Dynamic Pricing

Flexible lease agreements with revenue-based rent models can help mitigate high fixed costs.
Dynamic pricing strategies can help prevent customers from automatically switching to cheaper online alternatives.
Efficient inventory management reduces overstocking and unnecessary capital investment.

4. Leveraging AI & Digital Tools

The same technologies that have made Temu so successful can also benefit local retailers:

Predictive analytics to optimize inventory levels.
Personalized product recommendations to encourage targeted purchasing.
Automated pricing optimization to stay competitive in fluctuating markets.

5. Using Sustainability & Transparency as a Competitive Advantage

Consumers are increasingly prioritizing ethical consumption—retailers should not treat sustainability as just a marketing gimmick but as a genuine differentiating factor.
Clear communication about supply chains, production practices, and carbon footprint can help retailers stand apart from anonymous online sellers.

These measures can help retailers compete against online platforms and secure long-term success. The key takeaway from Depot’s bankruptcy? Retail must actively evolve to remain relevant.