Digital Retail is Unravelling
The financial fallout from the SSENSE bankruptcy continues to unfold, weeks after the Canadian retailer filed for bankruptcy protection in August. The move came following months of financial distress, leaving both independent designers and major fashion houses owed millions of dollars in unpaid invoices for goods already delivered.
SSENSE had cultivated a cult following based on its fashion-forward merchandise edit and acclaimed editorial content, which gave established labels a sense of cool and emerging brands credibility. While the brand scaled rapidly during the 2020-2021 Covid-era e-commerce boom—reportedly achieving $1.2 billion USD in sales— what it never saw coming was the U.S. government’s shift in trade policy (specifically the elimination of the de minimis tariff exemption) and the sharp contraction in post-pandemic luxury consumer spending. This GQ article explains why the meltdown happened, who’s owed money, and how SSENSE and the brands affected by its bankruptcy and restructure are trying to move forward.
Yet, this bankruptcy is not an isolated incident, but the latest in a series of severe disruptions to the luxury retail sector. It comes on the heels of the Saks Fifth Avenue restructure, which left the department store owing money to nearly 3,000 brands, and the Matchesfashion collapse approximately a year-and-a-half ago, which similarly left hundreds of brands unpaid. The concern is that these successive business crises will ultimately bankrupt emerging labels that can’t absorb so many financial hits to their bottom lines.
These failures, however, are symptoms of a much deeper problem: a fundamental structural challenge in how multi-brand luxury e-commerce works. Call it a market correction, but the platform model that everyone used to bet on is struggling. Why? Consumer behavior has shifted, regulations are tighter, and most importantly, luxury brands are now completely focused on their own, more profitable, direct-to-consumer channels.
The root cause of the crisis is the unsustainable digital scaling of the traditional wholesale model. I said this years ago as DTC was taking off and more luxury brands were starting to develop their own e-commerce experiences, but why should a customer shop a limited edit of a brand like Dolce & Gabbana from a multi-brand department store when they can access the full collection on the designer’s website? The only reasons I can think of is that the customer finds the multi-brand store’s edit to be unique, has an exceptional salesperson who provides next-level service or has access to exclusive customer perks. For major luxury brands, cutting out wholesale is about reclaiming control over their distribution channels, prioritizing their own DTC sites, securing better profit margins, and having greater control over inventory management. All of this has left the once-powerful multi-brand retailers squeezed between brands that want exclusivity and a consumer base that is now more price-sensitive.
While established luxury houses are scaling back their wholesale commitments, the situation is more complicated for independent and emerging labels. For these smaller players, being carried by a big multi-brand retailer offers a crucial “halo effect” or brand validation, along with the potential to reach a bigger or even global audience. However, the trade-offs mirror the reasons major brands are departing: the wholesale model puts a financial strain on brands due to delayed payments, lower profit margins, and limited control over discounting. Brands must now choose whether the benefit of being seen on a multi-brand platform is worth the risk of that platform going bankrupt and not paying them.
For multi-brand luxury retailers to survive, the era of competing solely on breadth and discount is over. That means moving away from the traditional wholesale model toward becoming a curated media and service platform. What SSENSE got right is that it became a cultural destination:
• Media & Curation: Successfully positions itself as a cultural protagonist by blending editorial content, art, and music with commerce.
• Data-Driven Clienteling: Integrating deep customer data to provide bespoke, highly personalized service that moves beyond mere transactions.
• Phygital/Service: Launched a visionary five-story flagship store in Montreal that functioned as an appointment-only cultural hub, a physical twin to the e-commerce site, focused on service over stock.
• Targeting: Mastered connecting with the Gen Z consumer by merging luxury with streetwear and being "ahead but in sight" of cultural trends.
For independent and emerging luxury labels, the future will be based on building a hybrid business model. Instead of relying on wholesale for volume, brands must prioritize their own DTC channels to secure better margins, fully control their brand narrative, and collect valuable customer data. Wholesale still has a purpose, but only for its 'halo effect'—using it strategically to acquire new customers in key cities. Ultimately, market survival requires owning the customer relationship by leveraging data to create personalized shopping experiences and taking charge of distribution.
