SVB logo seen through broken glass
Photo: REUTERS / Dado Ruvic

The collapse last Friday of Silicon Valley Bank (SVB), which served as the go-to bank for tech startups and venture capital firms, didn’t spare the retail industry.

Among those in the retail space impacted:

  • Some Etsy sellers had their payments delayed by one business day. The online marketplace worked with other payment partners to resume payments by Monday.
  • Shopify halted payments to online sellers with SVB accounts, telling merchants they must switch accounts to receive funds.
  • Poshmark, the resale marketplace, assured sellers in a blog entry that their accounts “continue to be safe and secure. We do not use SVB to store customer or marketplace funds, and your ability to process payments and redemptions is not affected.”
  • Stitch Fix’s $100 million revolving line of credit included a $40 million commitment from SVB that the clothing subscription box service expected would no longer be available due to the bank’s receivership.
  • Camp, the experiential toy store, sent an email last Friday offering discounts and pleading with customers to help it make payroll and keep its nine locations afloat, as 85 percent of its assets were tied to SVB.

By Monday, the near-term danger passed with the U.S. federal government’s intervention to protect uninsured deposits of SVB, the second-biggest bank crash in U.S. history that was precipitated by the sudden rise in interest rates. SVB’s collapse also disrupted major tech players, including Roku and Roblox. With the government also taking over Signature Bank, changes to the banking system, particularly stricter federal regulatory oversight of mid-sized banks, may be forthcoming.

High interest rates may mean the end of the easy money era for tech startups. It may also create turbulence for retail’s digital push.

The collapse, for some, signals broader fallouts reminiscent of Bear Stearns’ failure in March 2008, a precursor to the global financial crisis. Thursday’s bailout of Credit Suisse by Switzerland’s central bank further raised fears of unseen risks in the financial system.

Gary Wassner, CEO of Hilldun Corp., which finances many designers, told WWD, “When things like this occur, it creates more uncertainty in an already uncertain environment.”

BrainTrust

“Like all things in business, regulations and oversight strategies need to be checked and updated regularly to keep up with changing times.”

DeAnn Campbell

Head of Retail Insights, AAG Consulting Group


“The whole incident is a great wake up call for customers to have a better idea of what their bank’s balance sheet looks like.”

Jeff Sward

Founding Partner, Merchandising Metrics


“Everyone needs to settle down, keep their heads in their business, and follow the news.”

Rich Kizer

Principal, KIZER & BENDER Speaking

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DISCUSSION QUESTIONS: Do you see the failure of Silicon Valley Bank as an isolated incident or a sign of more trouble for the U.S. banking system? Will the current financial instability eventually cause issues for many more retailers?

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15 responses to “Is the Silicon Valley Bank Collapse a Warning for Retail?”

  1. Neil Saunders Avatar
    Neil Saunders

    Silicon Valley Bank isn’t a completely isolated incident, it is part of a wider issue in the banking sector caused, among other things, by US banks sitting on around $620 billion of unrealized losses thanks to rising interest rates pushing down the value of bonds they count as assets. If banks can hold these to maturity there isn’t a significant problem; however difficulties arise when they need to sell these assets to raise liquidity, for example to pay depositors should there be a spike in demand for withdrawals. The FDIC and Treasury have done what they can to improve liquidity and to stand behind the full value of deposits (presumably all $17 trillion plus of them!), but confidence is still fragile and I would not be surprised if more problems surface here and there. It would be prudent for retailers to review their banking and ensure they have contingency and access to funds should any aspect of it become disrupted.

  2. John Lietsch Avatar
    John Lietsch

    The trouble with easy money periods of accelerated growth is the reckoning that proceeds them. I’m not a banking sector expert but would expect further trouble in any business that took advantage of easy money to make questionable business investments. There’s some evidence of that in the massive tech layoffs as “profitability” has all of the sudden become important. There will be more instability across banks and all businesses especially those that invested poorly or had poor fundamentals. All other businesses will weather the storm as they always do and we will come out stronger, as often is the case.

  3. Jeff Sward Avatar
    Jeff Sward

    Uncertainty piled on top of inflation can’t be a good thing. But SVB held a small slice of the overall pie and the government acted quickly to minimize the uncertainty. The whole incident though, is a great wake up call for customers to have a better idea of what their bank’s balance sheet looks like. The fact that a couple of other banks needed quick support also pulls back the curtain on the fragile position that some banks have wandered into. Safe and secure banking needs to be a no-brainer. There’s too much at stake to let banks get themselves into precarious positions.

    1. Gene Detroyer Avatar
      Gene Detroyer

      Have the banks wandered into dangerous territory because of naiveté or ego?

  4. Brandon Rael Avatar
    Brandon Rael

    Our confidence in our financial sector impacts our emotions and overall shopper sentiment. Consumer confidence is fragile and must be handled delicately by retailers and brands. Silicon Valley Bank’s challenges are not isolated incidents and represent a much more significant issue in the banking sector. Silicon Valley Bank experienced a run precipitated by a decline in start-up funding, rising interest rates, and the firm’s sale of government bonds at a considerable loss to raise capital.

    We are in a tenuous situation with our financial markets, especially with banks such as First Republic being rescued by the banking industry. The economic headwinds, the relentless news cycle focusing on the looming financial crisis, a potential housing crisis, ongoing inflationary challenges, continued tech layoffs, retailer restructuring, and consolidations are all factors to be considered when forecasting retail sales.

    Retail is a resilient and enduring industry. However it is not immune or protected against these macroeconomic forces.

  5. DeAnn Campbell Avatar
    DeAnn Campbell

    Like all things in business, regulations and oversight strategies need to be checked and updated regularly to keep up with changing times. A thorough stress check and fresh set of eyes is needed for the entire banking system, even if just to give businesses the reassurance and confidence to continue to invest in their business.

  6. Gene Detroyer Avatar
    Gene Detroyer

    Maybe there should be a law preventing commercial banks from acting as investment banks. WAIT! There used to be just such a law. Commercial banking is supposed to be boring. Maybe it is tough to be boring in Silicon Valley.

    The government’s quick action drove the hysteria off the front pages and communicated confidence to bank customers around the country and the world. We all learned much from the 2008 financial crisis. We didn’t learn that it isn’t just big banks that misbehave.

    As Congress considers strengthening the laws weakened in 2018, bank lobbyists will descend on the Capitol to prevent regulation that will help the banks not default. Is it hubris or incompetence?

  7. Dave Bruno Avatar
    Dave Bruno

    I definitely think we are in for more uncertainty and fallout from the SVB collapse. At a minimum, consumer confidence will be threatened, and at worst more retailers will be directly impacted like Camp. The eternal optimist has hope that the SVB collapse will provide the impetus for stricter regulations of the financial sector, but the realist in me looks at our political environment and realizes we are likely in for more turmoil, rather than actual progress and prevention.

    1. Gene Detroyer Avatar
      Gene Detroyer

      I suspect what Congress passes will sound like stricter regulations and will actually be the opposite.

  8. Ron Margulis Avatar
    Ron Margulis

    For a second, the SVB collapse had the potential to negatively impact several retail tech companies that had major deployments underway at retailers of all sizes and in all channels. Just for a second. Cooler minds quickly prevailed and we’re at a place where the sector still faces challenges but nothing near the existential situation a week ago.

  9. Cathy Hotka Avatar
    Cathy Hotka

    Congress passed Dodd-Frank in the aftermath of the 2008 crisis to increase transparency and accountability. Those regulations were dumped after lobbying by the previous administration. We need to again rein in big financial institutions that want to benefit from risky investments, bailed out by taxpayers when they fail.

  10. Perry Kramer Avatar
    Perry Kramer

    On the consumer macro level anything that disrupts consumer confidence is bad for retail. This will contribute to the tightening of some wallets and reduce discretionary spending. On the technology and innovation macro level it will not make a notable difference. Retailers will continue to use their existing budgets to innovate and independent innovators with feasible concepts will continue to find PE funding.

  11. Rich Kizer Avatar
    Rich Kizer

    Will the current financial instability eventually cause issues for many more retailers? Many retailers (and people) are sitting on edge because of the current bank events. Everyone needs to settle down, keep their heads in their business, and follow the news.

  12. Craig Sundstrom Avatar
    Craig Sundstrom

    Welll, both: I don’t think the Banking System is about to collapse, but yes, there are problems. And one of the problems – WARNING: Editorializing ahead!! – is society’s failure to live with even minor adversity: how often here on RW do we go thru a mutual handwringing at the thought there might be…a …Recession !? (They used to be normal). Look at how long the narcotic of ZIR was allowed to continue for fear of the results of ending it – namely that R thing – with the resultant distortion of asset markets, and devastation to savers. As horrible as the Great Depression was, it caused fundamental reforms; we don’t seem able to do that anymore.

    1. Gene Detroyer Avatar
      Gene Detroyer

      As I noted above … I suspect what Congress passes will sound like stricter regulations and will actually be the opposite.

Share Your Opinion

DISCUSSION QUESTIONS: Do you see the failure of Silicon Valley Bank as an isolated incident or a sign of more trouble for the U.S. banking system? Will the current financial instability eventually cause issues for many more retailers?

Leave a Reply

How concerned should retailers be about the troubles of Silicon Valley Bank, Signature Bank and Credit Suisse for retail?

View Results

Loading ... Loading …
15 Comments
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Neil Saunders
Neil Saunders
Noble Member
6 months ago

Silicon Valley Bank isn’t a completely isolated incident, it is part of a wider issue in the banking sector caused, among other things, by US banks sitting on around $620 billion of unrealized losses thanks to rising interest rates pushing down the value of bonds they count as assets. If banks can hold these to maturity there isn’t a significant problem; however difficulties arise when they need to sell these assets to raise liquidity, for example to pay depositors should there be a spike in demand for withdrawals. The FDIC and Treasury have done what they can to improve liquidity and to stand behind the full value of deposits (presumably all $17 trillion plus of them!), but confidence is still fragile and I would not be surprised if more problems surface here and there. It would be prudent for retailers to review their banking and ensure they have contingency and access to funds should any aspect of it become disrupted.

8
John Lietsch
John Lietsch
Member
6 months ago

The trouble with easy money periods of accelerated growth is the reckoning that proceeds them. I’m not a banking sector expert but would expect further trouble in any business that took advantage of easy money to make questionable business investments. There’s some evidence of that in the massive tech layoffs as “profitability” has all of the sudden become important. There will be more instability across banks and all businesses especially those that invested poorly or had poor fundamentals. All other businesses will weather the storm as they always do and we will come out stronger, as often is the case.

3
Jeff Sward
Jeff Sward
Active Member
6 months ago

Uncertainty piled on top of inflation can’t be a good thing. But SVB held a small slice of the overall pie and the government acted quickly to minimize the uncertainty. The whole incident though, is a great wake up call for customers to have a better idea of what their bank’s balance sheet looks like. The fact that a couple of other banks needed quick support also pulls back the curtain on the fragile position that some banks have wandered into. Safe and secure banking needs to be a no-brainer. There’s too much at stake to let banks get themselves into precarious positions.

4
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Jeff Sward
6 months ago

Have the banks wandered into dangerous territory because of naiveté or ego?

1
Brandon Rael
Brandon Rael
Active Member
6 months ago

Our confidence in our financial sector impacts our emotions and overall shopper sentiment. Consumer confidence is fragile and must be handled delicately by retailers and brands. Silicon Valley Bank’s challenges are not isolated incidents and represent a much more significant issue in the banking sector. Silicon Valley Bank experienced a run precipitated by a decline in start-up funding, rising interest rates, and the firm’s sale of government bonds at a considerable loss to raise capital.

We are in a tenuous situation with our financial markets, especially with banks such as First Republic being rescued by the banking industry. The economic headwinds, the relentless news cycle focusing on the looming financial crisis, a potential housing crisis, ongoing inflationary challenges, continued tech layoffs, retailer restructuring, and consolidations are all factors to be considered when forecasting retail sales.

Retail is a resilient and enduring industry. However it is not immune or protected against these macroeconomic forces.

2
DeAnn Campbell
DeAnn Campbell
Active Member
6 months ago

Like all things in business, regulations and oversight strategies need to be checked and updated regularly to keep up with changing times. A thorough stress check and fresh set of eyes is needed for the entire banking system, even if just to give businesses the reassurance and confidence to continue to invest in their business.

3
Gene Detroyer
Gene Detroyer
Trusted Member
6 months ago

Maybe there should be a law preventing commercial banks from acting as investment banks. WAIT! There used to be just such a law. Commercial banking is supposed to be boring. Maybe it is tough to be boring in Silicon Valley.

The government’s quick action drove the hysteria off the front pages and communicated confidence to bank customers around the country and the world. We all learned much from the 2008 financial crisis. We didn’t learn that it isn’t just big banks that misbehave.

As Congress considers strengthening the laws weakened in 2018, bank lobbyists will descend on the Capitol to prevent regulation that will help the banks not default. Is it hubris or incompetence?

4
Dave Bruno
Dave Bruno
Member
6 months ago

I definitely think we are in for more uncertainty and fallout from the SVB collapse. At a minimum, consumer confidence will be threatened, and at worst more retailers will be directly impacted like Camp. The eternal optimist has hope that the SVB collapse will provide the impetus for stricter regulations of the financial sector, but the realist in me looks at our political environment and realizes we are likely in for more turmoil, rather than actual progress and prevention.

1
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Dave Bruno
6 months ago

I suspect what Congress passes will sound like stricter regulations and will actually be the opposite.

1
Ron Margulis
Ron Margulis
Member
6 months ago

For a second, the SVB collapse had the potential to negatively impact several retail tech companies that had major deployments underway at retailers of all sizes and in all channels. Just for a second. Cooler minds quickly prevailed and we’re at a place where the sector still faces challenges but nothing near the existential situation a week ago.

3
Cathy Hotka
Cathy Hotka
Active Member
6 months ago

Congress passed Dodd-Frank in the aftermath of the 2008 crisis to increase transparency and accountability. Those regulations were dumped after lobbying by the previous administration. We need to again rein in big financial institutions that want to benefit from risky investments, bailed out by taxpayers when they fail.

7
Perry Kramer
Perry Kramer
Member
6 months ago

On the consumer macro level anything that disrupts consumer confidence is bad for retail. This will contribute to the tightening of some wallets and reduce discretionary spending. On the technology and innovation macro level it will not make a notable difference. Retailers will continue to use their existing budgets to innovate and independent innovators with feasible concepts will continue to find PE funding.

0
Rich Kizer
Rich Kizer
Member
6 months ago

Will the current financial instability eventually cause issues for many more retailers? Many retailers (and people) are sitting on edge because of the current bank events. Everyone needs to settle down, keep their heads in their business, and follow the news.

1
Craig Sundstrom
Craig Sundstrom
Active Member
6 months ago

Welll, both: I don’t think the Banking System is about to collapse, but yes, there are problems. And one of the problems – WARNING: Editorializing ahead!! – is society’s failure to live with even minor adversity: how often here on RW do we go thru a mutual handwringing at the thought there might be…a …Recession !? (They used to be normal). Look at how long the narcotic of ZIR was allowed to continue for fear of the results of ending it – namely that R thing – with the resultant distortion of asset markets, and devastation to savers. As horrible as the Great Depression was, it caused fundamental reforms; we don’t seem able to do that anymore.

2
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Craig Sundstrom
6 months ago

As I noted above … I suspect what Congress passes will sound like stricter regulations and will actually be the opposite.

1