Retail bankruptcy, while obviously not a pleasant experience for those going through the process, can create opportunities for others. Some companies, have benefited from other retailers’ misfortunes. Staples, for example, acquired 30 Rickel Home Center stores last year as the result of Rickel going out of business. Twenty of the units are now open under the Staples name. The firm, also acquired three former Rich’s Department Stores in UK. It allows you to penetrate markets much faster than you could if you had to build stores from scratch.

While Kmart's bankruptcy filing earlier this month was the biggest retail bankruptcy on record, it's far from uncommon. Thousands of retail businesses end up in bankruptcy every year. Business crises can and do affect all kinds of retailers old, new, virtual, physical, ethical, sleazy. Besides Kmart, Montgomery Ward, HomeLife, eToys, Proteva, CyberRebate, AtHome and Heilig-Meyers Furniture are just a few of the more notable business failures of recent months. Sometimes businesses emerge from bankruptcy but more often, they do not. Either way, the harsh truth is that lenders, suppliers, employees and customers all lose money in the bankruptcy proceeding, and in most cases, customers are far down the pecking order. First in line are secured lenders - those who hold a mortgage on real property or who have required the company to put up collateral of some kind. Next come all of the unsecured lenders, a large group that has its own pecking order. One thing to keep in mind: the priority list doesn't mean much if a bankrupt company has no assets once secured lenders are paid. If there's no money left over, no one gets paid.

The process as a whole, including inventory liquidation, has improved greatly over the years, according to Weinstein, who made his comments along with other bankruptcy professionals at ICSC’s England Idea Exchange. The whole bankruptcy marketplace was grossly inefficient just 10 years ago. Now debtors can sell assets, convert them to cash, and borrow against them much more efficiently than they could in the past.

Venue is a big issue in the bankruptcy process. Retailers generally file in those jurisdictions which have historically been retailer friendly. From a lender’s perspective, the most significant problem with bankruptcies is that they create uncertainty. Lenders always strive for certainty, and for that reason the bankruptcy process creates a lot of anxiety. One way to avoid uncertainty is to take the decision out of the judge’s hands. By forging their own deals, all involved parties can avoid putting their fate in the hands of judges or subjecting themselves to retail auctions. But now in bankruptcy court, judges generally prefer to have the parties make deals on their own.