GOODBYE TO BARNEYS: WHAT’S NEXT FOR LUXURY DEPARTMENT STORES?
Barneys New York opened its doors on the corner of 7th and 17th street in New York City in 1923, a time of economic prosperity and an increased fascination of consumerism in which the luxury department store was able to grow from a small menswear boutique into an iconic luxury destination by the late 1970s. Barneys branded themselves as a haven for exclusivity and status by charging steep prices, their couture inventory, hosting lavish parties, and collaborating with popular designers and celebrities.
And after almost a decade of business, Barneys filed for bankruptcy at the end of 2019, replacing Manolo Blaniks with wooden boards and large “80% Off” sale banners. Their financial comedown tainted memories of the store’s golden days and replaced them with images of a chaotic showroom full of people digging through piles of designer rarities, just looking for a good deal. So what caused the rapid downfall of Barneys New York?
Many signs point towards the “retail apocalypse” which is best described as the shift in consumers away from in-store shopping in favor of online browsing, pressuring many retailers to shut down multiple (if not all) of their locations. While it may not be surprising that this trend is affecting cheap, fast-fashion stores like Forever 21, the luxury market has historically been immune to trends in the economy, only making Barneys downfall more surprising.
Barneys is not the only luxury department store to face a recent decline. In 2019, Henri Bendels closed, and Neiman Marcus went through a frantic debt-restructuring plan after braving through a tough year. 2019 also included a fall of 1.5% in same-store sales (the revenue generated by an established retail location in one unit of time in compared to an identical unit of time, usually from the previous year) in the third quarter, which left Neimans with a $31.2 million loss. Meanwhile, luxury e-commerce is only predicted to grow, with some economists claiming that at least one-fifth of all personal luxury shopping will be done online by the year 2025.
These numbers indicate that the luxury market is not immune to the retail apocalypse, and in order to survive, luxury department stores must adapt to the changing market. The importance of establishing a strong online presence is vital in today’s market (something Barneys failed to do in time), as is finding their competitive advantage. The liquidation of Barneys came not long after Dennis Friedman moved in as creative director of the company and subsequently attempted to “modernize” the store, which was perceived as a bad move by employees and customers alike. In turn, Barneys eventually lost the elements which made it unique. Neiman Marcus and Nordstroms seem to be recognizing the importance of being not just a store, but a destination, including elements such as bars, spas, and restaurants in their recently-opened New York City locations. The amount of success that their newest locations bring in the following quarters will be indicative if there really is any place for luxury department stores in the future of retail. If you feel as if Carrie Bradshaw and the rest of the Sex and the City girls deserve a formal apology from the Barneys CFO, we agree. However, we are optimistic that Barneys financial downfall is only leading to a better era for the future of luxury retail.