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Can Barneys rise again amid the global decline of department stores?
A FEW years back, I received a call from my credit card company asking me to confirm a suspicious purchase. It was a US$695 clothing purchase from Barneys New York. I was more than a tad amused. It was fraud, but how on earth did Visa know? I do like shopping for clothes, even if it's rare I spend that much at one time. And Barneys was hardly a store I was unfamiliar with, right? Then I realised I couldn't even recall the last time I stepped foot in a Barneys.
I thought about that moment as I wandered through Barneys Madison Avenue flagship location on Tuesday, wearing a US$30 sundress purchased on Amazon. As I looked at the four-figure handbags and outfits, Madonna played in the background. The symbolism was all too perfect. I, like many other former Barneys customers, had moved on. Barneys not so much.
Last October, I wrote about the bankruptcy of Sears, noting that most eulogisers considered the company's fall almost inevitable, even though it was more accurate to describe the famed department store as a victim of private equity. The "inevitable fall" argument works better for Barneys, which filed for bankruptcy Tuesday morning, while announcing it would close all but seven of its 22 locations. Yes, there was a hedge fund involved - Perry Capital. And, yes, the precipitating event was an enormous rent increase for the store's Manhattan flagship, something of a plague on Manhattan retailers. But mostly, Barneys outlived its usefulness to shoppers.
The past decade has not been any kinder to Barneys than it has to other small luxury chains. Gourmet food purveyor Dean & DeLuca shut down almost all of its US locations this year, after the Thai real estate mogul who owned it failed to keep up with money owed to suppliers and staff. Henri Bendel, another small legacy department store, went by the wayside, too.
All three were once trendsetters. Dean & DeLuca introduced many New Yorkers to once exotic items such as extra virgin olive oil. Jean Paul Gaultier once staged a fashion show at Bendel's. As for Barneys, it was the "it" store of the 1980s and early 1990s, the place people went if they wanted to discover unknown designers such as Rei Kawakubo and Helmut Lang. Those days are long gone. One could argue Dean & DeLuca's raison d'etre ended when you could find brie, balsamic vinegar and extra virgin olive oil at the local supermarket. The same, in a way, was true for Barneys. As it passed through successive owners - the founding Pressman family lost control of the store after an overly ambitious expansion, and a fight with a business partner that led to a 1996 bankruptcy - the store became less and less distinct. But it wasn't that the fashion was less fashion forward or, frankly, expensive. It was that to find unique fashion, there were suddenly many, many options besides Barneys.
As a boutique department store, Barneys prospered when designers and premier fashion brands needed it more than it needed them. But that is no longer true. There are many, many outlets for a designer or a brand to reach an audience, or for an audience to discover them. Barneys still carries coveted designers such as Isabel Marant, but so does Saks Fifth Avenue, not to mention Internet giant Net-a-Porter. The result? "Barneys has had a hard time distinguishing itself against Bergdorf, Saks and Neiman's," retail consultant Pam Danziger told me. Those stores are not exactly problem-free either. Neiman Marcus is juicing up the discounts on designer goods to bring customers in, but same-store sales are in decline. Saks, which debuted an extensive renovation to its Manhattan Fifth Avenue flagship, is doing better, but analysts are not convinced the gains will hold if the economy slows. Department stores of all sorts - whether owned by private equity, hedge funds or large publicly traded conglomerates - are in deep financial trouble.
Maybe Barneys could have competed if it beefed up its online presence sooner. But then again, as we are seeing time and time again with other retailers, it's extremely hard for a business whose success for decades rested on physical locations to just up and pivot into the virtual world. It's potentially even harder for department stores, which never gained the popularity with millennials that they enjoyed with older generations.
Yes, it's possible Barneys will find a new owner, emerge from bankruptcy court and continue on. The store is keeping the Madison Avenue flagship, which is responsible for a large portion of the chain's sales, open. But even if that happens, it's hard not to suspect the Barneys that once drew such passionate fans will never return. That's not because of management. It's because the world has changed. Barneys is no longer a unique, lucky star. It's just one of many. No management change can alter that reality. WP