In Luxury, Trying To Avoid Barneys' Fate

How the Retailer's Upscale Rivals Are Evolving

Nov 05, 2019
Marketing

SMITH BRAIN TRUST  Who would have thought it would come to this for Barneys New York?

The epitome of New York affluence, a retailer who catered to the city’s most elite, reduced to bankruptcy court, then sold off in pieces.

Last week at auction, Authentic Brands Group bought the Barneys name, saying it planned to license it to other shops – Saks Fifth Avenue, for example, in the United States and Canada. Meanwhile, the remaining Barneys merchandise was bought up, to be scattered to several different places and sold without the cache of the flagship Madison-and-61st Manhattan address.

But Barneys won’t be Barneys anymore, says Yajin Wang, assistant professor of marketing at the University of Maryland’s Robert H. Smith School of Business. “It’s sad,” she says. “But it was kind of inevitable.”

The company’s one-time rivals now are striving to avoid its fate.

Barneys filed for bankruptcy in August, after a prolonged, and ultimately unsuccessful, bid to try to find a suitor. Its downfall, Wang says, was a culmination of multiple factors. Among the biggest factors, she says, was e-commerce. “A lot of retailers – especially luxury retailers – were slow to respond to the way that consumer purchasing behavior has changed,” she says.

Barneys maintained its brick-and-mortar presence, but arrived late to the game in e-commerce. It hadn’t evolved to compete in the increasingly multichannel industry, and its consumers moved on. There was a stream of other brands, Wang says, such as Net-a-Porter and Farfetch, competing for their affections. Some were multichannel and some offered online-only luxury goods. “Barneys did not do enough to survive in today’s multichannel competitive environment,” she says. “They were losing out.”

For others in the luxury retail space, Barneys is a warning, Wang says.

Its high-end department store sisters, such as Saks Fifth Avenue, Neiman Marcus and Nordstrom, have made big investments in e-commerce and other online services, in an effort to reach customers across channels, Wang says. They’re paying closer attention to the experience of online shopping, offering tools for determining the right size, offering customer-friendly return processes, and even offering monthly fashion subscription services.

But apps and online aren’t enough either, says Wang, which is why luxury stores across Manhattan and elsewhere are evolving too. They’re seeking to provide a more experiential and personal shopping environment, one that will draw consumers into the physical stores. For Neiman Marcus, that’s meant adding spas and salon services, sometimes to the first floor of a multi-story department store.

“It’s a problem for all of the high-end luxury department stores, but also for smaller, niche luxury sellers like New York’s Bergdorf Goodman,” she says. “They are facing similar situations, where they are asking themselves how they can compete with online retailers, and what unique selling points they can offer by having an actual physical store. I think that’s the overall challenge.”

Meanwhile, in New York’s tony SoHo shopping district, Louis Vuitton, Gucci and Celine are all experimenting with new store concepts, investing in video installations, art installations, cafes.

“It’s happening across luxury retail. Retailers are trying to set up a lifestyle or an experiential center in the stores, rather than just trying to display products.”

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About the Expert(s)

Professor Wang received her Ph.D. in Marketing from the Carlson School of Management at University of Minnesota in 2015. Her research focuses on luxury brands and conspicuous consumption, and social/ interpersonal influence on consumer's behavior. Her research has been published in Journal of Consumer Research and Psychological Science, and has been covered in the New York Times, Wall Street Journal, Harvard Business Review, BBC News, FOX News, and CNN. She teaches consumer behavior in the undergraduate program.

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