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Barneys New York’s Bankruptcy Saga Can the Retail Icon Survive?
Case Study This case was written by Meenu Bhatnagar and reviewed by K. Bhagyalakshmi, Amity Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources. © 2020, Amity Research Centers Headquarter, Bangalore. Website: www.amity.edu/casestudies/ No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner.
Distributed by The Case Centre North America Rest of the world www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903 All rights reserved e [email protected] e [email protected] centre
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
Page – 1
Author: Meenu Bhatnagar
Barneys New York’s Bankruptcy Saga:
Can the Retail Icon Survive? Abstract: Barneys New York (Barneys), a luxury speciality retailer was founded in 1923 by Barney Pressman and epitomised high opulent fashion. It utilised the talent of prominent designers to focus on high-end contemporary customers. Barneys transformed the concept of designing window display making use of natural light which beckoned customers to enter. Barneys profitably pioneered fashion brands like Armani, Alaia and Zegna, Comme des Garcons, Hubert de Givenchy, Pierre Cardin and Louboutin. Celebrity models catching the fancy of the retailer’s consumers included Britney Spears, Kim Kardashian and Sara Jessica Parker. After the reign of almost a century, Barneys iconic fashion status suffered due to plethora of reasons such as steeply rising store rent, declining in-store sales, en-mass shift of consumers to e-commerce and lack of retail estate ownership. The retailer could not conform to the young people’s changing needs and shopping habits. Subsequently, Barneys filed for bankruptcy under Chapter 11 in August 2019. It was acquired by Authentic Brands Group (ABG) and Riley Financial Inc. in October 2019. ABG had assured to preserve the legacy of Barneys and had devised plans for its long term global growth. Would ABG be able to preserve and build upon Barneys’ lifestyle brand and luxury retail experience status?
Case Study “It was the place to be... People wanted to be in there — the designers and the creative people... Customers did, too.”
1
– Cathy Paul 2
“Like many in our industry, Barneys New York’s financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand.”
3
– Daniella Vitale 4
1 Schneier Matthew, “What Went Wrong at Barneys? How a New York shopping paradise went big, then
bankrupt.”, https://www.thecut.com/2019/10/how-barneys-went-bankrupt-and-what-comes-next.html, October 24
th 2019
2 She worked for the Pressmans in the early ’80s as a fine Jewellery Specialist, when Barneys was a single store on
17th Street and Seventh Avenue. 3 “Bye Bye, Barneys? Why Luxury Is the Latest Retail Casualty”,
https://knowledge.wharton.upenn.edu/article/barneys-bankruptcy/, August 27 th
2019 4 She was the Chief Executive Officer and President of Barneys New York until its closure in 2019 and now is the
Chief Brand Officer at Tiffany & Co.
“© 2020, Amity Research Centers HQ, Bangalore. All rights reserved.”
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
Page – 2
arney Pressman (Pressman) established Barneys New York in 1923 which grew to operate stores in Beverley Hills, Chicago, Seattle, New York, Boston, Las Vegas and San Francisco.
The chain of stores spread upto Tokyo establishing its own fashion trends drawing consumers and new designers like a magnet. It strategically offered merchandise at conspicuously lower rates than its competitors to attain successful business growth. The company’s sales strategy characteristically comprised creative advertising, unique holiday themes, outstanding window displays and fashion concepts from top global designers. In 1970s, Pressman’s next generation had also introduced products for women’s apparel. The store offered shoes, accessories, jewellery, fragrances, cosmetics and decorative household articles. Famous models Madonna and Iman demonstrated the beautified Barneys’ denims designed by Paloma Picasso, Keith Haring, Jean-Michel Basquiat and Andy Warhol. However, the initial reluctance of Barneys for facilitating the online consumers proved detrimental for its business growth. Besides, Barneys did not upgrade its business model for greater revenue generation. Management shortcomings at Barneys resulted in serious financial impediments taking it to the edge of bankruptcy. After acquiring Barneys, the Authentic Brand Group expressed their confidence for retaining and expanding Barneys brand in the U.S, as well as other attractive markets like Turkey, Germany, U.K. and the Middle East. Would ABG be able to sustain and carry forward Barneys brand and fashion legacy?
Barneys: The Corporate Journey The department store scenario of New York City had long been associated with letter ‘B’ which represented ‘Bloomingdale’s, Bergdorf Goodman and Henri Bendel’ as well as Barneys New York (Barneys).
5 Barneys was known for offering the greatest fashion shopping experience in
New York City. It pioneered ultra modern styles from innovative designers that were proffered artistically at their 7th Avenue store in the world renowned Garment district.
6 Robin Givhan,
Fashion Editor, The Washington Times and Pulitzer Prize winning writer, stated, “The store excelled at a time when fashion was elitist and its elitism only made people want it more... it was a place that encouraged you to stand up straighter and try to impress others — or really just yourself.” She further added, “It might have induced insecurity in some folks; it made others aspire.”
7
Barneys was founded by Barney Pressman in 1923, with an initial investment of $500 by selling his ‘wife’s engagement ring’. He rented 500-square-foot retail space at Seventh Avenue and West 17th Street in Manhattan and put up a signboard ‘Barney's Clothes’. The store had a collection of ‘40 name-brand suits’.
8 After its establishment, Barneys had rapidly grown into
the synonym of high opulent fashion. The company had tied up with a clutch of designers who went onto capture people’s imagination. These included names such as Jonathan Simkhai, Eugenia Kim and Jonathan Adler. According to Steve Dennis, (Dennis) Former Retail Executive
5 Pearl Diana, “With Barneys in Financial Trouble, Can Iconic Department Stores Be Saved?”,
https://www.adweek.com/brand-marketing/barneys-is-on-the-verge-of-bankruptcy-can-iconic-department- stores-be-saved/, July 23
rd 2019
6 “Barney’s Bankruptcy Provides Lessons for the Future of Retail”,
https://www.thewisemarketer.com/retail/barneys-bankruptcy-provides-lessons-for-the-future-of-retail/, September 6
th 2019
7 Givhan Robin, “The end of Barneys, the store that made us lust for fashion”,
https://www.washingtonpost.com/lifestyle/2019/11/02/end-barneys-store-that-made-us-lust-fashion/, November 2
nd 2019
8 “Barney’s Inc. Company History”, https://www.company-histories.com/Barneys-Inc-Company-History.html
B
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
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and President, SageBerry Consulting 9 , “Its customer base is ‘narrowly focused’...going after a
subsector of the high-end customer, particularly one who is more contemporary or ‘edgy’.” 10
Right from the beginning, Barneys had followed a distinctive path not only in New York but across other locations as well. Vanessa Friedman, (Friedman) Fashion Director and Chief Fashion Critic, The New York Times stated, “Its Madison Avenue store... was an extravagantly unmistakable symbol of that separateness and that aspiration: the largest new specialty store to be built in Manhattan since the Depression, and one that broke all the rules.” While Gene Pressman, Grandson, Barney Pressman opined, “Of course, there are a lot of stores uptown. But there’ll be only one Barneys. We’re different.” Meanwhile, tying up with, Peter Marino
11
the company gave him a free hand to establish new parameters to design the store. Barneys changed the concept of designing store display as it characteristically utilised windows on most floors for natural light to flow in rather using the walls for creating more shelf or rack space.
12
Don-Alvin Adegeest, (Adegeest) Managing Director & Consultant, Pressroom International Digital Marketing Institute stated, “It was the windows at Barneys that evoked one to enter its revolving doors.”
13
Highlighting that ‘Barneys knows best’ Friedman further stated, “...it made Barneys a destination for shopping tourists in search of the cutting edge. But it was also unabashedly elitist, proudly exclusionary — you got it or you didn’t, and if you didn’t, that was your problem, not theirs.”
14 While Adegeest said, “Barneys’ signature sense of wit and style was...
manifested in its creative advertising campaigns, holiday themes, award-winning window displays and discerning fashion edit from the world’s top designers.”
15
Barneys - the luxury specialty retailer was reputed for presenting a collection of ready to wear clothes for both women and men from world renowned designers, besides shoes, accessories, jewellery, fragrances, cosmetics and household decorative articles. Barneys operated in Beverley Hills, Chicago, Seattle, New York, Boston, Las Vegas and San Francisco. Further, it had a prominent luxury online store, Barneys.com, besides 25 ‘full price stores and warehouse stores’ spread all over the United States.
16 (Annexure I).
Barneys Glorious Journey Earlier, in 1930s, Barney Pressman strategically advertised his products on radio and television under the slogan ‘Calling All Men to Barney's’. Further he promoted Irish woollens through special radio programs. He even arranged a boat ride for 2,000 of his customers from Manhattan to Coney Island as a part of his publicity campaign. Barneys sold clothing crafted by
9 It helps retail and luxury/fashion brands and investors realize remarkable, customer-centric growth and
marketing strategies. 10
“With Barneys in Financial Trouble, Can Iconic Department Stores Be Saved?”, op.cit. 11
An architect also as the crown prince of fashion store design creating the new looks of boutiques namely Armani, Dior, Louis Vuitton, Zegna. 12
Friedman Vanessa, “Of Barneys’ Bankruptcy, Pride and the Fall”, https://www.nytimes.com/2019/08/06/style/barneys-chapter-11- bankruptcy.html?action=click&module=RelatedLinks&pgtype=Article, August 6
th 2019
13 Adegeest Don-Alvin, “Barneys New York, the tragic ending of an iconic retailer”,
https://fashionunited.uk/news/business/barneys-new-york-the-tragic-ending-of-an-iconic- retailer/2019110346036, November 3
rd 2019
14 “Of Barneys’ Bankruptcy, Pride and the Fall”, op.cit.
15 “Barneys New York, the tragic ending of an iconic retailer”, op.cit.
16 “Barneys New York Is”, https://www.tableware.com/m/sites/view/Barneys-New-York-Luxury-Designer-
Handbags-Shoes-and-Clothing
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
Page – 4
renowned manufacturers’ at lower prices as it procured them from sources like retail overstocks, showroom samples and manufacturers' closeouts as well as ‘auctions and bankruptcy sales’. In 1934, store spaces were increased as business prospered. Barneys was the only Manhattan store for affordable men's suits.
17
The company was famous for its conceptual black, diverse home items and the inclination to establish its own trend. According to Friedman and Michael J. de la Merced, Reporter, The New York Times, “Barneys was a magnet for new designers...a place for consumers to discover talent, and a harbinger of the cutting edge. Its singularity and willingness to take chances on new names gave it power to demand exclusives and certain… sense of its own importance.”
18
In 1946, Fred – Barney Pressman’s son joined the business. However, beginning 1964, the store began to drop its discount label.
19
Barney Pressman known as the ‘Cut-Rate King’, his son Fred, and grandson Gene together expanded the range by including womenswear and home goods. The company thereafter, developed a mainstream and global network. They were the first to introduce Giorgio Armani suits before they were showcased anywhere else in America. Besides, they also retailed the creations of Rei Kawakubo and Comme des Garcons before anyone else.
20 By the end of 20
th
century, the company went onto become most eminent name in the fashion world. 21
Besides, Barneys was the first to present fashion brands like Alaia, Armani, Zegna, Comme des Garcons, and Louboutin.
22
In the 1960s, Fred gave a new direction to the store for better business growth. A decade later, he was not only recognised for introducing ‘Giorgio Armani’s tailoring to Americans’ but he initiated ‘the opening of a women’s store at Barneys’. It was taken forward by Gene his son who was praised for developing it ‘into a nexus for luxury and unique fashions’. According to Maris Kreizman
23 , “The store where my mom had played with the three-way mirrors in the free
alterations area was changing quickly.” 24
Fred persuaded the retailer to sell luxury duly supported by his friends Hubert de Givenchy and Pierre Cardin to make Barneys the hub of European men's fashion. However, by 1970s Pressman’s next generation had developed products by including ‘women's apparel and home goods’ with adequate sections to be known as department store.
25 Barney’s had grown into a
multi-level showplace wherein designers Giorgio Armani’s collections were launched into the US besides Givenchy, Pierre Cardin as well as new names like Azzedine AlaÏa.
26
17
“Barney’s Inc. Company History”, op.cit. 18
Friedman Vanessa and Merced Michael J. de la, “Barneys, Global Symbol of Creative Cool, Files for Bankruptcy”, https://www.nytimes.com/2019/08/06/business/barneys-bankruptcy.html, August 6
th 2019
19 “Barney’s Inc. Company History”, op.cit.
20 “What Went Wrong at Barneys? How a New York shopping paradise went big, then bankrupt.”, op.cit.
21 Crenshaw Madeleine, “A Look Back At Barneys, the Department Store that Broke the Rules of Retail”,
https://footwearnews.com/2019/business/retail/history-of-barneys-new-york-1202862913/, October 28 th
2019 22
Friedman Vanessa and Maheshwari Sapna, “Barneys Is Sold for Scrap, Ending an Era”, https://www.nytimes.com/2019/11/01/business/barneys-bankruptcy-authentic-brands.html, November 5
th 2019
23 Great Great grand niece of Barney Pressman.
24 Kreizman Maris, “My family founded Barneys. Now the great department store is closing”,
https://www.vox.com/the-goods/2020/2/5/21113525/barneys-bankruptcy-closing-liquidation-sale, February 5 th
2020 25
Howland Daphne, “How Barneys New York lost its cool”, https://www.retaildive.com/news/how-barneys-new- york-lost-its-cool/560356/, August 8
th 2019
26 Cuozzo Steve, “The demise of Manhattan fashion emporium Barneys”,
https://www.propertyweek.com/insight/the-demise-of-manhattan-fashion-emporium-barneys/5106704.article, March 6
th 2020
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
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Initially, Barneys shop sold branded menswear at substantially lower rates. Pressman’s strategy was effective as he considerably underpriced his competitors to achieve successful business growth. With Fred, Barney’s son taking over, the shop gained prominence as a luxury retail giant. Michelle Honig, (Honig), Freelance Fashion Writer stated, “Once the brand incorporated womenswear into its offerings in the 1970s, it really solidified its status as a repository of the aspirational and the cutting edge, of progressive and unique fashion that didn’t exist in other department stores.”
27 Barney's annual sales clocked $33 million in 1973
while the store had an inventory of 60,000 suits and employed 232 tailors to carry out alterations. It had a full range of offerings from leading designers namely Pierre Cardin, Bill Blass, Christian Dior and Hubert de Givenchy. The retailer organised ‘twice-a-year warehouse sale’ at Manhattan creating immense sales potential. In 1979, on Gene's request, ‘the apostrophe in Barney's', name was excluded and by 1981 the company was known as Barneys Inc. and the store as Barneys New York.
28
The rising models namely Naomi Campbell, Christy Turlington, and Linda Evangelista in November 1986 found place in Barney’s ads. In the same year the store organised ‘Decorated Denim’ – an auction wherein Barneys’ artists’ modified Levi’s denim jackets and sold them to support AIDS research. Prominent models Madonna and Iman were dressed in the denim which had been beautified by ‘Paloma Picasso, Keith Haring, Jean-Michel Basquiat as well as Andy Warhol.
29
By collaborating with up-and-coming designers, rather than sticking to the latest trends. Barneys’ family’s independent fortitude was able to draw the New York fashion crowd. By the 1980s, it became a focal point to shop for the latest designs from the world over. In 1993, Barneys opened its Madison Avenue location in New York.
30 Meanwhile, to draw the attention
of Wall Street shoppers, it inaugurated a store for men at the World Financial Center amongst the offices of New York’s big banks. The store offered $3,250 two-buttons suits from Ermenegildo Zegna as well as $7,000 virgin wool basket-weave collections from Brioni.
According to Kim Bhasin, Luxury Reporter and Jordyn Holman, Business Journalist, Bloomberg, “Celebrity fans would talk up the store’s glitz and glam, attracting shoppers over the years from Britney Spears and Kim Kardashian to Sarah Jessica Parker.” As expansion became the main priority, Barneys launched its first stores in Chicago and Beverly Hills outside Manhattan. Besides, it formed a partnership with Isetan - a Japanese retailer who invested $600 million in Barneys to fuel the brand’s growth to 13 stores spread over the U.S.
31 Isetan aimed to take the
Barneys fashion appeal to Japan, but both Isetan and Barneys ended up in a legal tangle. 32
By 1996, tensions mounted between the two, leading to bankruptcy proceedings. Although in the
27
Honig Michelle, “Barneys was a fashion tastemaker — but its success came with a dark cost”, https://www.jweekly.com/2019/11/05/barneys-was-a-fashion-tastemaker-but-its-success-came-with-a-dark- cost/, November 5
th 2019
28 “Barney’s Inc. Company History”, op.cit.
29 “My family founded Barneys. Now the great department store is closing”, op.cit.
30 “A Look Back At Barneys, the Department Store that Broke the Rules of Retail”, op.cit.
31 Bhasin Kim and Holman Jordyn, “Richard Perry’s Bankrupt Barneys Bets Its Future on Madison Ave.”,
https://www.bloomberg.com/news/features/2019-08-07/barneys-new-york-files-for-bankruptcy-and-here-s- how-it-got-here, August 7
th 2019
32 Kestenbaum Richard, “Why Barneys New York Won't Survive Bankruptcy”,
https://www.forbes.com/sites/richardkestenbaum/2019/08/05/prediction-barneys-new-york-will- liquidate/#515fac1439a2, August 5
th 2019
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Barneys New York’s Bankruptcy Saga: Can the Retail Icon Survive?
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2000s, Barneys went on to increase its store count by opening new stores at Boston, Las Vegas and San Francisco.
33
Meanwhile, Daniella Vitale, Former Chief Executive Officer & President, Barneys stated, “For more than 90 years, Barneys New York has been an iconic luxury specialty retailer, renowned for its edit, strong point of view, creativity and representation of the world’s best designers and brands.”
34 The opulent fashion destination – Barneys New York had been looked upon as
the harbinger of high style by ‘celebrities and fashionistas’. However, it could not avoid liquidation and filed for bankruptcy under Chapter 11 in August 2019.
35
Can Barneys Survive Under Authentic Brands Group? Barneys Struggles Diana Pearl, Deputy Brands Editor, Adweek and Managing Editor, Brandweek stated, “In becoming synonymous with downtown cool—a reputation boosted by its iconic flagship on 17th Street and Seventh Avenue—Barneys occupied a different space than competitors like Bergdorf Goodman, which catered more to shoppers with deep pockets.” But according to Dennis, “Specificity might have caused troubles for Barneys, creating an identity crisis. Though some things had changed including senior leadership, Barneys' fundamental struggles continued to be mostly unchanged.” (Annexure II).
36
Barneys struggle for survival saw it establishing ‘The High End’ - a fashionable cannabis lifestyle store at its Beverly Hills location. While it set-up ‘thedrop@barneys’ facility providing ‘food, workshops and installations’ in New York and Los Angeles jointly with Highsnobiety
37 . Carter
stated, “...the retailer failed to keep up with younger consumers and to reach them through today's requisite modes of marketing, like social media and influencers.” Thomai Serdari, (Serdari) Professor, Luxury Marketing and Branding, Stern School of Business, New York University stated, “Younger consumers have finally turned their attention away from even the coolest department store...That younger population that could perhaps have been interested in Barneys, they have moved on to individual brands that have stand-alone stores.”
38
The predicament for Barneys was the imminent doubling of Madison Avenue store’s rent. The retailer had spread its physical footprint way too far but was slow in synchronising with the retail world.
39 It had also lost in a disagreement with its Madison Avenue store landlord leading
to an increased annual rent of $30 million up from $16 million, seriously impacting its financial fortunes (nearly one-third revenue of Barneys was coming from the flagship Madison Avenue
33
Bhasin Kim and Holsman Jordyn, “Richard Perry’s Bankrupt Barneys Bets Its Future on Madison Ave.”, https://www.bloomberg.com/news/features/2019-08-07/barneys-new-york-files-for-bankruptcy-and-here-s- how-it-got-here, August 7
th 2019
34 Hargrove Channing, “Barneys New York Is Officially Closing After Filing For Bankruptcy”,
https://www.refinery29.com/en-us/2019/07/237924/barneys-new-york-bankruptcy, November 4 th
2019 35
“The rise and fall of Barneys, the iconic New York luxury department store that will likely soon close its doors for good”, https://1businessworld.com/2019/10/business/barneys-new-york-history-rise-and-fall-2019-9/, October 31
st 2019
36 “With Barneys in Financial Trouble, Can Iconic Department Stores Be Saved?”, op.cit.
37 It is a German-based streetwear blog, media brand and production agency.
38 “How Barneys New York lost its cool”, op.cit.
39 Dennis Steve, “Here We Go Again. Can Barneys Survive In Luxury's New World?”,
https://www.forbes.com/sites/stevendennis/2019/07/17/here-we-go-again-can-barneys-survive-in-luxurys- new-world/, July 17
th 2019
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store). Regrettably, Barneys on August 6 th
2019 filed for bankruptcy in the harsh retail environment.
40 Barneys ‘aura of cutting-edge luxury’ was inadequate as management
shortcomings and costly store launches resulted in massive impediments. However, Barneys’ decline was not unusual as earlier also it had been on the edge of bankruptcy in the 1990s. Despite, its popularity amongst ‘celebrities and fashionistas’ it had gone through financial hurdles and leadership failings which surfaced with its first bankruptcy in 1998.
41
Barneys was amongst the popular retailers like Sears and Toys ‘R’ Us to have approached the ‘bankruptcy court’. The company cited issues like ‘rising rent, slumping in-store sales’ as well as ‘a consumer shift to e-commerce’. Besides, it had leased numerous retail sites at high rental fees and did not own any real estate. Jeff Trexler, Associate Director, Fashion Law Institute opined, “I think one of the lessons is, Barneys should have made a substantial expansion in the real world in real estate... It would have had assets to sell in high-end urban areas with high property values and probably wouldn't have needed to declare bankruptcy.”
42
With the changing real estate market, luxury market was also undergoing transformation. Apart from rent increases Barneys alongwith other established department stores experienced financial pressure due to declining sales and extreme competition particularly online. In the changed scenario, brands did not require brick-and-mortar store for generating sales volumes. Serdari observed, “The struggles are a reminder that the department store — once a venerated institution in the American retail industry — must re-invent itself...We need to remember that this exact model of floor after floor after floor was implemented in the late 19th century, so it had a pretty good run of about 150 years.” She further added, “...we are in almost 2020, having made tremendous advances in technology that have educated us and trained us to shop in a different way, so the concept of the department store needs to change.”
43
Moreover, the initial reluctance of Barneys in accepting the consumers’ preference for online shopping was the proverbial last straw. The company data indicated, “60 percent of its customers ages 34 and under — the much-coveted millennial demographic — still shop in its bricks-and-mortar locations.”
44 Yet, Barneys was keen to retain its e-customers through
‘beautiful presentation and personalised service’. It even re-launched its e-commerce sites based on responsive design highly improving its online presentation.
45 The retailer was well
aware that it was critical to reformulate its e-commerce strategy as customers were using their phones, tablets and laptops for purchasing. Matthew Woolsey, (Woolsey) Former, Executive Vice president, Digital, Barneys stated, “Mobile, personalization and editorial are the most impactful e-commerce trends of the moment and will be for quite some time...Our new site is the first fully responsive site in luxury retail, which is a real game-changer for us.” It was significant to recreate the in-store experience for online customers. Woolsey said, “A key to the company’s e-commerce strategy is going to be amping up its editorial content, because that’s an area where they’re achieving significant return on investment...Customers who read The Window spend 40% more than our average shopper... So far, customers have responded
40
“Barney’s Bankruptcy Provides Lessons for the Future of Retail”, op.cit. 41
“The rise and fall of Barneys, the iconic New York luxury department store that will likely soon close its doors for good”, op.cit. 42
Curan Catherine, “Barneys looks at downsizing to survive bankruptcy”, https://www.chicagobusiness.com/retail/barneys-looks-downsizing-survive-bankruptcy, September 9
th 2019
43 “Bye Bye, Barneys? Why Luxury Is the Latest Retail Casualty”, op.cit.
44 “Barneys, Global Symbol of Creative Cool, Files for Bankruptcy”, op.cit.
45 Wahba Phil, “Barneys New York raises e-commerce ante with site relaunches”,
https://fortune.com/2015/03/03/barneys-new-york-e-commerce/, March 3 rd
2015
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extremely well to personalized editorial such as lookbooks, exclusive designer interviews, videos and Window stories that are tailored to them.”
46 However, fast growth in its online
sales could not bear the burden of loss-making stores. Having made heavy investments in e- commerce, Barneys stated, “Online retail is a ‘profitable and promising revenue channel’ that makes up 30% of sales.”
47
Barneys appeared to be another prey of millennials’ distinctive fashion choices. Shawn Grain Carter, (Carter) Associate Professor, Fashion Institute of Technology observed, “...like many of its competitors, Barneys hasn’t kept up with young people’s changing shopping habits. And online, Barneys faces competition that it didn’t 25 years ago thanks to the emergence of luxury ecommerce retailers like Net-A-Porter, Shopbop, Mytheresa and FarFetch.” She further added, “Think about how young millennials shop—even those with money, they shop online... You have to set your business model so the revenue generation is more online than it is in your physical store now.” On the closure of well-known department stores - Lord & Taylor and Henri Bendel’s flagship locations in 2018, Dennis according to Deloitte’s Center for Consumer Insight stated, “A major problem for all these retailers comes from the fact that many of their prices are prohibitively high for most shoppers, particularly those under 35, who have 35% less wealth than consumers of the same age back in 1996.” High prices being synonymous with luxury, Dennis further said, “Luxury, in general, is a very mature market, and a lot of the high- end luxury players have not figured out how to attract younger customers without lowering prices considerably, so they’re sort of boxed in from that high-priced position.” While Carter opined, “So many of these stores are really showrooms for the merchandise these days because there’s so little foot traffic in them.” However, the existence of these high-end stores signified New York City’s status as ‘Mecca of fashion and style’.
48
Barneys and Authentic Brands Group LLC The Barneys story ‘as a legendary retail destination’ ended officially. Honig said, “It’s a devastating end, even humiliating, to what is an ironically New York institution, and not just because New York is in its name. Barneys was a retail destination that was born of the American dream.” She further added, “Barneys’ singular focus on luxury for the sake of luxury created a company culture that often was at odds with its clientele.”
49 On October 31
st 2019,
according to a report by Business of Fashion, “Barneys' ongoing bankruptcy saga ended after a judge approved a deal to sell Barneys to Authentic Brands Group and B. Riley Financial Inc. for $271.4 million.” (Exhibit I). Under this current agreement, ABG proposed to shut down many of Barneys New York stores though it was not going to divest of the Barneys brand completely. Moreover, ABG was licensing Barneys' brand to Saks Fifth Avenue (Saks) wherein Saks would initiate a couple of Barney’s shops within its area. While for the prominent Madison Avenue spot, ABG would convert the place as a ‘pop-up retail experience’ consisting of boutiques, art installations as well as other entertainment varieties.
50
46
Lindner Matt, “Barneys relaunches its e commerce site with an eye on personalization and editorial content”, https://www.digitalcommerce360.com/2015/03/24/barneys-relaunches-its-e-commerce-site-more- personalization/, March 24
th 2015
47 “Barneys looks at downsizing to survive bankruptcy”, op.cit.
48 “With Barneys in Financial Trouble, Can Iconic Department Stores Be Saved?”, op.cit.
49 “Barneys was a fashion tastemaker — but its success came with a dark cost”, op.cit.
50 Penrose Nerisha, “Barneys New York Has Officially Been Sold”,
https://www.elle.com/fashion/shopping/a29669437/barneys-new-york-sold/, November 1 st
2019
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Exhibit I Closing of Barneys Stores
Source: Edelson Sharon, “Authentic Brands Group Is Keeping an Open Mind About Barneys New
York”, https://wwd.com/business-news/retail/authentic-brands-group-is-keeping-an-open-mind- about-barneys-new-york-1203401825/, December 19
th 2019
Jamie Salter, (Salter) Founder, Chairman and CEO, ABG stated, “This is an important deal for ABG...It’s a luxury brand. It’s a retail brand that in my opinion is a real brand, that has a heartbeat, has a lot of emotion, can go in a lot of directions. It’s part entertainment, it’s part luxury, it’s part trend, it’s part experiential. It really is an incredible brand to add to the ABG portfolio. We are going to treat it incredibly carefully.” On ABG’s future plans for the Barneys brand, Salter said that he had planned to include a “...lot of Barneys stores around the globe as shop-in-shops...Some are going to be as big as 50,000 square feet and maybe some as small as 5 to 10,000 square feet.” He further added, “Among the markets... especially attractive to Barneys were Korea, China, the U.K., the Middle East, Germany, Turkey, Israel, and Russia. Barneys’ Japanese stores will continue to operate as usual, maintaining an existing licensing agreement between Barneys New York and a Japanese partner.”
51
ABG was taking a multiple views to the Barneys New York business which it had acquired out of bankruptcy. There were many aspects, yet few ideas had begun to concretise. Sharon Edelson, Senior Editor — Women's Wear Daily
52 stated, “ABG is looking to monetize its
investment overseas, and for partners to power the concept it installs at Barneys’ former Madison Avenue flagship.” Further, the company was looking to utilise Barneys’ overseas recognition in East Asia which included Japan by retaining 12 stores in association with its existing partners. It was concentrating on those countries where business was operational with sufficient staff to improve its position. This covered Shanghai where ABG had office saw opportunity and Korea where Barneys was popular among customers. In 2018, Barneys had signed a wholesale agreement with Boon the Shop for selling its private label. Boon the Shop was operational in Cheongdam, units in Gangnam, Centum City and Daegu New World. Simultaneously, during the Boon the Shop deal, Barneys was also considering distribution in China. Just after Barneys’ acquisition, Salter “envisioned international distribution of branded private label merchandise created as a result of the intellectual property agreement.” Salter was addressing the fashion and retail circles by enquiring from ‘fans’, “Where should we take Barneys next? To Russia? Should we take Barneys to Korea?” According to industry experts, “An international play would make sense, since the retailer is known in Japan and there’s
51
Schneier Matthew, “Good-bye, Barneys New York. Hello, Barneys New York at Saks”, https://www.thecut.com/2019/11/goodbye-barneys-new-york-hello-barneys-at-saks.html, November 1
st 2019
52 It is a fashion-industry trade journal sometimes called "the bible of fashion".
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demand for the nameplate overseas.” While Salter opined, “We’re fairly confident that over the next couple years, Barneys will be much bigger than it is in its current state... Other attractive markets include Turkey, Germany, the U.K. and the Middle East.”
53
A statement released by the company stated, “Authentic Brands is committed to preserving the legacy of Barneys New York while positioning it for long-term growth through key partnerships that will expand its global presence as a lifestyle brand and luxury retail experience.”
54 With an eye on the future, ABG with its brand portfolio - Juicy Couture and
Nautica proposed to utilise its international stronghold for reorienting Barneys and enhance its existence worldwide by means of ‘pop-ups, shop-in-shops and e-commerce’ alongwith ‘a new freestanding store in an as yet unidentified key U.S. market’. ABG in its statement said, “There is a vision to create multisensory experiences that will usher Barneys New York into a new era while staying true to the brand’s DNA... Its initial focus will be on high-fashion collaborations, branded namesake products, and expanding international retail in both brick and mortar and eCommerce.”
55 Besides, ABG's plans for Barneys would also focus on ‘lively dining, and
premium shopping experiences’. Further, it would make Saks Fifth Avenue - a retail partner for the brand in the U.S. and Canada’ through a licensing partnership.
56 ABG stated that it would
be ‘building a business model that will adapt this legendary brand for the future of experiential luxury’.
57 Moreover, Barneys' 12 stores in Japan in operation by Seven & I Holdings based on
licensing agreement would also continue its operations. 58
ABG had approximately 50 other businesses linked to its continuously expanding network while having plans to run the Barneys digital operations by licensing Barneys to a well known expert - Saks Fifth Avenue and its parent, Hudson’s Bay Co. Relief was expressed by retail experts and brand partners that Barneys had a future.
59 Apart from ABG’s plan of having nearly
40 Barney’s shops within Saks Fifth Avenue stores, it was likely to include few ‘free-standing locations’ at Boston and a new location in Greenwich, Conn.
60
Retail was experiencing disrupting and merciless changes wherein several ‘established retail infrastructure’ were getting destroyed. The consumers were willing to purchase but wanted it in a different way than how Barneys had been offering it since long.
61 Would ABG be able to
nurture the ultimate legacy of Barneys and carry forward the torch of fashion? According to Ray Hartjen, Marketing Director, RetailNext
62 , “Barneys has, and still has, a lot of brand cache
among its core customers and target demographics. While Authentic Brands will have to be
53
Edelson Sharon, “Authentic Brands Group Is Keeping an Open Mind About Barneys New York”, https://wwd.com/business-news/retail/authentic-brands-group-is-keeping-an-open-mind-about-barneys-new- york-1203401825/, December 19
th 2019
54 D’innocenzioap Anne, “Barneys New York officially being sold piece by piece”,
https://www.sandiegouniontribune.com/business/nation/story/2019-11-01/barneys-officially-has-a-new-owner- authentic-brands, November 1
st 2019
55 “Authentic Brands Group completes acquisition of Barneys”, https://cpp-luxury.com/authentic-brands-group-
completes-acquisition-of-barneys/, November 3 rd
2019 56
Mau Dhani, “What’s going on with Barneys? A Timeline of its sale and what’s next”, https://fashionista.com/2019/11/barneys-closing-bankruptcy- timeline?utm_source=site&utm_campaign=related, November 1
st 2019
57 “Barneys Is Sold for Scrap, Ending an Era”, op.cit.
58 “What’s going on with Barneys? A Timeline of it sale and what’s next”, op.cit.
59 “Will the Union of Barneys & Saks Help Refuel the Department Store Sector?”, op.cit.
60 “Barneys is awarded to Authentic Brands, which plans to shut stores”,
https://www.latimes.com/business/story/2019-10-31/barneys-awarded-to-authentic-brands, October 31 st
2019 61
“Why Barneys New York Won't Survive Bankruptcy”, op.cit. 62
It is the worldwide market leader and expert in retail analytics for brick-and-mortar retail, delivering real-time analytics.
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careful on how it moves forward, it should be able to protect the brand's identity and strong following.”
63 Meanwhile, on the future of Barneys under ABG, Salter excitedly said, “I’m really
excited about it...The brands in ABG’s portfolio continue to get stronger and stronger as the years go by. You can’t just be a retailer anymore. You’ve got to be experiential, you’ve got to be in so many different things today. You really have to offer everything to the customer. We feel that we’re off to a great start with Saks and feel incredibly confident.”
64
Annexure I
Barneys Growth Journey through Decades S.# Decades Particulars
1 1920s Barney Pressman pawns his wife's engagement ring for opening a 500-square-foot men's discount clothing store on Seventh Avenue and 17th Street. His slogan? "No Bunk, No Junk, No Imitations."
2 1930s Barney develops his business with bold and creative marketing.
3 1960s Barney's son Fred kick-starts the transition from discount store to luxury destination in collaboration with Hubert de Givenchy and Pierre Cardin to give New York men a taste of European style leading to emergence of men's designer clothing.
4 1970s
Fred’s youngest sons, Gene and Bob enter the family business to look after expansion of women’s designer clothing. Meanwhile, Phyllis - Fred’s wife supervises gifts for home labelled ‘Chelsea Passage’ to successfully compete with elegant uptown retailers.
5 1980s
The apostrophe in Barneys was dropped. Ivan Chermayeff - Artist and advertising visionary created the new Barneys New York logo. Barneys establishes itself as the place where fashion-forward men and women go for innovative design. The CO-OP is born. Japanese avant-garde designers find their first home in the U.S.
1986 - Madonna’s ramp walk in a denim jacket was the ultimate merger of uptown and down. The Barneys advertising campaigns were shot by a roster of emerging photographers like Nick Knight, Herb Ritts and Steven Meisel casting promising supermodels du jour LINDA, NAOMI and CHRISTY setting new standards of creativity in the industry. Besides, Barneys opened the legendary, still-talked-about 17th street store for women, designed by Peter Marino and Andree Putman. It was equipped with a restaurant, hair salon, eclectic designer mix and bold windows designed by Simon Doonan to fast become a downtown destination.
6 1990s
During this decade Barneys opens stores across the country and expands into Japan. In 1993, Barneys New York opens the largest new store in New York City - a 230,000- square-foot Peter Marino-designed flagship on Madison Avenue with a performance by Barry White at the opening party.
7 2000s
The Barneys expansion continued with new stores in Boston, Dallas, Scottsdale, San Francisco and Las Vegas.
2011 - CEO Mark Lee enabled the Barneys brand to enter a new era of innovation and reinvention. Besides, for 2011 Holiday, Barneys New York partnered with Lady Gaga to create an unprecedented extravaganza called Gaga’s Workshop.
2012 - For 2012 Holiday, Barneys New York unveiled the Electric Holiday video in the windows of its Madison Avenue flagship. Conceptualised by the brilliant minds at the Walt Disney Company wherein the moving-art short offered a glimpse of high-fashion world through the eyes of the ever-stylish Minnie Mouse.
63
Howland Daphne, “Where does Barneys go now?”, https://www.retaildive.com/news/where-does-barneys-go- now/566623/, November 5
th 2019
64 “Good-bye, Barneys New York. Hello, Barneys New York at Saks”, op.cit.
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2013 - For 2013 Holiday, Barneys New York and Shawn ‘JAY Z' Carter introduced A New York Holiday, an unprecedented collaboration celebrated the spirit of the city. Barneys New York and Carter partnered with some of the most prestigious fashion houses in the world—including Balenciaga, Balmain, Lanvin, and more for creating an exclusive, limited edition collection inspired by New York City. 2017 - Daniella Vitale took over as CEO after first spearheading significant growth within Barneys’ e-commerce sector.
2019 - Barneys continued to falter as a result of lost foot traffic, skyrocketing rent and stiff competition from e-commerce. In August 2019, the luxury retailer filed for Chapter 11 bankruptcy.
8 ...and
Beyond
Barneys New York worked with renowned photographers like Juergen Teller, Mario Sorrenti, Bruce Weber, Inez van Lamsweerde and Vinoodh Matadin on groundbreaking advertising campaigns.
Source: Compiled by the Author from – 1. “Barneys New York Is”, https://www.tableware.com/m/sites/view/Barneys-New-York-Luxury-Designer-Handbags-Shoes-
and-Clothing 2) Tewson Cameron, “The Rise and Fall of Barneys”, https://www.frontrowedit.co.uk/the-rise-and-
fall-of-barneys/, November 1 st
2019
Annexure II Fundamental Struggles Faced by Barneys
S.# Problems Particulars
1 Narrowly focused business model
Barneys' positioning was rather well-defined and compared to its luxury brand competitors it targeted a more consistently affluent customer. From a differentiation standpoint, this was a positive, but limited customer appeal.
2 Limited market
potential
As a narrowly focused model, it seemed only a few markets could support a full-line store. Despite execution errors, Barneys had proved that its brand did not travel well as the company entered and left Dallas twice, flagship store in Scottsdale, Arizona, closed after only a few years while expansions into Las Vegas, San Francisco and Boston had significantly under-performed.
3 Maturing luxury
market
Apart from Barneys' specific issues, any turnaround would necessitate an evolving, rapidly maturing luxury fashion market. The historical core customer for high-end luxury was aging and spending less money on stuff and more on experiences. Younger customers generally seemed less interested in expensive fashion.
4 Escalating
competition
There was no shortage of brands vying for Barneys' customers. In particular, many of Barneys' suppliers had aggressively invested behind their own direct-to-customer initiatives by opening their own stores and improved their online presence. Newer brands like Net-a-porter and Farfetch as well as digitally native brands like Glossier were eating into Barney's business.
Source: Compiled by the Author from - Steve Dennis, “Here We Go Again. Can Barneys Survive In Luxury's New World?”, https://www.forbes.com/sites/stevendennis/2019/07/17/here-we-go-again-
can-barneys-survive-in-luxurys-new-world/, July 17 th
2019
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r pu
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to v
ie w
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m at
er ia
l o n-
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pr in
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yo ur
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il 21
-J ul
-2 02
1. P
ur ch
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fo r
us e
by W
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L in
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21 -J
ul -2
02 0.
O rd
er r
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38 69
76 .
