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Rebooting Barneys New York

The troubled retailer could once again be reborn. But this time, it’s going to take a drastic overhaul to get the business back on track.
Barneys New York bags | Source: Getty Images
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What a week it's been for Barneys New York. After filing for Chapter 11 bankruptcy protection in the early morning of August 6, the luxury retailer, which owed brands millions of dollars in back payments, announced that it had secured $218 million in financing that would allow it to keep operating while searching for a buyer. (It has until October 24 to find a partner or face liquidation.)

All week, Chief Executive Daniella Vitale has been issuing messages reassuring employees, updating them on new developments and thanking them for their patience during the uncertainty. “Please know that we understand the personal impact the closing will have on some of you and your families, and we are working hard to make the transition as smooth as possible by giving you as much advance notice as we can,” Vitale wrote in an August 7 memo. “I appreciate your continued support, commitment and tenacity. I am personally extremely grateful.”

If Barneys does find a buyer, it’s clear that the company will need to evolve. Yes, Barneys has a great brand and a still-devoted customer base. But depending on what kind of company gains control, a “reboot” could mean anything from a complete management turnover to an entirely new business model.

A licensing firm, for instance, may want to reduce the inventory of luxury goods Barneys actually sells, opting to shill branded merch at airport kiosks and boost its presence overseas à la Fred Segal or Harrods. However, if the new owner is eager to bring back the Barneys magic and make the retailer a fashion leader once again, it will have to make serious changes to the company’s approach.

Here’s what Barneys needs to consider:

Step 1: Shrink to Grow

As part of its financing deal, Barneys already has plans to shutter eight mainline stores as well as seven outlets, leaving open five physical “flagships” and two off-price locations, as well as its two e-commerce sites. There are clear advantages to having a tighter retail network: it keeps both focus and productivity high. Instead of opening a new store at the American Dream Mall in New Jersey — which is still in the retailer’s current plan — it should focus on these five locations and consider shrinking its footprint even further while it recalibrates and figures out a new value proposition.

Step 2: Reimagine the Floor Plan

While reducing its number of doors is critical, what Barneys does with its remaining square footage is equally important. Does Barneys really need all the floor space in its nine-story, 230,000-square-foot Madison Avenue flagship? Surely downsizing is critical to both reducing the burden of high rent and improving retail productivity. That said, small doesn’t always mean beautiful. Barneys’ 9,266-square-foot unit at The Grove, a popular outdoor mall in Los Angeles, is a tenth of the size of its 108,000-square-foot flagship in Beverly Hills. But the Grove location is boring — bad merchandising, awkward layout — while the much larger Barneys Beverly Hills is the second-highest-grossing store in the group (after Madison), and probably its most productive per square foot. It’s a fun store: there’s the restaurant Fred’s, but also a beautifully laid out shoe floor and an easy-to-navigate ready-to-wear department. It’s also a little more crowded than Barneys’ other locations, making for a buzzier shopping experience. Selfridges, Le Bon Marché, Dover Street Market: these successful retailers have large stores, but they are not spare; they’re genuine destinations, filled with things to keep the eye busy.

Step 3: Double Down on Digital

Physical retail isn’t dead. But online touchpoints are increasingly the beginning and end of the customer journey. Barneys may have missed its opportunity to become the American equivalent to MatchesFashion, the London-based retailer which went all-in on digital more than a decade ago. It certainly can’t get back the $200 million it’s poured into physical retail in recent years. But Barneys clearly needs to allocate greater funds to boosting its e-commerce presence and turning this channel into a more significant revenue driver for the business.

Step 4: Better Integrate Physical and Digital

Retailers like Nordstrom and MatchesFashion might not be opening new stores, but they are opening new service- and experience-focused spaces linked to online inventory. Last year, MatchesFashion, which placed far less focus on its physical footprint as its digital business took off, opened the widely lauded 5 Carlos Place, a five-storey townhouse in London's Mayfair area, to host events, offer personal shopping services and showcase an incredibly tight edit of its overall offering, with the ability to order from the full catalogue with the flick of a finger. The Los Angeles iteration of Nordstrom's zero-inventory "Local" concept — part events space, part "click-and-collect" centre for online orders — has been so successful that the department store plans to open two in New York City this fall. Barneys already has a leg-up on experiences: its events, from a recent Chanel pop-up in Manhattan to The Drop, a streetwear-driven concept, often generate significant sales. The Drop LA — a weekend-long event hosted in May 2018 with streetwear site Highsnobiety that included a surprise musical performance from Wu-Tang Clan as well as several designer appearances — generated $1.2 million in retail sales along with $440,000 in online sales.

Step 5: Make Men’s a Bigger Focus

Barneys started out, in 1923, as a 500-square-foot men’s suiting store and was the first to bring Giorgio Armani’s big-shouldered blazers to America in 1976. To this day, it remains a leader in luxury menswear, a market that is growing and diversifying thanks to the rise of millennials and the changing tastes and looser gender boundaries they have embraced. (The men’s designer fashion and footwear market continues to expand and is projected to reach $46 billion by 2023, according to data from Euromonitor International.) Barneys should run with this, championing young designers by offering favourable contract terms and increasing its marketing moments dedicated to men’s fashion.

Step 6: Shake-up the Creative Team

Barneys has had multiple heydays: Fred Pressman took it upscale in the 1960s and 1970s. The late Glenn O'Brien, who joined in 1988 to run advertising, brought his signature irreverence to luxury. As fashion director from 1992 until 2010, Julie Gilhart made sure the best, newest brands were sold at Barneys, and former creative director Simon Doonan devised the most inventive holiday windows imaginable. In order for Barneys to rise up again, it will need a confident creative team with a strong sense of the current zeitgeist, how to generate cultural relevance and what the retailer needs to be now, from its buys to its windows to its digital marketing.

How this all plays out remains to be seen. Even with the right buyer, strategy and management team, Barneys New York has a lot of catching up to do. And unlike its 1996 bankruptcy, which was covered in print, this time around, consumers have been following the fall of Barneys online, play by play, eroding its once shiny brand. But everyone loves an underdog; especially one with good taste. Don’t count Barneys out just yet.


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