What Barneys New York once was is what retailers should be — exciting, experiential, innovative and au courant.
“It was all about curation and style and editing where you could see what was going on in culture and fashion,” observed Robin Kramer of the Kramer Design Group. “It wasn’t just a place to buy stuff or what new designer you could find on a rack. It was clubby and really about community as much as buying products. It was a hotbed of creativity, not just clothes.”
“It’s ironic. Barneys started as a discounter almost a 100 years ago and now is saying goodbye like a discounter again. It’s heartbreaking,” lamented one former longtime Barneys executive. “What you see in the store now is not all Barneys-bought. Much of it has been bought by the liquidator.”
“Watching Barneys evaporate is very, very hard. To me, Barneys was aspirational,” said Marian Salzman, senior vice president of global communications for Philip Morris International. “In my 20s and 30s, I longed for the day when I earned enough money to shop there.…But Barneys represented a point in time. It never reinvented. Other stores like Zara, Old Navy and Bloomingdale’s have done better jobs of recognizing a new generation without losing the old generation. The most important thing you can be as a retailer is resilient.”
With its chic, hip Madison Avenue flagship liquidating with huge discount signs blasting 40 to 60 percent off storewide, seriously unbecoming the Barneys image, what remains are fond memories along with feelings of sadness and disappointment over its demise. While trying to fathom all the reasons why Barneys failed, the fashion industry is contemplating if there is any real future for Barneys under its new ownership. It seems limited. Once a business goes out of business, it’s hard to make a comeback.
In November, less than three months after it went bankrupt for the second time, Barneys was sold to Authentic Brands Group and B. Riley Financial Inc. for $271.4 million. Then ABG struck a licensing agreement with Hudson’s Bay Co., the parent of Saks Fifth Avenue, to enable Saks to integrate the Barneys brand into its operations. Most Barneys stores have already closed, but there’s no precise date yet when the flagship, as well as the Chelsea branch in Lower Manhattan, shut down.
WWD has learned that Saks, through its licensing agreement with ABG, plans to re-brand its contemporary business, currently called The Collective, to Barneys. It would be a low-cost maneuver aimed at casting a brighter light on contemporary fashion at Saks.
Jamie Salter, ceo of ABG, has said 40 Barneys shops will open inside Saks locations, including a 50,000-square-foot Barneys within the Saks flagship in Manhattan, as well as a freestanding location in Greenwich, Conn. But it’s not like Saks or ABG are about to put up new Barneys shops or spend a lot of capital. It’s about re-branding contemporary floors already existing at Saks stores and re-branding the freestanding Saks Collective store in Greenwich.
Saks could develop new Barneys logos, shopping bags, add social media and maybe even create cool uniforms for sales associates, to cast a fresh Barneys identity within the walls of Saks. In luxury retailing, it’s customary to brand the contemporary department with its own name and marketing. The contemporary floors are among the most trafficked in department stores so why not spotlight them. Bergdorf Goodman has “5F.” Neiman Marcus previously labeled contemporary as “Cusp,” and at Barneys, contemporary was identified as Co-op.
The 36,268-square-foot Collective contemporary floor at Saks has a boutique-y feel, mixing items from different brands to create unique outfits, “collectively” depicting a trend or a color palette, and leaning into looks and lifestyles that take precedence over aggressively promoting designer labels. It could be called Barneys or “Barneys Co-op at Saks Fifth Avenue.”
In Greenwich, Saks operates a 14,000-square-foot freestanding Collective store that could be re-branded Barneys Co-op. When that store opened in 2015, Tracy Margolies, Saks’ chief merchant, said of Collective, “It’s not about age. It’s about lifestyle, representing fashion, dressing women of all ages and making her feel current, elegant and fashion-forward. It’s about us standing for key trends, key items, and being first to launch emerging designer,” which is what Barneys always did.
“I would not expect them to spend a lot of capital on Barneys or have separate Barneys stores. But for Saks, it is an opportunity to bring in another customer to the store, a more fashion-forward customer,” Stephen Sadove, principal of Stephen Sadove & Associates and former chief executive officer of Saks, recently told WWD. The danger is that a Barneys presence dilutes the Saks image.
Barneys did morph its in-store Co-op business into a separate Co-op chain in the Aughts. They seemed popular for a while. “I believe Co-op responded to how times were changing. People were beginning to dress more casual,” said Salzman.
Yet in 2013 Barneys began closing the Co-ops and converted some to regular Barneys stores. More moderately priced competitors such as J. Crew and Banana Republic bit into the business, customers balked on much of the pricing at Co-op, and the ambience, at least according to Salzman, was “arrogant.”
One slice of Barneys that has stood the test of time is private label. It’s another logical addition to Saks. Barneys’ private label has been highly regarded, particularly in men’s wear and women’s shoes, and consistently it sold. Often sourced from top Italian mills and tanneries, the private-label operation was stacked with good merchants and buyers, and talented yet somewhat not well-known designers with a flair for details and quality fabrics.
“If they create Barneys products, Saks is a good venue to sell it and it will drive a healthy gross margin if done properly,” said Mortimer Singer, ceo of Traub, a management consulting and business development firm formerly called Marvin Traub Associates. “Saks gets a 55 percent initial markup from the brands they buy, and on their own developed product, 75 percent…Barneys’ private label was one of the better private labels I’ve ever seen and bought. The men’s is quite elegant, on trend, and of good quality. All the Barneys private label could be a significant business for Saks. I see that as being more strategic than trying to create a multibrand area. Just re-creating a zone with the name Barneys on it won’t mean much.”
The web is another opportunity. Saks could use the technology of its existing web site to power a Barneys web site, thereby operating two web sites efficiently.
ABG has touted the potential for opening licensed Barneys stores overseas in different countries. No partnerships have been unveiled yet. There are long-standing licensed Barneys stores in Japan, six flagships and six outlets.
However, it usually doesn’t work out when department stores expand outside their native country. Licensed Saks stores in Mexico aren’t considered successful and Galeries Lafayette had a short run in the U.S. In any case, Barneys at its best would be difficult to reproduce abroad.
“Scale is important. If you are a small business stuck in the U.S. without really the ability to go global, and with all of the brands opening their own stores, it’s hard to succeed, though the licensed Barneys business in Japan has been successful,” said Singer.
“I believe it’s very difficult to only be in one business,” he added. “You need to leverage your brand to be a platform offering different kinds of products and services and creating experiences in different areas of the luxury lifestyle. What Barneys could have done, and what department stores don’t do, is to think about the culture of hospitality — how you’re greeted or waited on is a very different experience from the average department store. The way of engaging has to change, not only in customer service but with the offerings to customers. The interest in arts, travel, real estate — the lifestyle — has to be considered. If you have a luxury customer, you can’t just sell dresses and handbags. You need to take another piece of their wallet. The Barneys brand, done well with the right merchants and the right creatives, could very easily become a lifestyle brand, an American equivalent of a Brunello Cucinelli or Loro Piana.”
Over the last two-and-a-half decades, Barneys survived through a string of ownership and management changes, though for most of its history was owned and operated by the Pressman family. The business was founded by Barney Pressman, who, as the story goes, launched his namesake men’s wear discount store in 1923 by pawning off his wife’s engagement ring for $500. His son Fred elevated the store by starting to sell full-price, importing European designers and developing a knack for introducing designers to New York shoppers, including being the first to launch Giorgio Armani men’s wear in the U.S.
Women’s wear was introduced in 1976, with a dedicated women’s store opening in 1986 in a row of six town houses and two larger adjacent buildings on the same block at the original Barneys. Fred’s son Gene led the development of the women’s business and he did it with bravado. He also started the ill-fated Barneys America rollout to cities around the country, principally in the Nineties in such cities as Dallas; San Francisco; Scottsdale, Ariz., and Las Vegas.
“I was there for 18 years, from 1992 to 2010. It was a unique time as my tenure began when Barneys was still being directed by the Pressman family,” recalled Julie Gilhart, former Barneys senior vice president and fashion director, now president of Tomorrow Consulting and chief development officer for Tomorrow Ltd. “I saw the store go through may change of hands over the years, but the core team was solid. We didn’t have the biggest budgets or wrote the largest orders compared to other stores, but we had a lot of creative courage. We were constantly on the hunt for the new and the best but had a true sense of heritage as well.
“There were so many great days,” Gilhart added. “We were a family of overly passionate merchants. We laughed, screamed and cried. We tried hard to grow and support new talent and we did that very well and grew so many tiny brands into large ones. All small brands need advocates and we played that role. It was a pinnacle moment for me in 2007 when we did our ‘Green Holiday’ campaign focusing on environmental product.
“The worst day was when new management came in and myself with others were let go. I didn’t expect that but in hindsight it was the perfect time to leave.”
Vulture funds Bay Harbour (now known as Homeward Capital) and Whippoorwill Associates bought Barneys out of its first bankruptcy in 1999. Later it was sold to Jones Apparel Group, which sold Barneys to Istithmar, a Dubai-based private equity firm, which sold Barneys to Richard Perry of Perry Capital, which took Barneys into bankruptcy.
Through all the disruptive changes in management and strategies, the bottom line is that the numbers just didn’t work for many years. Barneys stores opened in markets that weren’t receptive and Barneys lost its cool factor. Even its irreverent windows that routinely satirized pop culture figures like Madonna or Oprah Winfrey got played out over time. Much of what comprised Barneys’ assortment became widely available on the Internet with a spate of emerging web sites such as Net-a-porter, Matchesfashion, Farfetch, Moda Operandi and ShopBop.
“Due to the ability to buy things globally and the proliferation of stuff, the bar has become higher on brand personality, brand vision and curation,” said Kramer, who redesigned Barneys’ beauty department when it relocated from the main floor to the lower level. Kramer also designed the Co-op space upstairs and other areas of the flagship.
“If you have a really strong point of view and are offering something uniquely creative and authentic, there is a place for you,” Kramer said. “Barneys lost a lot of its personality and differentiation and became more about spreadsheets. It’s very sad what happened. But what Barneys originally stood for could be very relevant again. In retailing, there is room for another great point of view, with curation and style. That’s the challenge.”
Marcus Lemonis, the serial investor and star of “The Profit” reality show, told WWD that in retail, the real pressure point is rent. “It’s all built around rent. Period. End of story,” he said. And in the case of Barneys, huge rent increases to its Madison Avenue and Beverly Hills flagships this year was the straw that broke the camel’s back.
Yet there were also some questionable tacks taken in recent years, under ceo’s Mark Lee and subsequently Daniella Vitale. The two Barneys ceo’s were not department store operators. Rather, they led mono-brands, like Gucci, and did so successfully. They orchestrated renovations and new presentations at the Madison Avenue flagship intended to boost business, but these backfired and seemed to overly commercialize the business.
“They ripped up the Peter Marino tile floors and put down gray slate,” said the former Barneys executive. “The increased rents was a killer, but in an effort to put their own signature on the business, they made decisions that did not help the situation.”
“I don’t think the fault lies with Daniella,” said one fashion industry source. As soon as Barneys was sold, Vitale revealed she was leaving, said she was sorry for what happened to Barneys, and in what seemed like a blink of the eye, landed a high position at Tiffany & Co.
“Barneys started to sink way before she came on board. It was a long time in coming,” said the former Barneys executive, who did think that under the regimes of Lee and Vitale, the physical character of the store seemed less specialized and more department-store-like.
In 2016, Barneys reopened on Seventh Avenue between 16th and 17th Streets: the very same site where the company was founded by Barney Pressman. The polished bronze door handles and a sweeping Oscar Niemeyer-inspired spiral staircase exuded an elegance, yet the store overall didn’t quite match up to the character and charm of the earlier Barneys on the site, which had a striking Andrée Putman-designed winding staircase and intimate charm. Returning to Chelsea seemed unnecessary. Did Barneys really need a second Manhattan location, particularly considering that years before a branch in Brookfield Place in lower Manhattan failed?
However, Barneys hasn’t been alone in its plight. It’s been a year of high-profile retail bankruptcies and massive store closings, notably Dressbarn, which will have liquidated its entire chain by the end of this month. In the litany of bankruptcies, Destination Maternity blamed its woes on the declining birth rate, leadership turnover and the overall retail landscape; Sugarfina, the high-end candy brand expanded too fast, and Forever 21 also overexpanded and is in the process of closing hundreds of stores.
Others included Avenue, which confronted greater competition in its plus-size niche; Charming Charlie and Gymboree, which like Barneys both experienced second bankruptcies, as well as FTD, the floral delivery service; Sonia Rykiel, the venerable French fashion label; Z Gallerie home decor; Diesel in the U.S.; Charlotte Russe; Payless, and Shopko.
“All retailers today need to look at efficiency of their retail footprint. It means that everyone has to be nimble,” said Robert Burke, ceo of the Robert Burke Associates consulting firm, which develops retail concepts for a variety of different venues. “For Barneys, multiple locations and bigger locations was not better.” In places like Dallas and Las Vegas, the Barneys brand was too esoteric. Opening stores in those locations were more about making real estate deals than understanding whether Barneys was entering the right market.
Others said Barneys became too “practical” with its web site, executives grappled over how much to fund it, and they really didn’t grasp how strong the Internet was coming on. Barneys was “late to the game” online, Burke noted. “By the time they focused on it and tried to catch up, there was a lot of competition. It’s important to realize that things are changing quicker than ever.”
Like Barneys, other department stores fell victim to the growing power and independence of brands evolving their own retail brick-and-mortar businesses and web sites, and Barneys never conformed to demands by major European luxury brands to house leased shops or concessions, inside the stores. There were consequences.
“Barneys lacked a balance of core brands along with young and emerging designers,” Burke said. “Barneys really didn’t have core businesses like Chanel, Louis Vuitton, Brunello Cucinelli, or even an Akris,” labels that other stores could rely on. “These are core businesses for many department stores. If your strategy is to focus on exclusive product, it’s really hard to make it work,” said Burke. “You can’t be doing exclusives just for the sake of exclusivity. It’s difficult.”
“The good times were amazing. I can’t imagine anything that would have been more exciting,” said the former Barneys executive. “With Gene, Neal Craft, Doug Lloyd, Glenn O’Brien and Fabien Baron who also worked on Barneys projects, it was an amazing whirlwind of creativity inspired by Gene who had a flair for marketing and merchandising.”
Barneys merchants established strong, often exclusive relationships with designers, Lanvin in particular with Alber Elbaz, creative director there from 2001 until 2015; as well as with Azzedine Alaïa, Dries van Noten and The Row, to name a few. Earlier, Fred Pressman established a strong relationship with Armani, and launched Armani men’s wear in the U.S. at Barneys.
For some, the beginning of the end for Barneys can be traced to the 230,000-square-foot flagship on Madison Avenue and 60th Street that opened in 1993. VIPs like Calvin Klein, Bianca Jagger and Ian Schrager packed the opening, Barry White performed and Barneys made an indelible impact on the avenue. Designer brands like Tom Ford subsequently saw an opportunity to open stores nearby and capture the overflow from the big boy on the block. With Barneys liquidating, a pall is cast over that part of the avenue.
“It wasn’t merely the fact that Barneys moved uptown. You had a lot of cooks in the kitchen,” said the former Barneys executive. “They were working with Peter Marino to create the store and changing orders often. That really sent the budget sky-high. Gene would spend hours designing something and Fred would redo it. There were changes in the construction phase. It was a very complicated situation and soon after, they started to stop paying bills,” primarily to smaller vendors. Barneys ran into major debt with its Japanese partner Isetan and in 1996 went bankrupt for the first time.
Certainly Barneys loyalists will miss the store. As Sarah Jessica Parker once told Vanity Fair, “If you’re a nice person and you work hard, you get to go shopping at Barneys. It’s the decadent reward.”
Barneys Madison Avenue landlord said in November that the Madison flagship will be around for 12 months more but in a shrunk-down format. As of last week, Barneys workers said they haven’t been notified of a targeted closing date, leaving them in the dark. Many have taken jobs at Nordstrom on 57th Street and other stores around town. At Freds inside Barneys, long a popular lunch-hour destination for VIPs and people-watching, workers there, too, didn’t know for how long they’ll be serving lunch and dinner.
Despite the Barneys experience, “We see a big opportunity for certain specialty stores, whether that be The Webster, Dover Street or Kith, to get the attention of that Barneys customer today,” said Burke. “We are not doom and gloom on retail or even multibrand retail. It just has to be distinctive. Look at what Selfridges and Bon Marché are doing. They are very strong retailers.”
“There is still plenty of room in the luxury retailing space,” said Gilhart. “But the approach has to be different and innovative.”