Los Angeles Times - 07.08.2019

C2 WEDNESDAY, AUGUST 7, 2019 LATIMES.COM/BUSINESS

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BUSINESS BEAT

The slew of value- and
mid-price retailers that
have entered bankruptcy in
recent years is getting some
posh company.
Barneys New York, the
upscale department store
chain, said Tuesday that it
had filed for Chapter 1 1
bankruptcy protection after
reports that it was seeking a
lifeline as it grappled with
high rents and tough com-
petition. The retailer said it
planned to close 15 physical
stores. The remaining busi-
ness will include five flag-
ship department stores,
including the one in Beverly
Hills; two Warehouse stores;
and its e-commerce shop.
Barneys isn’t a particu-
larly large chain: Saks Fifth
Avenue and Neiman Marcus
are close competitors that
have more stores. So its
closings won’t roil the retail
landscape like those of
ubiquitous retailers such as
Sears or Toys R Us. Howev-
er, thanks to paparazzi
photos of Kim Kardashian
and other celebrities stop-
ping by its stores, as well as
the reputation of its Freds
restaurant as a hub for New
York’s elite, Barneys looms
large as a defining emblem
of American luxury.
Its financial woes are
similarly symbolic because
they demonstrate just how
much the pressure to inno-
vate in the luxury business
has ramped up.
Luxury apparel and
accessory brands and stores
weren’t exactly at the lead-
ing edge of e-commerce,
with some in the industry
believing that shoppers
would never migrate en
masse to the internet when

looking for expensive pieces

that were traditionally sold

with high-touch customer

service. That notion has

been disproved, and online

is quickly becoming the

category’s most important

battleground.

It isn’t that Barneys

stood still on e-commerce. I

remember interviewing a

senior e-commerce execu-

tive there in 2015 and think-

ing the company was mak-

ing good progress on buzzy

industry ideas such as per-

sonalization. The problem is

that competition for a rela-

tively narrow market —

meaning shoppers who can

shell out $4,820 for a midi

dress — is becoming fiercer.

Richemont’s Net-a-

Porter has established itself

as a go-to digital destina-

tion. Matches Fashion,

which is based in the U.K.

but counts the United

States as its largest market,

is becoming an e-commerce

force with a particular em-

phasis on introducing cus-

tomers to new, under-the-

radar designers. That is

something Barneys has also

been known for.

Meanwhile, marquee

luxury brands are lavishing

attention on their own

stores and websites. And

resale marketplaces such as

Farfetch Ltd. and the Real-

Real Inc. are putting

secondhand luxury inven-

tory at shoppers’ fingertips.

Customers who might have

defaulted to Barneys five

years ago have seen an

explosion of options.

Barneys isn’t just a vic-

tim of evolving shopping

habits, though. The com-

pany said it has also been

choked by high rents. The

Wall Street Journal has

reported the rent on its

Madison Avenue store has

risen to $27.9 million from

$16.2 million earlier this year.

According to data from

CBRE, rents in prime shop-

ping areas in Manhattan

have fallen from recent

peaks but remain elevated

from where they were at the

beginning of the decade.

It’s clear that the value of

big-city flagships is being

reevaluated up and down

the retail food chain. Lord &

Taylor closed its Manhattan

location, and Ralph Lauren

Corp. and Abercrombie &

Fitch Co. have also moved to

give up New York flagships.

These chains seem to be

deciding that they don’t

need flashy showpieces, just

productive stores.

The trouble is, an ultra-

high-end retailer like Bar-

neys does need showpieces.

It needs its stores to be

emporiums of rarity and

inspiration. Matches Fash-

ion recently set up a tempo-

rary shop on a yacht and

ferried customers around

the Italian coastline. The

renovated Selfridges in

London is setting an ex-

tremely high bar for what

global luxury shopping

should look like. Barneys

needs to keep up, and hav-

ing sprawling stores in big

cities is part of that.

So, while less-upscale

retailers can afford to ditch

or shrink their lavish flag-

ships, Barneys simply can’t.

Barneys may emerge

from its bankruptcy as a

smaller but healthier com-

pany. The fact that it ended

up here, though, should put

the rest of the luxury world

on notice. No matter how

iconic your brand, you aren’t

immune to sweeping

change.

Halzack writes for

Bloomberg.

Lessons of Barneys bankruptcy

BARNEYSNew York filed for Chapter 11 bankruptcy protection as it struggles in

a relatively narrow market, where shoppers shell out thousands for a single dress.

Spencer PlattGetty Images

Luxury stores aren’t

immune to high rents

and industry turmoil.

By Sarah Halzack

COMMENTARY

Walmart Inc. is report-

edly looking to sell Mod-

Cloth, the women’s apparel

site it acquired two years

ago, as it looks for ways to

pare losses at its online busi-

ness.

“I can confirm that Wal-

mart has received outside

interest from buyers for

ModCloth,” the brand’s chief

executive, Silvia Mazzuc-

chelli, told Glossy magazine.

“We are in the process of ex-

ploring potential opportuni-

ties.” Recode first reported

that Walmart was consider-

ing a potential sale last

month.

Representatives for Wal-

mart didn’t immediately re-

turn requests for comment.

The world’s largest re-

tailer acquired ModCloth in

March 2017 to bring some

much-needed pizzazz to the

company’s stodgy apparel

business, which for years

didn’t venture far beyond

basic items such as T-shirts

and underwear. Acquisi-

tions of other online clothing

retailers such as Bonobos

and Eloquii followed, along

with a partnership to sell

Lord & Taylor’s products on

Walmart’s website.

Founded in 2002 by Su-

san and Eric Koger, Mod-

Cloth began as a seller of

vintage clothing, hawking

items handpicked by Susan.

The business grew into a

$150-million retailer known

for its whimsical dresses and

quirky outfits for the retro

girl, but it faltered in 2014 as

struggling sales growth led

to two rounds of layoffs. The

founders stepped aside and

hired Matt Kaness, a retail

veteran, to help bring Mod-

Cloth into the mainstream.

The brand dialed back its

more outlandish offerings,

hoping to appeal to a

broader range of women,

and began opening physical

storefronts.

ModCloth was always an

odd fit inside Walmart’s but-

toned-down culture, and the

business has seen a revolv-

ing door of senior managers.

Mazzucchelli, who previ-

ously worked at American

Apparel, is the brand’s third

CEO in three years. Plans to

open additional physical

stores have been dialed

back, Glossy reported.

Walmart’s online expan-

sion has come at a cost to

profitability, and losses at

the U.S. e-commerce busi-

ness could rise to about $1.

billion this year from $1.4 bil-

lion in 2018, Morgan Stanley

estimates. In recent weeks,

the company has merged its

Jet.com subsidiary into its

broader e-commerce unit, a

signal that Walmart can just

as easily reach urban millen-

nials with its main shopping

site.

Walmart may sell

women’s apparel

website ModCloth

WALMART’S online

unit Bonobos has bricks-

and-mortar shops too.

Bebeto MatthewsAP

Retail giant is seeking

ways to trim online

losses after expansion.

bloomberg