Barneys’ Bankruptcy Sheds Light on the Shifting Retail Market

Thoughts | Vanessa Nardin-Kruczaj

On Aug. 6, 2019, after a month of speculation regarding the financial situation of the iconic luxury retailer Barneys New York, the company declared it was filing for Chapter 11 bankruptcy.


It comes as no surprise that as technology and social media permeate all aspects of the luxury market, traditional retailers, like Barneys, experience the challenges of the shifting retail market. The demand for luxury goods and in-store experiences continues to evolve as a result of the financial advantage the online playing field has over the skyrocketing overhead costs, particularly increasing property rents, that are faced by traditional retailers. Barneys’ two most iconic locations, the flagship on Madison Avenue, New York and their store on Rodeo Drive, Los Angeles, cost the retailer millions of dollars in rent. As of January 2019, the rent of the New York flagship property had almost doubled from its previous value, going up to $30 million from the original $16 million (CNBC). As the number of luxury product channels expands, beloved retailers such as Barneys find themselves seeking innovative ways to remain prominent in the modern luxury landscape. However, they do not always find a long term profit-bearing solution. “The entire industry is in survival mode,” Barneys CEO Daniella Vitale said earlier this year, according to CNBC. “The model is not working, it’s not working for Neiman [Marcus], it’s not working for Saks, it’s not working for us, it’s not working for Nordstrom.”

Replacing these traditional retailers are exclusively online luxury platforms, such as SSense, Moda Operandi, Farfetch, Mytheresa, and Net-a-Porter, which benefit from their prominent online presences, high profile campaigns, and the increasing consumer attention they receive. These new channels offer a variety of luxury products, from clothing and accessories to skincare and home goods, and provide large-scale accessibility, efficient shipping methods, and exclusive partnerships with up-and-coming contemporary designers. Over the past few years, as social media and technology have provided easy accessibility and coverage for luxury brands (Bain), Generation Z has become the primary consumer demographic propelling the luxury retail market. The rise of Instagram boutiques and of applications like Shopify highlights the prevalence of “social shopping” within the retail landscape, where sellers and designers are finding new medians to showcase their pieces, sell their goods, and interact with consumers. For larger brands, “grammable” events and sponsored trips have become the main form of interactive marketing, utilizing social media’s influence amongst Gen Z shoppers to display an artificial depiction of what one can achieve by purchasing the company’s products. After all, being “grammable” has become the aesthetically pleasing trait that every business must assume, as retailers are no longer solely selling merchandise, but selling moments to be remembered and shared via Instagram’s multimedia platform.


“Generation Z expects technology to be intuitive, relevant and engaging — their last great experience is their new expectation,” says IBM General Manager of Global Consumer Industries Steve Laughlin (NRF).  With this in mind, it has become essential for retailers to curate personalized, interactive digital content, all while maintaining superior in-store shopping experiences to meet consumers’ demands. Due to the hyper-globalization of fashion and luxury products, which is coupled with consumers’ vast knowledge of products, the linear purchasing process of the past no longer seems to exist. It’s important that with the competitive state of the online market, traditional retailers don’t overlook the significance of a harmonized experience across both shopping methods, and that they attempt to make the transition between in-store and online shopping as seamless as possible. While poor online experiences cause retail confusion, positive online experiences aren’t enough to make up for a retailer’s lack of in-store innovation. In fact, according to the NRF, the “Uniquely Gen Z” study conducted by the IBM Institute for Business Value determined that “67 percent of Generation Z shop in a bricks-and-mortar store most of the time.” Additionally, when one area is lacking in retailers’ channels, consumers are easily attracted elsewhere. Loyalty is never consistent, as shown by the statistic that “52 percent of Gen Z consumers transfer loyalty from one brand to another if the brand’s quality is not up to par” (NRF). However, fixing this problem is easier said than done. Large investments have to be made for short-term relief from the fast-paced and constantly evolving market that doesn’t seem to stop for anyone. Luxury retailers need to make strategic decisions on topics like when to provide in-person showrooms rather than exclusively online outlets, which methods will cover overhead costs and generate profit-bearing outcomes, and how to ensure competitive longevity without harming the heritage and legacy of the establishment.


As high income earners in emerging markets become richer and the less fortunate experience even tougher economic downfalls, the wealth gap continues to expand and the role of the middleman is further reduced. "Store closings are the canary in the coal mine. They are tell-tales of fundamental economic shifts in the country,” says Brian Kelly, president of consultancy Brian Brands (RetailDive). “There is death in the middle, not because of a lack of meaningful differentiation but rather a lack of meaningful market size… Retail failure is consumer failure." The increasing wealth of Generation Z, which has a buying power of $44 billion, is leaving businesses scrambling to cater to this demographic, of which “75 percent [say] they spend more than half of the money that is available to them each month” (NRF). With the potential that Gen Z has to catapult businesses to success, retailers face relentless pressure to meet the competitive demands of this generation, which will make up 40% of the consumer market by 2020. (RaveReviews).

With Generation Z acting as the fuel driving the growth of fashion retail platforms, major changes are being made beyond the modification of buying channels. Brands are tapping into the evolution of cultures and social norms, which is leading to greater diversity and size inclusivity in their products. To reach larger demographics and meet these progressive expectations, brands are challenged to explore innovative mediums and become more aware of their societal and environmental implications. Fashion houses are beginning to both acknowledge and actively engage in improving their carbon footprint by shifting to eco-friendly production and manufacturing systems, while simultaneously replacing print marketing strategies with exclusively digital campaigns.

You might be wondering what the answer is here. Will in-store experiences eventually diminish? According to the “Uniquely Gen Z” study, they will not. Engaging with fashion in-person, where one can touch, feel, and interact with the fabrics, textures, and ambiances displayed by designers and retail strategists, is still a primal experience integral to the industry. Another question is whether luxury shopping can become even more efficient and fast-paced than it is today. At its current rate of growth, with the competitive culture manifested by companies like Amazon, and the hikes in both technology and fashion production, there seems to be no slowing down in the near future. Lastly, the most important question remains: Which legacy retailers will make it to the finish line? Only time will tell.

Barneys New York, Madison Avenue,  The Real Deal

Barneys New York, Madison Avenue, The Real Deal

Photo Creds:

Barneys’ Bag image: 


Interior image: 

Barneys, New York, Architectural Digest

Phone image: 

Barneys’ Mobile Website, Corra