Update: A Barneys spokesperson stated that Barneys will not shrink its footprint in an email sent to Retail TouchPoints.
“Barneys New York is committed to maintaining the footprint of its Madison Avenue flagship, and continuing to serve its customers within this iconic store,” said the spokesperson in their message. “There are no active conversations regarding the store’s footprint, and all statements indicating otherwise are false.”
Barneys New York may shrink the size of its Madison Avenue flagship store by more than half, people familiar with the matter told the New York Post. The luxury retailer may give up as many of five of its nine floors, which would lead to a significant reduction in the retailer’s current annual rent.
The retailer’s lease on the building ended on Jan. 31 and the new annual rent is set at $30 million — nearly twice the $16 million the retailer previously paid. The flagship store reportedly accounts for one-third of Barneys’ annual revenue.
Other retailers have been scaling back or shuttering their New York City flagship stores due to high rents and changing consumer behavior. Some recent high-profile closures and downsizes include:
- Gap shuttering its flagship;
- Calvin Klein closing its Madison Avenue store;
- Hudson’s Bay Co. divesting the iconic Lord & Taylor Fifth Avenue shop by selling it to WeWork;
- Ralph Lauren closing its own Fifth Avenue store less than three years after opening;
- L Brands shutting all Henri Bendel stores, including its NYC flagship.
- The six-level Nike experiential store, which uses mobile technology to bring displays to life and let shoppers check out anywhere;
- The resurrected FAO Schwarz store, which has put an emphasis on the shopper experience and added products beyond toys; and
- Sephora’s Paris flagship, which added an AI-powered digital mirror to provide a new level of personalization and curation.
The number of flagships closing and downsizing also may have to do with the national rate of vacancies, which was at 10.2% at year-end 2018, according to Reis. Malls were particularly hard hit, growing to a 9.1% vacancy rate in Q3 2018 from 8.6% in Q2, though they stabilized at 9% in Q4. The economic ripples from these vacancies, which are partially caused by bankruptcies, can lead to restructuring across the industry.
“Bankruptcies such as Bon-Ton’s will impact all types of locations indiscriminately, but surviving department stores will implement closure programs selectively,” said Deborah Weinswig, Founder and CEO of Coresight Research in an interview with Retail TouchPoints. “Those programs are likely to have a bigger impact on lower-traffic regional malls with lower sales densities than on premium malls — although retailers may opt to reduce the size of their expensive flagships, too.”
While many of those retailers shuttering or contracting are traditional department stores, modern, experience-focused locations are still going strong. Examples of flourishing flagship stores include: