When Barney’s New York was sold for a pennies last fall it signaled a shift in the luxury consumer landscape. Consumers are not rushing to retail stores quite like they once were (if you could argue that there was ever a time that luxury retailers were particularly thriving), and growing concern for the coronavirus economic crisis could mean that brick and mortar retailers are faced with more sudden closures than ever before.
Neiman Marcus last week filed for chapter 11 bankruptcy protection, a decision that would add stress to its many locations and its Bergdorf Goodman line of luxury retail shops. But the decision was no surprise, as the brand has been struggling with revenue loss for months. Unlike its former competitor, Barney’s, however, the brands have no plans to shutter in the immediate future. The company secured $675 million to resume its operations while it restructures its business model, aiming to maintain growth in the future.
“We have reached an agreement with lenders to undergo a financial restructuring that will substantially reduce our debt load and provide us access to a significant amount of financing to ensure business continuity via Chapter 11 proceedings. This is not a liquidation of our business,” said the company on its social media pages when it announced its bankruptcy on May 7th.
Neiman Marcus isn’t alone in its financial struggles.
Even in a bustling economy, some of the world’s biggest luxury retailers were struggling to get customers in the door. Faced with the challenge of modernizing into the digital consumer age or fizzling out, companies like Nordstom chose to expand their brands to accommodate a new generation of shoppers. Meanwhile others, like Neiman Marcus and its subsidiary Bergdorf Goodman, chose not to. Now, amid a growing economic crisis as a result of the coronavirus pandemic, luxury retailers are finding their demise come sooner than expected.
Luxury retailers have been struggling in recent years to maintain revenue growth as online shopping creates new ways for brands to sell directly to consumers rather than through a retailer. When Nordstrom launched its atelier services last fall with Nordstrom Local, it provided a place for shoppers to go that would enhance their online shopping experience like never before. Onsite tailor services paired with a co-working space-style interior allowed for shoppers to get some work done while waiting for their orders to be tailored to fit their needs.
The shopping experience gave shoppers a reason to want to choose Nordstrom over other luxury retail experiences, and the comfort of the service provided an advantage to ordering an outfit for a special occasion through Nordstrom rather than through an individual brands’ direct to consumer website.
While Nordstrom is still struggling to maintain revenue growth in the digital age and into the coronavirus crisis, its ability and ingenuity to modify its services to fit the needs of a new era of shoppers shows that it might survive after all. For brands like Neiman Marcus and the lower tiered J.C. Penny, which announced its bankruptcy and subsequent closure of 200 stores this week, the pressure to change could make or break the future of the companies as a whole.