Here we go again. Can Barneys survive in luxury’s new world?

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Last week, reports emerged that Barneys New York might again be headed toward bankruptcy. Many observers, including a fellow Forbes contributor, wonder whether the iconic Manhattan-based luxury retailer might be destined for the retail graveyard.

I have some history with the brand (aside from having bought a suit there eons ago to look good for post-business-school job interviews). When I joined the Neiman Marcus Group as senior vice president for strategy and business development, my appointment made the front page of Women’s Wear Daily on speculation that my new role must somehow be tied to a pending acquisition. While my mother was impressed with the story—spoiler alert—it was totally unrelated, and of course no deal transpired. In the intervening 15 years, I can neither confirm nor deny having taken a look or two at the company for a client. But I did write a blog post about Barneys’ long-term prospects after the retailer dodged an earlier bullet.

While some things have changed (including senior leadership), Barneys’ underlying struggles largely remain the same.

1. Narrowly focused business model. Barneys’ positioning is rather well-defined. Compared with its luxury brethren, the brand targets a more consistently affluent customer with an edgier (some would say overly New York-centric) point of view. From a differentiation standpoint, this is a positive, but it also constrains customer appeal. In many ways, Barneys is less a luxury department store and more a specialty boutique on steroids.

2. Limited market potential. Given the narrowly focused model, it seems only a few markets can support a full-line store. While there have been execution missteps along the way, Barneys has certainly demonstrated that its brand doesn’t travel very well. The company has entered and left Dallas twice. A hoped-for expansion of its Co-op format fizzled. The flagship store that opened in Scottsdale, Arizona, closed after only a few years, and there have been many reports suggesting that expansions into Las Vegas, San Francisco and Boston have significantly under-performed.

3. Maturing luxury market. Aside from Barneys’ specific issues, any turnaround would need to be executed in an evolving, rapidly maturing luxury fashion market. The historical core customer for high-end luxury is aging and spending less money on stuff and more on experiences. Younger customers generally seem less interested in spending as much as their parents did on expensive fashion. Recent earnings reports from Neiman Marcus, Saks (HBC) and Nordstrom all reveal the challenges in growing the top line profitably. Headwinds abound.

4. Escalating competition. There is no shortage of brands vying for Barneys’ customers. During the past decade in particular, many of Barneys’ suppliers have aggressively invested behind their own direct-to-customer initiatives by opening their own stores and improving their online presence. Newer brands like Net-a-porter and Farfetch, along with digitally native brands like Glossier and many more, are chipping away at segments of Barney’s business. While still relatively small, Rent-The-Runway and TheRealReal are battling for share of wallet among many of the same customers.

The precipitating crisis for Barneys appears to be the upcoming doubling of its rent at its Madison Avenue store. But make no mistake, Barneys has been a nearly dead brand walking for several years, largely owing to its having expanded its physical footprint too far and moved too slowly to a more harmonized retail world.

A bankruptcy filing holds the promise of allowing Barneys to “right-size” its brick-and-mortar footprint to a more manageable cost structure. But in a world where good enough no longer is and consumers have so many choices, Barneys’ long-term issues still center on being remarkable and relevant enough to rise above the competition at any meaningful scale. Unfortunately, this is likely to end badly.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts here.  

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