New York is again attractive for a revival of department stores

New York is again attractive for a revival of department stores

Only in New York: It is boom times for the old-fashioned department store in Manhattan. Five new stores—representing more than 650000 square feet of space—are set to open in Manhattan by 2018. Barneys New York will lead the push, opening a new store at its original location on West 17th Street in mid-February

Saks Fifth Avenue will open the first of two new stores in Brookfield Place in lower Manhattan later this year. Neiman Marcus and Nordstrom have each decided to build their first stores in the city.

The building boom defies the indications that these stores nationally are on the wane amid fierce competition from online shopping and a variety of other retail options. Sales at U.S. department stores fell last year by roughly 2% through November, according to the U.S. Census Bureau. Barneys has closed stores in places such as Dallas in recent years. Macy’s is closing about 40 stores amid a downturn in revenue, and activist investors are pressing it to spin off its real estate, which by some estimates is more valuable than its core business.

What makes New York the focus of so much optimism now? The answer lies in the recent evolution of the city, where new neighbourhoods have blossomed in former industrial zones, with rising luxury apartments drawing young, wealthy residents who don’t shop uptown.

Barneys decided to make the move to Chelsea after realizing that downtown residents were not coming to its Madison Avenue flagship. “We were not serving the downtown client,” says Daniella Vitale, chief operating officer of Barneys.

Hudson Yards, where Neiman Marcus is going, is expected to continue the transformation of the Manhattan’s far west side along the river from a no-man’s-land to a vibrant centre. Similarly, Brookfield Place in lower Manhattan is at the heart of the redevelopment of the World Trade Centre location, with vast residential and business complexes, as well as crowds of tourists drawn to the area’s memorials.

“The city is changing,” says Marc Metrick, president of Saks, pointing to trendy shopping neighbourhoods such as the Meatpacking District south of Hudson Yards.

Tourists are a big part of the equation for Neiman Marcus’s 215000 square-foot-store, expected to open in 2018 near the northern end of the High Line, a popular park built on an elevated rail line. “The number of tourists coming through Hudson Yards and the population that is moving to and living in the West Side of the City will continue to grow,” says Karen Katz, chief executive of Neiman Marcus.

Nordstrom’s new location, on West 57th Street, is closer to the traditional shopping central area in midtown south of Central Park where its competitors have their flagships.

It isn’t clear that New York can absorb 650000 square feet of new department stores so quickly. Foreign tourists are shopping less due to the strong dollar, and local residents have more places to buy clothing—online or in stores—than at any time in recent history.

Still, New Yorkers love their department stores. Retail palaces are deeply woven into the culture and image of the city, as showcased in movies from “Miracle on 34th Street” to “Elf.” Residents are also famous for their loyalty to individual stores. Who doesn’t have a favourite and know her mother’s favourite as well?

New Yorkers can be stubbornly neighbourhood-identified, with cool-hunting downtowners bragging that they do not venture to midtown’s tourist-packed avenues. That is one reason Barneys is returning to its roots—opening its new store on a block it first occupied in 1923 and abandoned in 1997 after opening its Madison Avenue flagship. “It’s very emotional,” says Ms. Vitale.

The new Barneys store is set to open in mid-February, with a strategy focused on the fabric of the Chelsea neighbourhood that was the retailer’s first home. After Barneys closed that store amid financial pressures, a Loehmann’s discount fashion store moved in. By 2013, it was Loehmann’s that was ailing financially. At Barneys, now owned by investors including majority owner Perry Capital, Chief Executive Mark Lee pounced, recognizing an opportunity to market this prodigal son’s return to the neighbourhood, and started renovations in February 2015 for a five-floor, 55000-square-foot store.

Lee is not keen on calling Barneys a department store, and presses to position it differently. “We’re a specialty store,” he corrects, using an industry term that more often refers to small independent retailers. “A big specialty store, but nevertheless, that’s what we consider ourselves.”

The store will carry young-trending labels such as Vetements and Hood by Air (as well as Gucci, Saint Laurent, Valentino and Givenchy), while offering food delivery from its 120-seat restaurant. There will be a cocktail bar to help build evening business.

A massive curving staircase will anchor the store—a visual reference to a staircase at the original Barneys. Cosmetics and facials will be offered on the ground floor. Higher floors will carry womenswear, men’s goods, and its restaurant, Fred’s.

There will be fewer cash registers than in most department stores and more iPads and mobile checkouts, with sales associates using apps to help recognize shoppers who have agreed to be tracked. Digital beacons will beam photos and information to those shoppers’ mobile devices as they move around the store. The store will accept Apple Pay. None of this is groundbreaking technology in 2016, but it is more than most department stores currently employ.

“We’re very focused on the experience,” says Ms. Vitale. “We’re really in a neighbourhood. We’re not a tourist destination.”

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