Comparable sales have been down at luxury department stores, however, February brought a wave of new store openings.
Barneys returned to its original flagship location in Downtown Manhattan, Saks Fifth Avenue opened two stores in Canada and Neiman Marcus set up shop on Long Island. Rivet caught up with Marshal Cohen, NPD chief industry analyst, who discussed why executives have continued to make bold moves in an uncertain economic climate.
Rivet: How are luxury department stores faring in relation to the middle tier?
Cohen: Luxury is challenged just as mid-tier is but just not as big a drop off. Luxury’s biggest challenge is still the loss of the aspirational customer that now can buy lux at lower prices from lux brands. Even the same brands.
Rivet: Why do luxury retailers continue to invest in new locations if comparable sales are down?
Cohen: The only path to growth these days is to do it yourself and get that exposure to the consumer yourself. If you rely on the retailers, you will certainly be sold short and in many cases get less space than ever.
Rivet: What adaptations do the new department stores have that will help them succeed? Is omnichannel the focus?
Cohen: Omnichannel is the focus but it is not enough. In fact it is already passé. Retailers just ramping up their omnichannel programs are already behind the times. Today, brands are selling more selection direct to the consumer and creating a relationship with that same customer.
Rivet: Will sales continue to slow in the luxury market, or do you anticipate growth as the economy shifts?
Cohen: Certainly as the economy strengthens (post-election as it always does) the luxury market has the opportunity to grab some but don’t expect it to just happen, the market has to earn it. With better, newer and more advanced product.
Rivet: Specifically in New York, is there still a market for more luxury department stores? Will real estate developments help to build this market?
Cohen: Yes, there is room. But much of the work will come from suburbanites and tourists. New Yorkers will only split their spending even more with more stores, not spend more.