BOSTON — Just a few weeks after Barneys New York filed for bankruptcy, Chief Digital and Technology Officer and Executive Vice President Katherine Bahamonde Monasebian discussed some of the problems that forced the company into that position in the first place.
"Department stores used to be, in their heyday, the emporium. They were the center of the community. They were the place you went to find what you needed, perfectly curated. There was no retail without department stores," Monasebian said during a panel at the eTail East conference this week, noting that the model has had to evolve in a period of change. "It's easy to say, ‘Amazon killed department stores. Millennials killed department stores.' It's easy to say, but it's actually a confluence of a lot of things. Yes, it's the digital upstarts. Yes, it's leverage — it's very hard to have heavy debt loads on razor-thin margins."
Monasebian also pointed to trends like changing business models, including consignment and rental and the shift from experience to product. With respect to Barneys in particular, the brand has some challenging financial issues of its own, including high rent, which was one of the things that catapulted the retailer into bankruptcy.
"That was sort of the nail in the coffin, was that our rents there increased over twofold and it was challenging for us to absorb," Monasebian said of the retailer's famous New York flagship, noting that they are keeping it despite the high cost. "That flagship is actually the DNA of the brand. New Yorkers know, it is a New York institution. Madison Avenue wouldn't be the same without it. ... It's the place where we exercise the most creativity, it's the most true to sort of the heritage of the brand."
She commented that despite the rent increase, the New York store is profitable and productive, and with the brand's plans to close 15 of its 22 stores, it will remain one of only a few left. However, that doesn't mean the retailer is backing out of brick and mortar, Monasebian said.
While "a very healthy percentage" of the retailer's business is in digital, stores are still a key part of the department store's strategy, and according to Monasebian, even its young consumers prefer shopping in its physical locations.
Going forward, the focus of those stores is going to be on Barneys "as a venue," meaning dining opportunities, more experiences and continuing to play around with new trends through events like The Drop and concepts like its cannabis-focused The High End. Monasebian believes that with a trimmed down store footprint and a healthier operating structure to build off strong brand cache, Barneys will be "extremely well-positioned to weather the storm."
"We get the question a lot: Are department stores dead? Are they in the retail graveyard? Are they obsolete?" Monasebian said. "I don't think that department stores are dead. I think that they are reinventing themselves to be more experience-focused, more customer-focused. The startup economy has been a wake-up call for these large, traditional, heritage retailers."
That includes Barneys, which is searching for an acquirer in bankruptcy, but by leaving behind the "shackles" of some of its leases, Monasebian is hoping to see a stronger company coming out the other side.
"Our intention that we're setting is to come out of this with a very strong, digitally-focused partner," she said, "and emerge on the other side with a healthier balance sheet and operating structure, be able to implement all of the vision of the company, which again extends beyond retail to food, to entertainment, to all these other experiences."