Direct Selling Will Become The Focus Of The Development Of Luxury Brands After The Bankruptcy Of Department Stores.

In early August, Barneys New York, a luxury department store operator in the United States (Barneys), formally submitted the Chapter 11 bankruptcy protection application document to the Southern District Court of New York. Barneys has received $75 million from Financial Services Company Hilco Global and its Gordon Brothers Group subsidiary. It will remain in the process of bankruptcy reorganization and will close its 15 stores. Court documents show that Barneys's assets and liabilities range from $100 million to $500 million.

After filing for bankruptcy, the contradiction between Barneys New York and its luxury suppliers also began to emerge. According to Reuters, Barneys New York is a luxury brand Prada (Prada) of about $1 million 600 thousand, and it is owed millions of dollars to Gucci (Gucci) and Givenchy (Givenchy). This summer, many suppliers of Barneys New York began to refuse delivery unless Barneys promised cash delivery.

Although the bankruptcy of Barneys has a certain impact on the wholesale channel of luxury goods suppliers, with the decline of department stores and the rise of e-commerce, the bankruptcy of Barneys is not a good thing for luxury brands. Luxury brands will pay more attention to direct store sales and online e-business sales.

Luxury brands can maintain brand value by reducing price promotions, increasing brand exposure and increasing profit margins according to the new cycle of market adjustment.

"Most luxury retailers prefer to sell in their own outlets," said Jerry Storch, chief executive of Storch Advisors, a consultancy. For fashion brands, although Barneys department stores are very good at leading fashion trends, direct sales are far more profitable than wholesale. "

In early August, Prada CEO Patrizio Bertelli told analysts that Prada wholesale channel sales accounted for less than 20% of group sales. Patrizio Bertelli hopes that Prada will reduce this proportion to 5% in the next three to five years.

Most of the wholesale channel cuts will fall on Italy and other European countries. Prada has transformed nearly 40 sales outlets in the US Department Store into "brand area", that is, the brand will be rented by exclusive stores or counters in large department stores.

This "brand area" model is very common in Europe, but for many luxury retailers in the US, this transformation is still more difficult. Barneys also insisted on no concessions. Recently, it was revealed that after 3 years of interruption of cooperation, Prada resumed its wholesale partnership with Barneys. Barneys said it hoped to continue to control sales.

However, the brand monopolization mode is the trend of the times. According to industry sources, with the depression of department stores and physical retailing, the position of brands in the negotiations with department stores began to increase, so the franchise fees are also decreasing year by year. Brands gradually have more voice to the location and mode of sale of goods, and some brands even opt out of department stores.

Ron Frasch, former president of Fifth Avenue boutique department store, Sax, said: "large department stores often rely on well-known brands in stores, which can bring traffic and reputation to department stores. Therefore, department stores are facing tremendous pressure and challenges.