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Uptown/Downtown: The Changing Luxury Landscape Of New York City

(Source: forbes.com)

The saying goes, “You could eat out every day of your life in New York City for the rest of your life and never eat at the same place twice.” I suspect you’d have to double, triple, quadruple that number of daily visits if you wanted to shop every day at a new retailer in New York City.

Recent changes in the uptown retail landscape got me wondering if uptown Manhattan was losing its luxe, thinking about the recent closing of uptown luxury retail institutions, like Henri Bendel, Lord & Taylor and Ralph Lauren Polo store, and the increasing number of retail vacancies on Madison Avenue. Add to that the fact that Tiffany feels the need to remodel its iconic 5th Avenue flagship and the report that Chanel is closing its New York City headquarters.

On Chanel, a company spokesperson assured me that the rumor it was abandoning New York City are not just greatly exaggerated but false. It is simply moving core corporate roles and about 50 positions, in legal, finance, HR and CSR, to the U.K. as part of an overall “simplification” strategy. Chanel remains very much rooted in New York City, having bought its flagship retail location since 1993 at on East 57th Street this past June.

Yet there is no denying that “for rent” signs are sprouting like weeds on Madison Avenue. Matthew Bauer, the president of the Madison Avenue Business Improvement District was quoted by the New York Post in January saying, “There is an 8.5 percent vacancy rate, which is more than we want.”

Sensing a bigger trend emerging, I reached out to a network of luxury retail experts to get the lay of the land of the luxury retail market in Manhattan. Here are the signposts I discovered on that journey.

Two-and-two don’t make four

Martin Shanker of Shanker Inc., who founded his sales and leadership training company more than 20 years ago after a career with Macy’s and counts many of the major luxury brands as clients, says the examples above don’t add up to a bigger trend, rather each of these are individual company decisions that have more to do with corporate goals than changing consumer shopping patterns.

“These are individual cases and in retail it is always survival of the fittest,” Shanker say. “In looking at a landscape we want to connect the dots. But these examples don’t tell a trend about uptown or downtown. These stores didn’t stay healthy because they weren’t well conceived or not doing well in the beginning.”

Greg Furman, founder and chairman of the Luxury Marketing Council, concurs. “The recent domino chain of store closings and proliferation of ‘for rent’ signs on Madison and Fifth Avenues does not signal the demise of luxury or of Manhattan as a global center,” he says.

Yet Furman feels these are a wakeup signal of bigger changes taking place in the luxury consumer mindset. “It calls on luxury brands to re-invent themselves with the utmost creativity and passion in ways yet to be imagined. The best luxury brands are seriously rethinking this challenge,” he adds.

In the case of the venerable Henri Bendel closing, Lorre White, “The Luxury Guru” at White Light Consulting, believes it all comes down to management failure. Mass-market L Brands was a poor corporate parent for a luxury retailer like Henri Bendel.

“There is no larger cause of failure in the luxury sector than inappropriate marketing and by that I mean mass marketing. I fear L Brands is filled with mass-marketing minds and they focus on what they can understand. My experience is that mass marketers do not even know what they don’t know,” White says.

Eastside vs. Westside

“Retail in New York is constantly changing,” says Jeff Carvalho, managing director for North America at Highsnobiety, a downtown media company that focuses on forward-thinking, young affluent men’s lifestyles. “It is transient. You have to move around and always refresh and think of a new way of approaching things. Keeping your store for the long term is an older, outmoded model.”

A major change coming to luxury uptown will be the opening next year of Nordstrom’s women’s store at 57th Street and Broadway, to join its men’s store across the street, and downtown the opening of Hudson Yards spanning 10th and 12th Avenues from West 30th to West 34th Streets, which will be home to the first Neiman Marcus store in New York.

“The bigger story is the Eastside/Westside divide. Up until now Bloomingdales, Saks, Bergdorf and Barney’s have been consider Eastside. The first real test of luxury on the Westside will be Nordstrom and Hudson Yards,” Shanker believes.

But Shanker is quick to point out that younger affluents are less interested in shopping in department stores and shopping centers in general. “Luxury customers, most especially young luxury customers, are shopping less in shopping centers. Shopping centers are seen as more ‘commercial,’ and they want something more individualize and a more personalized experience.”

Tearing down the temples to luxury

While the luxury experts I polled may disagree on the uptown luxury landscape, none dispute that there is a vibrancy downtown that uptown seems to lack. There is a growing sense of stagnation or lethargy in the uptown luxury landscape.

Massimiliano Di Battista, CEO of Management + Artists that represents artists and producers in photography, creative direction, styling and beauty, describes it as boredom. “Consumers are bored by traditional stores and do not feel the connection to big uptown stores that they perceive as catering to an older generation and excessive consumerism” he shares.

Mortimer Singer, president and chief executive of Marvin Traub Associates, a business development and strategic consultancy firm, puts it more tersely. “These stores are monoliths or temples to luxury. They are sterile. I don’t feel attracted to walk in because while they look beautiful on the outside, there is no impulse or curiosity or cultural convergence that cries, ‘Wow! Look at this.’”

Uptown stores have become luxury institutions and so are institutional and going into them makes a shopper feel institutionalized, as Ken Nisch, chairman of JGA, a retail design firm, sees it. Downtown luxury doesn’t have any of those connotations.

“If you look at Madison Avenue, the story has already been written. Everything is looking backward not forward. Downtown, the story isn’t written yet and you can become part of its becoming,” he says, adding, “Walk up Madison Avenue and you know what is on the next block. Walk downtown and you don’t know what is around the next corner.”

Elusive luxury downtown, exclusive luxury uptown

“There has always been a divide between uptown and downtown luxury,” says Ruth Bernstein, CEO and cofounder of Yard NYC, a creative agency named AdAge’s Small Agency of the Year award winner in 2018.

“That’s nothing new and it’s not going anywhere. The new era of luxury in NYC is that the number of players has increased dramatically. A brand doesn’t have to have a 100-year heritage (or lease) to be considered luxury. New luxury understands is not about hallowed halls,” she continues.

Those uptown luxury temples, institutions and hallowed halls spoken of stand in stark contrast to the openness and welcoming atmosphere found downtown. Uptown is all locked up. Downtown opens the door.

“We talk a lot about freedom, in the way we look at luxury accessibility,” Highsnobity’s Carvalho says. “Uptown is a closed-door environment. Their doors are locked. But we live in a multi-cultural world which wants to be accepted. People don’t want the traditional sterile view of luxury,” as he adds, “How luxury is defined is a question that people will argue about forever.”

Rather than defining luxury by exclusivity as uptown brands are want to do, or all the other traditional hallmarks posited as defining that class, downtown luxury is more elusive, less quantifiable and open to rapidly evolving interpretations.

“If they want to reach the ‘new luxury’ consumer and the level of exclusivity that brands such as Dior, Gucci and Louis Vuitton offer, they will need to focus on issues bigger than fashion, toward ideas that define lifestyle and purpose,” explains Jared Tomlinson, executive creative director at Standard Black, a creative agency.

“The brands that are defining a ‘new luxury’ aren’t doing so by trying to fit ‘luxury’ in a traditional sense. They’re challenging the mindset and the perception of the category,” he continues.

Gucci is a prime example of a heritage luxury brand that has broken out of traditional luxury’s chains. “Brands have to adapt to the neighborhoods where luxury goes,” says JGA’s Nisch. “The Gucci store downtown in SoHo could never live on Madison Avenue. It is too provocative, too in-your-face. If it were uptown, people would be saying, ‘There goes the neighborhood.’”

“The new Wooster St. Gucci store is phenomenal and unlike any Gucci store in the world. It is more like an event or a club that Gucci is putting on than a store. People want to be part of that,” Nisch continues.

Hospitality meets retail downtown

Traub’s Singer believes that luxury retail needs to borrow ideas from hotels to elevate the store from just another place to buy stuff. “We need to see a convergence between retail and hospitality, where brands create buzz with their own creativity and use art, music, design and culture as a cocktail medley of impulses that transform their spaces. Every brand needs a ‘programmer-in-chief’ like hotels groups have a head of programming,” he says.

Singer points to SBE Hotel Group as having successfully combined hospitality with retail through partnerships with Evian, Lincoln Motor Cars and Maria Sharapova’s candy brand, Sugarpova. There guests can “create their own experience in the hotel then buy the products or test drive the car. You are shopping a lifestyle and living it. That is what the luxury brands need to think about,” he advises.

“Hospitality retail acts like a concierge for their customers, not just trying to sell them clothes, but bring them into the life of the brand,” Singer continues.

Making the point, Singer asks why people shouldn’t be meeting their friends at a department store,“like you would say meet me in some boutique hotel lobby. But then those stores would have to devote prime real estate to spaces where that can happen. Too much department store retail is based on a 20th-century model that thinks in terms of sales per square foot,” Singer continues. “Rather they need to think in terms of memories per square foot.”

Downtown is where hospitality and retail are more likely to meet. “On Madison Avenue you have to be invited into the club, because it is more exclusive. Downtown you get to make the club or find the club or the club starts because you are there,” Nisch explains.

To achieve this convergence of hospitality and retail, Singer believes luxury brands need to use content and experiences to drive commerce, like “Having a celebration every week in the store so people will talk and come to discover something different every week,” he says, pointing to Alice + Olivia as having nailed that.

“They have trained people to be there at noon every Friday for the new drop because they didn’t make much of the product and people won’t find much left if they don’t come,” he continues.

Taking it to the street

To conclude this tour of luxury uptown and downtown, the biggest challenge and opportunity for luxury retail is taking it to the street, as in streetwear and street life.

“Today what is happening on the street level is now influencing what is happening on the runway,” Highsnobiety’s Carvalho says, which is the opposite of how traditional luxury brands have thought and operated.

But some heritage brands, like Burberry, Dior, Gucci and Louis Vuitton, are catching on by bringing in designers and artistic directors from the street world. Drawing parallels to rock ‘n roll, Carvalho says, “Designers, creative and artistic designers within luxury brands are the new rock stars and the brands are the new bands.”

Commenting on the up-and-coming designers and creatives that come from a streetwear background, Standard Black’s Tomlinson says, “It shows these established luxury houses are continuing to evolve with their customers. These brands are showing what they are all about and saying ‘this is who we are,’ not telling people how they should think.”

As much as I believe uptown luxury retail will go on and have a continued place in the fabric of New York City, I think, and my luxury colleagues largely agree, the new life, the new look and the new experience of luxury is happening downtown.

On luxury retail, Shanker says, “Today is one of the most exciting times for NYC retail.” Traub’s Singer agrees, “I am very bullish about retail. It is a creative industry.” And downtown is where that creativity, of which luxury brands have no lack of, flows most freely.

“To keep retail relevant, luxury retail has to be innovative,” Yard NYC’s Bernstein says. “That’s why ten years ago John Varvatos opened a boutique in CBGB’s. It’s become a place for shopping and concerts.”

In other words, uptown luxury brands play classical music, with virtuosity but melodies heard before, and downtown it’s rock ‘n roll. I say, along with The Who, “Long live rock!”

More Info: forbes.com

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