Barneys is planning to extend the target market by embracing budget fashionistas as well as current target customers who are fashion connoisseurs with a high disposable income and cutting-edge taste. It is because, according to Spending Pulse, Sales of luxury goods fell 27.6% in December 2009 compared with December 2008 including credit cards and cash. The pullback in luxury spending due to the deteriorating economy brought about a sharp slowdown and a torrent of extraordinary markdowns last year. The competitors including Bergdorf Goodman, Saks Fifth Avenue, and Neiman Marcus have been saddled with excess inventories and double-digit sales decrease. In order to do extend target market, Barneys will increase the amount of contemporary, accessory and Co-op merchandise up to 60% of whole inventory in two years, which can draw fashion-oriented customers with limited budget. The primary marketing objective is to accomplish sales increase by 3% compared with sales of $780 million for 2008 keeping profit margins of 50% or more, and a 8% increase in sales compared with sales of 2009, maintaining profit margins of 60% or more in the second year. The economic downturn has been bankrupting some firms, toppling longstanding agreements on pricing and distribution. Also, deep markdowns have been destroying the exclusivity that designers are trying to do.
Customers are continuing to turn to the internet for clothing shopping because the online stores offers fashion trends and styling tips as well, and shoppers can quickly search the items by various categories, which makes shopping experience more efficient and not physically demanding. The leading online retailers of designer brands including Net-A-Porter.com and Bluefly.com have performed well showing revenue increase except for the fourth quarter 2008.
The shrinking economy, stock market declines, investment erosion, housing crisis, higher food and gas prices have curbed consumers’ craving for shopping.
In the recession, the number of fashion-conscious shoppers with money and credit has decreased.
Marketing massages are getting real, simpler, and straight forward in order to draw skeptical consumers in the recession.
Brands fostering more open communication with their customers via two-way medium of the Internet have become more important in customers’ everyday lives.
In an harsh retail climate, accessories are faring better than apparel because they are relatively inexpensive wardrobe updates.
The items that can be worked into what customers already have in their wardrobes are selling.
3-1. Performance review
Barneys has 9 Flagships(New York City, Beverly Hills, San Francisco, Chicago, Boston, Chestnut Hill, Las Vegas, Dallas, and Seattle), 18 Co-op stores and 13 outlets in the U.S. The Madison Avenue and Beverly Hills units are healthy and profitable having deep customer base and more known in their markets, but the Las Vegas, San Francisco, Dallas and Boston units have been slow since they opened. Barneys is going for aggressive expansion; four flagships were built in past three years, and it is also looking for store locations in Europe, the Middle East and the Far East.
Product and Service:
Barneys is high-end department store offering an upscale and original assortment of apparel, accessories, jewelry, beauty and decorative home products, and also assorts two private labels, Barneys New York and Co-op. Additional services include a bridal and gift registry, concierge service, studio service and spa, but most of them are only provided at Madison Avenue and Beverly Hills flagship store except personal shopping service. In 2008 September, a men’s Made-to-Measure Clothing service was launched at the Madison Avenue flagship store.
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