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Bloomingdale's Rolls Out The Luxury Leases For Gucci & Prada

BloomingdalesGucciLike any major department store, Bloomingdale's is a continually evolving work-in-progress, and over the past few seasons, the store has added an abundance of luxury megabrands to its main floor that hasn't been seen at 59th & Lexington since the store's fabled heyday in the 1970s and 80s. How did it happen? To a certain extent, Bloomingdale's is becoming less of a retailer and more of a landlord.

The most recent addition to the flagship's string of accessory boutiques are two Gucci boutiques, one for women (pictured above), and one for men, and men's counterparts to the recently opened Prada and longtime Louis Vuitton shops on the Lexington Avenue Arcade section. In fact, the store has just finished replicating a men's version of the Arcade concept along the Third Avenue wall of the main floor including Prada, Gucci, and LV (pictured below) along with smaller spaces for Ferragamo, Turnbull & Asser, Thomas Pink and Paul Smith. Why did Bloomingdale's have to lease out these shops? Probably because they wouldn't have been allowed to carry the labels any other way.

BloomingdalesGucciLVMenHow this happened is a story about how luxury brands are changing their way of dealing with American retailers and what it means for New York's shopping scene. Readers may remember a few seasons ago when Barneys made a surprise announcement that it was dropping Prada's women's apparel and accessory lines from all of its stores. Barneys had been a Prada supporter since long before it had been a household word, and was believed to have a strong business with the brand. However, Prada management was insisting that if the store wanted to continue carrying women's clothes and accessories (shoes and men's collections were not included in the deal) that it would have to turn over space to the brand so it could run its own boutiques under Barney's roof. Barneys claimed that this was against its policies, and let the lines go. For Prada, and other companies like it, this reflected a common practice in Europe that they were anxious to roll out to North America. Department stores in major overseas cities are often almost entirely made up of independent designer shops cobbled together under one roof, but for a store like Barneys which, changes in management notwithstanding, has always prided itself on the taste and curatorial authority of its fashion office and merchandising staff, having a vendor control what is sold in its store was out of the question, so a big chunk of Prada business went out the door. At around the same time, a brand new Prada accessory shop appeared in the North-West corner of the main floor at Bloomingdale's, which has never carried it, and is still working to burnish its luxury image after a damaging trading down during the recession of the 1990's. The existing Prada department at Saks Fifth Avenue also appeared taken over by its vendor at around the same time. We wouldn't be surprised to see a leased Prada apparel shop appear in Saks any day now. They already have one for Vuitton.

BloomingdalesPradaMenSuch arrangements are not unprecedented. In the late 1990's Louis Vuitton notified its retail partners that it was closing its wholesale business entirely, and converting to a fully leased shop-in-shop program, and any store that wanted to continue selling it would have to comply. Most of them did, and the Vuitton shops in Bloomingdale's, Saks and Macy's all became leased departments which have been dramatically expanded in the time since. Gucci has quietly engineered a similar exertion of control. The new Bloomingdale's shops as well as a large one upcoming in Macy's are all leases, and the brand has recently taken over existing men's and women's apparel and accessories shops at Saks Fifth Avenue. Only shoes are left to the store's own buyers. As these mega-brands -all of whom have gained dramatically in prestige over the past two decades- get bigger they are increasingly turning to the stores who helped built their success and taking that business back. What it means is that stores that wish to continue selling the labels are forced to give up some of their merchandising control (Bloomingdale's, Saks) or drop the lines (Barneys). So far the one store untouched by all this struggle for control appears to be Bergdorf Goodman, which has had several Gucci departments for years, and in the past few seasons, has repaired a relationship with Prada that was bitterly broken about 15 years ago leading to a decade-long banishment of the brand. Bergdorf's shares Barneys' policy against leasing space in their main product categories in part because both stores encourage cross selling by staff throughout the store that leasing can make difficult and confusing. One wonders if Gucci and Prada will be similarly turned out of Bergdorf's in the coming seasons, or if the brands will let it stand as a single store exception. What we may see going forward is a power shift from the client to the vendor, where luxury mega-brands choose to bestow their cachet on stores that meet their terms. They are already pretty demanding as it is. Brands like Chanel and Giorgio Armani have long lists of requirements for for stores who sell their products as authorized resellers, but leasing is another level of control. Eventually we might see a contest of prestige between the big designer labels and the stores who wish to carry them.


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