The New York City Retail Puzzle – Overstoring In The Internet Age Spells Disaster

The reality of how consumers are spending late in the second decade of the 21^st century has many New York department store operators very concerned. Sales productivity has shifted to the internet cutting into store sales. Yet, in a hope of somehow remaining competitive, every major New York store has started a major renovation of its store. Whether it is Saks Fifth Avenue, Macy’s, Bloomingdale’s, Bergdorf Goodman or Lord & Taylor, each has undertaken a major renovation program to remain viable. At a time when shoppers are very reluctant to spend aggressively, New York does not need any major new store entries.  But plans have been laid and we are expecting the opening of a 250,000-square foot store by Neiman Marcus at Hudson Yards in September 2018.  This is a new shopping development around 28^th street and 11^th Avenue on New York’s West side. Neiman Marcus has always been one of my favorite stores; since I believe that Karen Katz, its CEO, has merchandise savvy the luxury shopper appreciates. The company planned the store at a time when internet shopping was a smaller share of retail sales. Now Neiman Marcus internet sales are over 30% (I am guessing closer to 35%). Unfortunately for Ms. Katz, it is very likely the store will underperform from the start. Let’s say the store is planned to have sales of $200 million, with in-store sales likely to be closer to $140 million. The balance coming from the e-commerce site, which will likely be more promotional and offer free delivery. Moreover, the store is in an awkward location since Hudson Yards is hard to access and it lacks adequate public transportation. It is likely that the store will initially be unprofitable. Read more at Forbes.