Mark Lee is a cool customer. Trim and precisely dressed, he speaks in quiet, measured tones. Of course, he has other sides to his personality—to realize that, you had only to hear the heartfelt speeches that longtime colleagues gave at a Legal Momentum dinner during which he was honored a couple of years ago—but you suspect that his surface unflappability serves him well in business. After all, he occupies one of the hottest seats in retail. As the CEO of Barneys New York since 2010, he has been in charge of turning around the beloved luxury retailer during a turbulent time for department stores. Though his tenure has not been without controversy, he has steered the ship to safer waters, not least through a deal in which Perry Capital became the company’s majority owner and Barneys reduced its debt from $590 million to $50 million. I talked to Lee about how he and his team aim to set Barneys apart from the competition, the reasons behind the ambitious remodeling of the Madison Avenue flagship, and why the gig has been a “joyous” experience.
E-commerce is on track to become your second biggest retail channel, ahead of the Beverly Hills store and second only to the New York flagship. Do you envision a future where the physical stores are basically just showcases and most of the actual purchasing happens online?
Time will tell, but I can’t imagine a time when they’re not both going to exist. They exist side by side today. The customer is “double-dipping,” so to speak. Yes, there is some browsing in store and then shopping later on online, and that’s fine. There’s also a lot of browsing online and researching and investigating and understanding about designers and learning about what you might be interested in and kind of doing your preselection and thengoing to the store. There’s still a touch-and-feel aspect that some people find important. I think ultimately the store, though, serves a bigger role. The store is also an experience … I think, for us anyway, it’s always been the case that the store has to serve a purpose in terms of entertainment to some respect. There’s food, there’s Freds, there’s the social act of shopping, there’s the visual display and the windows—all those ingredients go into helping to communicate what Barneys is and what Barneys stands for. I think of it like movies and television—once upon a time in the 1950s, Hollywood was completely shaken up because of TV, and of course it fundamentally changed. It began a change of the studios and the product and how many movies were made. It used to be that a typical American family went to the movies three times a week or whatever. That’s not the case anymore, but everything lived side by side. I think in general—and you know better than me—every new media form that’s come along, it’s disruptive, yet all the historic and all the traditional media forms are still there.
Someone was telling me radio is thriving, so there you go. You mentioned the physical elements—the restaurant, the design, the windows, all those things. Are any of those elements more important than any of the others?
My motto is that everything counts. You use all the levers that you have. Again, it all goes into helping to shape and define the experience. We use all of those elements very strongly to differentiate ourselves from competitors. We really position Barneys strongly—we like to call ourselves a “specialty retailer.” We use that distinction as compared to a department store. All that refinement in terms of how we use all those channels, whether it’s the windows or the visual display and Freds—it all counts. We have a history of all of that. That’s all wrapped up in our DNA and we’re really working hard every day trying to move all those things forward in a modern manner.
“I felt strongly that what we really needed was a cleaner backdrop for the product.”
In terms of the Madison Avenue store, you made quite a few changes and you caught some flak for that. Were you surprised at that reaction? And what were your goals with the remodeling?
Yeah, a couple of goals. One is that when we started a few years ago, the majority of the Madison store hadn’t really been touched and hadn’t been updated in 16, 17 years, so obviously that’s a very long period of time. I think it’s fair to say that, as beautiful as it was in 1993 and the work that Peter Marino did, it was starting to become a little bit shopworn and it really did need investment and it needed some tender, loving care … Obviously I had huge respect for what was done in the early ’90s, because I think in that moment Barneys really did set a new standard for a luxury retail experience, and I think what Peter did—the very residential, very French, modern antiques, 20th-century antiques, the mosaic, all of that very layered, very decorated, very residential approach—it was very new and very groundbreaking at that moment. Flashing forward 16, 17 years and seeing how all of that was taken into the retail landscape and how much of that was taken on by big luxury mono-brands all over the world, we didn’t think that was really the newest way to reflect Barneys. [We felt] we needed a little bit cleaner, a little bit more simplified, a little bit more modern aesthetic. Second, there is the reality in terms of sales densities and sales per square foot and really how much product it does take in a store like Barneys to achieve what we achieve. We think we have the most beautiful and best product in the world, but it is also a fact that any given floor is shared by a dozen, or multiple dozens, of the best designers and the best talents in the world, and all of those design houses, all of those designers, have their own aesthetic point of view, and that product is constantly evolving and changing and new merchandise is flowing all the time. We felt strongly—I felt strongly, in particular—that what we really needed was a cleaner backdrop for the product and really to create a modern, more chic envelope for the product, because otherwise your decor—lamps and carpets and furnishings and mosaic floors and layers of decoration—ultimately become another visual element that can compete with the product. What we did try to retain, and one of the elements that I think is still very strong in terms of identifying Barneys, is a certain “gallery”-like feel. Madison Avenue, to some degree, is a loft in that we have very few walls and we really have open spaces, open expanses. It’s quite unusual for uptown, for Madison Avenue, to have that kind of feeling of space, so that was something that we retained. Also, I should say that when Madison opened, for historical reasons and reasons that were a little bit particular to the Pressman family, whatever, it was really built as two separate, vertical stores. There was a vertical, nine-level men’s store with an entrance on 60th Street and a vertical, nine-level women’s store with an entrance on Madison, and there were very few connections between those two stores … Well, that never really worked in practice, so Day One, I wanted to understand whether the floor plates aligned between the two buildings. And in fact they did, so we’ve been on a process of also connecting those two stores horizontally. They still serve as vertical, stacked entities, but they also connect across, and that’s been a very important game-changer for us because it emphasizes even further the open-gallery feeling. And it enhances the shopping experience for a man and a woman and it really enhances the social aspect of shopping, that you could come with your mate on a weekend—OK, you shop in women’s shoes and I’ll shop in men’s shoes and we meet in the middle.
I guess if designers like J.W. Anderson have their way, men and women will all be wearing the same clothes eventually anyway.
You alluded to a little bit of negative. And honestly, I was very attached to [the old store design], too. I think we caught some flak about the mosaic on the ground floor, and honestly, we studied very hard the mosaic, because I wanted to see if we could preserve it and treat it like that was a historic element. But it was so badly cracked. It was really in very bad disrepair. And we even considered that. We said, “OK, can we consider that it’s like Pompeii and it’s the ruins of Pompeii and we’re going to build around it and keep that as a signature element?” And we studied it hard and we thought about it, and of course we could’ve saved some money had we left the floor, but we actually thought in the end that it was going to look like we decorated the house and we didn’t have enough money to change the floor. And we thought it was so cracked and it was kind of heading to the wrong side of architectural ruin, so that was that decision. But it’s something that we didn’t take lightly. We studied quite a lot.
In terms of the sales and the results, have you seen positive results?
Yeah, we’ve been performing extremely well. We’re a private company, so we don’t give out so many numbers, but I can tell you that in each of the last three years, we’ve reached a new historic high in terms of total company sales, so we’re performing at historic levels in terms of revenue, which is very positive. And I should say that we’re doing that with fewer stores, because along the way, since September 2010 when I’ve come, we’ve closed many stores—mostly smaller stores, but we closed some underperforming stores. So, we’ve been doing in total higher sales than ever in history with less stores, so that speaks to the fact that the comparable store sales growth has been very positive. And we’re debt-free, thanks to the vision and support of Richard Perry, our chairman and majority owner of the brand. For the first time in the history of Barneys, we have an absolutely clean balance sheet with zero long-term debt. In the last couple of years, we’ve gotten into a very strong, healthy financial situation that has really enabled us to reinvest back into the brand, to do a lot of renovation, which continues. It’s enabled us to invest in the digital properties. It’s enabled us to invest in our people and technology and all the things that we think can make the brand stronger for the future.
Obviously none of this would be possible without the consumer. How much do you know about your consumer?
We know a certain amount, and we’re working on some things on the backside and our infrastructure that will give us more knowledge and information in the future. We’re investing now in a new POS system, which is the point of capture for the physical store, and next up will be a new client database system, so all those things are in the works now. Online we know much more, honestly speaking, and we’ve invested a lot, and one of the things that’s really propelling us on Barneys.com is a lot of personalization. Take the men’s customer, for example—and we really run the gamut given our history in men’s, because as you know, we’re 91 years now in the menswear business. In men’s, we run from the most forward designer brands—J.W. Anderson for Loewe or Rick Owens or the Japanese or Belgians—all the way to the modern luxury brands, like Brioni, Kiton. Obviously those can be very different customer types, so we’re really finding now on Barneys.com, with the personalization work that we’re doing, we’re able to really customize the site. Based on your shopping behavior and even your browsing behavior, you will see a different site. If you’re prone to Brioni and more button-down shirts and more classic items, you’re going to end up seeing those items and we’re going to communicate to you those kinds of items and those kinds of brands, versus if you’re a very fashion-forward customer, you’re going to see tunics and dresses from Rick Owens or whoever.
“In some ways, we’re a reaction against that big, global luxury phenomenon that keeps getting bigger and bigger. I’m proud to be a niche.”
Customers are happy to allow you to use that kind of data?
I think what customers respond to are things that are tailored to them. If you’re sending them less e-mails about things that don’t concern them because you’re targeting more to what their potential interests are, then that’s a time-saver and that can be a positive experience for the customer.
Do you have a sense of your customer base in terms of global versus local?
We’re very local. We’re Madison Avenue, we’re not Fifth Avenue. We’re an American institution, and we’re relatively rare in the sense that we’re not everywhere and we don’t want to be everywhere. We’re quite local. The good news is we don’t go up and down with the big swings of currency flows and Europeans coming or not coming and all of that. We’re very local. It’s also defined, again, by our mix and our positioning, because we’re not actively competing for that. Generally speaking, our mix is not dominated by the big, global, mega-luxury brands. There’s maybe an exception here or there, but when you’re talking about brands that have 300, 400, 500 stores in the world and $2 billion, $3 billion, $4 billion, $5 billion in sales, we don’t have so many of those in Barneys. Our matrix is more lots of little people and lots of people that are below $100 million in global sales and below $500 million and a few that might get to a billion or whatever, so that’s a little bit of a different world in terms of how we position ourselves. We’re also deliberately not in the shop-in-shop business that has taken over the world. We have a policy of no leases and no concessions, so we don’t rent our space to anybody—we don’t make deals with the big brands to give them space and let them decorate, so those are all elements that keep us distinctive and help us play to that customer who favors something that’s a little less distributed. In some ways, we’re a reaction against that big, global luxury phenomenon that keeps getting bigger and bigger. I always say that we’re a niche and I’m proud to be a niche. And as this whole luxury machine keeps getting bigger and bigger and adds billions and billions and more wealth is created to a big degree, we’re a little bit of a reaction against that, but our piece of the pie is also getting bigger as a result.
It’s interesting because you came from the mono-brand side. Most of your previous experience is with the Guccis and the Saint Laurents and now it’s all about the mix where you are. What’s been the biggest learning experience going from one side to the other?
Well, it’s all retail at the end of the day, so the principles are the same. I actually started at the very beginning of my career in multibrand, at a big department store in New York in the buying office. And then it’s true I spent most of my career on European mono-brands. My half-joke and half-reality is that the margins are better in mono-brand because they enjoy the full margin from start to finish and the manufacturing and everything. We work on a much shorter margin, so that’s a challenge. At the end of the day we’re profitable and we work it out, but in terms of creativity, it’s much more freeing and liberating and creative to be Barneys. That’s a joyous change in the sense that we have this container that we can ultimately fill with anything in the world. That opportunity to step out of the cult of a single brand, of a single designer, and to see, as you do, the entire market and all the showrooms—that’s very freeing and that’s actually quite exciting.
Coming back to the digital side, one thing that Net-a-Porter has done very well is same-day delivery. I don’t think any department stores, including yours, have done that yet. Is that something you would like to be doing?
We’ve looked at it and we continue to look at it. We speed it up. We’re much faster than we were a few years ago. I think it’s a nice thing. It’s a lot of marketing more than reality—they get it in a couple of days from us and I don’t think it’s the most important thing. We’ve had to work on so many other fundamental things and we still have a long list of things that we’re working on, further enhancements to the site on a weekly, monthly basis. We may come to that at some point, but for us, from where we started a few years ago, it wasn’t the most important thing to focus on. There were so many other things in terms of the experience that were a bigger priority.
“Some companies spend all their time thinking about how to kill the competition. We’re more just focused on how to make Barneys better.”
In terms of competitors, which retailers do you keep an eye on?
I mean, everybody’s competition, so I think we’re aware. I try to just stay generally aware in my mind and never rest on our laurels, but we tend to focus inward because at the end of the day we don’t have that much time to go looking around the world and shop other people. I think there’s an awareness certainly online—I have more time on the weekend, I can look around—but I would say, I think in a healthy way, we’re more inward-focused. On the negative side, we sometimes don’t pat ourselves on the back enough. Sometimes we forget. It’s a lot of type-A, very driven executives that are ambitious in terms of making Barneys the best. We achieve something great, and then we kind of move onto the next thing in about 30 seconds, so that’s good and bad. But I would say the good is that I think there’s a culture of some companies that really spend all their time thinking more about how to kill the competition as opposed to how to be great themselves, and I would say we fall into the opposite category where we’re more just focused on how we can make Barneys more interesting and more surprising and better and how we can improve the customer experience and how we can improve the merchandise according to our own drum as opposed to really thinking so much about the competition.
In terms of future plans, you’re working on a downtown Barneys?
We’re designing it now—we’re targeting to open early 2016, so we’re about 18 months away and it’ll be our homecoming downtown. It’ll be 56,000 square feet on Seventh Avenue and 16th Street, which is the street that we lived on for 70-plus years and the street that Barneys was born on in 1923, so that’ll be a big full circle. Certainly, that’s the biggest plan in the works, so that’s a thrill.