Christmas carnage at FAO Schwarz and Bergdorf Goodman.

Commentary about business and finance.
Dec. 6 2008 6:40 AM

Desperate Housewares

Observing the Christmas carnage at FAO Schwarz, Bottega Veneta, and Bergdorf Goodman.

This is shaping up to be a dismal Christmas. The International Council of Shopping Centers, which is supposed to help promote the industry, last Thursday trumpet­ed an "awful beginning to the holiday season." Excluding Wal-Mart, retailers reported that same-store sales last month fell 7.7 percent, the worst November in recent history. The big crowds that stampeded (literally, sometimes) through the doors of big-box retailers on Black Friday have dispersed. Shoppers seem inured to the relentless Christmas spirit. The Boston Consulting Group says that half the households it surveyed are planning to reduce their Christmas spending, while only 10 per­cent plan to boost it. ICSC projects that holiday sales could actually decline in 2008, "which would be the weakest holiday-sales performance on record," says Michael Niemira, chief economist and director of research at ICSC.

But no indicator was quite so telling as the plaintive message left on my home an­swering machine over Thanksgiving weekend. A kindly Bergdorf Goodman salesperson invited members of our hum­ble household to stop by and check out the bargains. Now, if you're not a habitué of the his-and-hers luxury department stores on Manhattan's Fifth Avenue, there are a few things you should know about Bergdorf Goodman. This place puts the haute in haute couture. It's about as wel­coming to the public as North Korea. It's the kind of store where the salespeople take one look at your shoes and judge whether you're a big spender. Bergdorf Goodman cold-calling suburban shoppers? It's like col­lege kids canvassing for Obama votes at a National Review conference.


But these are desperate times. During the late economic expansion, the well-off—and, in particular, the really well-off—thrived while the middle and working classes struggled. But in 2008, the stalwart customers of New York's luxu­ry retailers have been falling along with the hedge funds. The investment bankers and their significant others? See ya. Rich tourists from points south and west? Not this year, y'all. Europeans and Brits fueled by their powerful domestic currencies? Adios, au revoir, cheers! Russ­ian oligarchs? Da svedanya. In November, according to ICSC, luxury stores saw sales fall 10.5 percent. Neiman Marcus, which owns Bergdorf, reported sales were off 11.8 percent.

Strolling the half-mile of Fifth Avenue from Rockefeller Center to Central Park—the white-hot heart of the high-end Amer­ican Christmas experience—you en­counter the businesses that man­age to separate more people from their hard-earned money more than any others. But crowds in these thrift-killing fields were relatively sparse last week (aside from the clutch of Citi­group bankers trying to present toxic mortgage-backed securities as collateral for loans from Salvation Army kettles). The Rockefeller Center tree, like everything else in New York this year, has been down­sized. The 2008 Norway spruce is 72 feet, down from 84 in 2007. In Bottega Veneta, not a creature was stirring, not even a Vogue assistant editor. The Apple Store earlier this fall was so mobbed that hipsters had to take a num­ber to enter the Shrine of Jobs. This time, I swept right in and didn't have to wait to pay. Across the plaza from Apple stands FAO Schwarz. In normal times, it's an anxiety-inducing miasma of kids, tourists, and fly­ing plastic toys. Last Tuesday, it was an oasis of calm. I could have done yoga safely in the Lego section.

Why should we care where and how the well-off are spending? Well, the top 20 percent of households account for about 40 percent of discretionary spending, and the top 40 percent account for 74 percent of all discretionary spending, according to BCG. As go the rich and wannabe rich, so goes the nation. And while the residents of Richistan aren't moving to Pooristan just yet, they are cutting back. "Consumers who have money have decided they want to hold it in their pocket," says BCG part­ner Michael Silverstein. Luxury retailers have responded by acting like discounters. "In a better econo­my, customer service, quality, selection are the key selling points," says Ellen Davis, vice president at the National Retail Fed­eration. "But this year it's really all about price." Saks, which specializes in imported finery, is taking a cue from domestic automakers and offering zero percent financing. A/X is advertising all sorts of merchandise as half-off.

But not all luxury retailers seem to have gotten into the 2008 Christmas-shopping spirit. At Bergdorf Goodman's men's store, tasteful signs advertised 40 percent off marked prices. Which meant, for example, that a lovely Brunello Cucinelli gray wool sweater was marked down from an astronomical $1,075 to a merely absurd $649. As I looked at a rack of dark blazers, I was flattered that a sales­man actually spoke to me. "How much?" I asked. "Fortysomething hundred dollars," came the reply. I laughed. "That's Brioni," he said, "if it means anything to you." Why, yes it does, I thought. It means an insanely expensive product that probably won't sell much this year and, as a result, will fail to deliver fat commissions to nasty salespeople.

It's been fun. But next time, Bergdorf, don't call me. I'll call you.

A version of this article also appears in this week's issue of Newsweek.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster. Follow him on Twitter.



Smash and Grab

Will competitive Senate contests in Kansas and South Dakota lead to more late-breaking races in future elections?

Stop Panicking. America Is Now in Very Good Shape to Respond to the Ebola Crisis.

The 2014 Kansas City Royals Show the Value of Building a Mediocre Baseball Team

The GOP Won’t Win Any Black Votes With Its New “Willie Horton” Ad

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?


Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

One of Putin’s Favorite Oligarchs Wants to Start an Orthodox Christian Fox News

These Companies in Japan Are More Than 1,000 Years Old

Trending News Channel
Oct. 20 2014 6:17 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Oct. 20 2014 8:14 PM You Should Be Optimistic About Ebola Don’t panic. Here are all the signs that the U.S. is containing the disease.
Oct. 20 2014 7:23 PM Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing
Oct. 20 2014 3:16 PM The Catholic Church Is Changing, and Celibate Gays Are Leading the Way
  Double X
The XX Factor
Oct. 20 2014 6:17 PM I Am 25. I Don't Work at Facebook. My Doctors Want Me to Freeze My Eggs.
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
Brow Beat
Oct. 20 2014 9:13 PM The Smart, Talented, and Utterly Hilarious Leslie Jones Is SNL’s Newest Cast Member
Oct. 20 2014 11:36 PM Forget Oculus Rift This $25 cardboard box turns your phone into an incredibly fun virtual-reality experience.
  Health & Science
Medical Examiner
Oct. 20 2014 11:46 AM Is Anybody Watching My Do-Gooding? The difference between being a hero and being an altruist.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.