There was a time when the obvious first stop for luxury shoppers was a famous department store like Saks Fifth Avenue or Bloomingdale's.
Now those shoppers have ever-expanding options, whether that means hitting boutiques at upscale malls like Edina's Galleria or simply going online. Even Target, the master of cheap chic, is offering a Neiman Marcus line this holiday season.
This trend, not a lack of big spenders, is a prime reason analysts point to for the departure from the Twin Cities in recent years of some of the biggest names in luxury. The latest is Neiman Marcus, which leaves downtown Minneapolis at the end of January.
Luxury buyers are very different than they were 10, five or even two years ago. "They're shopping at Kohl's and designer outlet stores," said Pam Danzinger of Unity Marketing, a retail analysis firm that focuses on the affluent consumer. "They're just as happy to look for a diamond at Costco as at Tiffany."
The Twin Cities is hardly alone in losing Bloomingdale's, which left the Mall of America in March, or Saks, which scaled back to a Nicollet Mall outlet in 2005.
Bloomingdale's stores have also closed in Atlanta, Chicago and in the suburbs of Washington, D.C., all larger markets than the Twin Cities. Since 2010, Saks has closed seven under-performing stores.
The exception to the big-box luxury trend in this market is Nordstrom. The possibility of a store at Ridgedale, in addition to the existing Mall of America location, is still very much in the rumor mill, said Dick Grones, a local retail expert and principal of Edina-based Cambridge Commercial Realty.
Still, the growth market for Saks and other luxury department stores is in outlets like Saks Off Fifth, not full-price stores, said Danzinger. In fact, Saks announced last week that it is adding a second Twin Cities outlet store in the Paragon Outlet Partners project, which will open in Eagan in November 2014.
Part of Neiman Marcus' problem was the lack of other high-end retail shopping downtown, said Barbara Loken, chair of the marketing department at the University of Minnesota's Carlson School of Management. "They want a cluster of high-end stores that gives them a unique experience," Loken said.
Instead, Minneapolis Mayor R.T. Rybak said, the downtown is evolving into a place for everyday, basic goods. The days of downtowns being sophisticated, retail leaders are gone, he said.
Downtown's place as a fashion mecca has been usurped by Edina's Galleria, which is rich in smaller high-end stores such as Louis Vuitton, Tiffany and Gabberts, said Daune Stinson, owner of June, a resale shop in Minneapolis.
"I have customers who shopped Neiman's downtown, but a lot of them complained about the parking," she said. "They'd rather just go to the mall and park free."
Part of the Galleria's success, besides free parking, is the mixture of retailers with price points for middle to upper-end shoppers, say retail experts. It's what many other malls are doing to attract high-income shoppers, including Mall of America.
Although the megamall stumbled with the loss of Bloomingdale's, it wasn't due to a lack of luxury buyers, said Maureen Bausch, executive vice president for business development. "Bloomingdale's blames themselves. It was a lack of investing in this market and telling people what they had," she said. "Then they cut labor and cut service."
For many young luxury shoppers, service is a non-issue because they're finding what they want online.
The Internet has everything younger, affluent shoppers want at their fingertips, said Mary Brindley, owner of Grethen House boutique at 50th and France in Edina. "They've got their favorite sites bookmarked and credit card numbers stored," she said. "And they get free shipping and free returns."
Susanne Huber of Minneapolis says she shops online at sites such as Farfetch for lines from around the world, but she also shops local boutiques, consignment and resale shops such as June, where a pre-worn $1,600 Lanvin necklace was $400.
Like many of today's younger luxury shoppers, she buys a mix of new and used, full-priced items and markdowns from places as wide-ranging as Target and Arrow boutique in Minneapolis. Neiman and Bloomingdale's were never much on her radar, she said. "They were too big," she said.
MOA embraces luxury
Bausch said Nordstrom has escaped that trend. She said the retailer has done very well at Mall of America with couture lines such as Chanel, Chloe, Gucci, St. John and Armani and is expanding with a new Prada boutique to open early next year.
The mall has followed suit by designating the first and second floors of South Avenue between Macy's and the former Bloomingdale's as its luxury wing. Twin Cities luxury shoppers and especially international shoppers like brand names, said Bausch, and they are slowly getting them.
Retailers such as Henri Bendel, Armani Exchange, Stuart Weitzman, Hugo Boss, Burberry, and Michael Kors have been lining the avenue since 2007.
More would already be here, Bausch said, but high-end tenants are picky about the space they want to occupy. "We have six to 10 high-end retailers just waiting for existing leases to expire within the mall," Bausch said.
She wouldn't specify which ones are lying in wait. "I don't want the Galleria to go after them," she said with a laugh.
One high-end retailer that's often rumored to be joining the mall is the Spanish chain Zara. But some observers think local styles and other differences also play a role.
"Zara is a European store for European style," said Nelson Fraiman, a professor at Columbia Business School. "And what is the problem in America? They don't fit in the clothes."
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