It is the distinguishing characteristic Twin Cities retail brokers are trying to downplay: two major luxury department store closings within a year. And this time, it’s not strictly a downtown issue. Bloomingdale’s left Mall of America, with its 42 million annual visitors, and Neiman Marcus says it has studied the entire Minneapolis-St. Paul market and no longer wants to do business here. It hurts not just our municipal egos, but our chances of attracting other top national chains.
Why does luxury retail struggle so in the Twin Cities? Minnesota’s unemployment rate is lower than the nation’s as a whole; the average income is higher. Minnesotans attend the theater, eat at fancy restaurants, live in big houses, drive expensive cars, and work for Fortune 500 companies. But no one wants to pay full price for an Ermenegildo Zegna suit.
The Twin Cities has a long history of losing some of the best upscale stores: Saks Fifth Avenue, Polo Ralph Lauren, Mark Shale, to name a few. Yet each high-profile exit feels like a surprise—probably because certain luxury brands seem to thrive here: Louis Vuitton, Tiffany & Company, and Burberry. Several newer boutiques in town are successfully catering to the high-end shopper. And upper-midmarket Nordstrom continues to amp up its designer offerings at the very mall where Bloomingdale’s could not survive.
It’s not fair to say Minnesotans don’t spend enough to support high-end retail; then again, it’s not entirely accurate to say we do. The reality, according to industry experts, seems to be this: Minnesotans are unusually picky consumers who never really got over their first girlfriend, Dayton’s, more than a decade ago. To succeed here, high-end retailers must understand the modest, value-conscious, service-oriented psyche.
Dayton’s Nordstrom Kind of Town
“We’re still Dayton’s people,” says retail broker Stephanie Meyer, a senior vice president with Mid-America Real Estate. “We miss Dayton’s terribly. Nordstrom replaces their service, their return policy.”
Where Bloomingdale’s never seemed to connect with Minnesotans, Nordstrom has gone out of its way to tailor its products and services to the community. “We want to be the hometown store,” says Nordstrom spokesman Colin Johnson.
When Macy’s took over Marshall Field’s several years back and eliminated many of its designer lines, Nordstrom scooped them up and added an annual designer fashion show to connect with luxury shoppers. “We do a lot of listening and respond to what our customers seem to respond to,” Johnson says. “Our model is to make sure we have great balance to our offerings. Whether that’s a $500 sweater or a $50 sweater, we want to provide the best possible fashion and best possible quality at that price.”
By emphasizing quality and service, Nordstrom has been able to sell more of those $500—or even $1,500—sweaters than Neiman Marcus or Bloomingdale’s did. “For a number of years, we’ve been working hard to strengthen our designer presence [at MOA],” Nordstrom’s Johnson says. “All we know is our customer has responded favorably. We saw an opportunity and have continued to build on it.”
Nordstrom isn’t the only one. Sales growth at Galleria in Edina has been largely concentrated on luxury brands, says the retail center’s Vice President and General Manager Jill Noack. Beyond upscale retailers such as Cole Haan, Tiffany & Company, Louis Vuitton, and BCBG, many of Galleria’s local tenants do well selling designer brands, from $300 Missoni scarves at StyledLife to $1,200 Mulberry bags at Pumpz & Company.
“There is no lack of luxury customer here,” Noack says.
Finicky, Self-Aware Consumers
The key is figuring out what Twin Citians will spend on. “Luxury cars, houses, and household goods, yes, but maybe less on clothing or accessories, compared [with] other cities,” says Susan Sun, owner of women’s designer apparel boutique OPM in St. Louis Park. The store has had to adjust down its average price to survive, but Sun says she is not afraid to mix in special items.
“Selling luxury goods is like selling desire,” Sun says. “Minnesotans appreciate low-key luxury goods that may not scream ‘look at me’ in public, but rather [buy] for themselves, because they appreciate the value. In order for them to take out their wallet, an item has to be personal enough and special enough that they can’t find it anywhere else.”
That attitude is not necessarily compelling to national retailers, especially in a state already known for its high cost of doing business, points out Paula Mueller, president of the Minnesota Shopping Center Association. Minnesota ranks 45th out of 50 on the National Tax Foundation’s State Business Tax Climate Index.
“I’ve talked to retailers who’ve said they would come to Minnesota, but only if they could open four or five stores, and they don’t see that they can do that here,” Mueller says, due to the size of the market and our modest spending.
Mueller is the general manager of Northtown Mall in Blaine, which is also home to big companies with well-paid executives, such as Aveda and Medtronic. The average household income around Northtown is $102,000, which Mueller notes is approximately $30,000 more than the average in Uptown. But fashion-forward specialty brands including Jonathan Adler home goods and John Fluevog footwear didn’t consider Northtown before grabbing space this year near Lake and Hennepin for their first Twin Cities locations. Numbers aside, Uptown has solidified its reputation for unique, modern upscale retail—especially home furnishings.
“We have pockets in the Twin Cities,” Mueller says. “People in this market are willing to drive for what they want. But just because they have money doesn’t mean they buy.”
Study after study shows that Minnesotans are choosier at the mall than are shoppers in larger markets, and even in some markets of similar size. “The Minnesota customer is less willing to pay a premium for goods handled by upscale department stores,” says David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas’ Opus College of Business. “Those Minnesotans who are willing to purchase those goods often do so at stores in other cities.”
Brennan’s belief is widely held by local high-end retailers and luxury shoppers, but difficult to back up with data. If true, it portends a challenging vicious cycle, where we eschew local outposts of national retailers to shop their branches in New York, Beverly Hills, Chicago, or Naples, Florida. The result is dumbed-down iterations of those stores in local malls or none at all, further driving shoppers out of town.