What happened at luxury retailer Saks that caused bankruptcy?

Saks Global — the luxury retail conglomerate that owns brands like Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman — filed for Chapter 11 bankruptcy this week. That’s the kind of bankruptcy that lets companies reorganize to try to stay afloat rather than shut down completely.

But given that higher-income consumers are driving so much of retail spending these days, why is a chain of luxury department stores that caters to just such a clientele struggling?

People buying luxury goods often break down into the really wealthy who don’t care that much about price and those who might stretch a bit to buy something nice.

“When it comes to luxury, Saks Fifth Avenue, Neiman Marcus, other players like that are more what I would call in the ‘aspirational luxury,’” said Shikha Jain, the lead partner for North American retail at Simon-Kucher.

The Saks Global brands were getting those “aspirational luxury” shoppers, but Jain said those shoppers are more likely to pull back spending in times of job insecurity and higher prices for everything from housing to health care.

That’s especially the case among younger consumers, according to Lars Perner, an associate professor of clinical marketing at USC’s Marshall School of Business.

“Many of their incomes have taken more of a hit, so they haven't had the same opportunities to get into luxury products that they would have had when times were better,” he said.

On top of that, luxury department stores are now competing even more with the brands they carry, said Marie Driscoll, a retail expert at Driscoll Advisors.

“What has happened in the last 20 years is many of the luxury brands have opened up their own stores, like the Dior, Chanel, Louis Vuitton,” she said.

To get a foothold in the new luxury retail landscape, Driscoll said that department stores will have to lean into the idea of offering those aspirational shoppers a luxury experience — even if they’re in the store for a budget purchase.