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Forging A Path
By David Moin
El Palacio de Hierro isn't afraid to take risks in an effort to expand its footprint, get a tighter grip on luxury and secure its status as Mexico's premier upscale retailer.El Palacio de Hierro Centro
Jos(c) Maria Blanco, chief executive officer of El Palacio de Hierro, nearly fell out of his seat when Don Alberto Bailleres, the company's owner, disclosed a daring scheme.
In the middle of Mexico's "Tequila Crisis," the economic collapse triggered by the sudden devaluation of the peso in 1994, Bailleres instructed Blanco to buy some prime real estate in Polanco, an affluent neighborhood just north of Chapultepec Park in Mexico City.
"'Buy the Polanco space. Go get it for me,'" Blanco said in an interview, recalling Bailleres' words. "I was shocked. I said, 'this is very, very macho.'"
The company bought 80 percent of the Polanco block from the developer/owner, in a financially risky move that ultimately proved pivotal, marking the beginning of El Palacio de Hierro's major expansion, and reinforcing the new strategy of upscaling started in 1993 when the retailer opened in the well-to-do Santa Fe section of Mexico City.
In Polanco, El Palacio built a mall anchored by the store, which opened in 1998, and a year later, the imposing headquarters of Grupo Bal, the conglomerate owned by Bailleres that includes El Palacio de Hierro, opened atop the site. It's among Mexico City's most recognizable structures -- a towering triangular stone edifice evoking the mysterious Teotihuacan Pyramids outside Mexico City. In the years since, El Palacio de Hierro bought up the adjacent buildings to own 100 percent of the block and position the department store for a $200 million expansion and renovation, more than doubling its size to 500,000 square feet.
"This will be the flagship of all flagships," Blanco stated, citing such introductions as Prada, Gucci and Louis Vuitton in luxury ready-to-wear and accessories. "They will all have windows and shops to the street. We started talking about this project over a year ago. Next month, we'll see the plans for the layout."
As part of the overall project, Grupo Bal's headquarters will grow, too, without losing its pyramid character and in proportion to how the store and the mall expand.