Will others follow Neiman Marcus’ return to a full-price focus?

Discussion
Photo: Neiman Marcus
Sep 20, 2017
Jasmine Glasheen

Neiman Marcus recently announced its intention to close more than 25 percent of its Last Call off-price outlets. The retailer has expressed hopes to reestablish itself as a leader in the full-price and luxury markets by narrowing its off-price offerings with the shuttering of 10 of 37 Last Call locations.

“This decision is about optimizing our Last Call store portfolio to deliver the best customer service and freeing up resources to support new initiatives for our full-line Neiman Marcus and Bergdorf Goodman channels,” Elizabeth Allision, senior vice president for Last Call, told USA Today.

Many believe it’s high time for Neiman Marcus to make a bold move. With six quarters of declining comparable sales and $5 billion in debt, it should come as no shock that the company feels it should start doing things differently.

Neiman Marcus is not the first high end department store to return to a luxury-focused business model after a brief foray into the off-price sector. Barneys New York led the pack in off-price store closures earlier this year. Barneys’ spokespeople said the company intended to focus on its classically successful business model by selling high-ticket items to an upscale clientele.

As Barneys incoming CEO, Danielle Vitale, told Fortune, “If it’s exclusive and rare and doesn’t exist anywhere else, we are not forced to mark it down.”

With Barneys and Neiman Marcus following in the footsteps of such luxury brands as Ralph Lauren and Coach by returning to full-price models, the New York Post recently questioned whether off-price stores are losing some of their appeal. The article pointed out that even Nordstrom’s successful Rack chain had seen its same-store sales increase slow from 4.6 percent in the first quarter of 2016 to 2.3 percent this year.

DISCUSSION QUESTIONS: Will Neiman Marcus’s shift back to its full-price business model affect other retailers who have focused more on off-price? How do you see luxury retail and off-price within the department store channel shaking out in the near future?

Braintrust
"There are probably more reasons this could be successful than reasons why it wouldn’t be. "
"I doubt many will follow. While Neiman Marcus has been unable to make Last Call work well, Nordstrom’s Rack business is flying..."
"Neiman Marcus refuses to work with manufacturers and brands who employ child labor, forced labor or who pay less than minimum wage."

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14 Comments on "Will others follow Neiman Marcus’ return to a full-price focus?"

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Chris Petersen, PhD.
BrainTrust

If department stores can’t differentiate their relevancy and customer experience, off-price stores will not save them.

Tony Orlando
BrainTrust

Maybe Nieman Marcus can pull this off, but retail these days is brutal for all of us and full-price clothing is something that would appeal to a very slim few who are willing to pay for the latest fashion line. The rest of us will wait until it goes on sale at 50 percent off (plus another 20 to 25 percent). Good luck on this, as all the other stores will continue to provide the customers with deals.

Tom Dougherty
BrainTrust

Neiman Marcus is simply returning focus to the brand that always made them exceptional. I never believed their brand had a place for off-price models.

More retailers should take notice. Your BRAND is where your preference (and margins) reside. Any move away from that root erodes preference.

Art Suriano
BrainTrust
There are probably more reasons this could be successful than reasons why it wouldn’t be. Neiman Marcus doesn’t belong in the off-price business nor should it use words like “discount.” They spent more than a century building a brand known for excellence. However, through the years they lost their edge and, like many retailers, began to chase competition. That never works long-term. Today we see a full circle in many areas of retail, particularly department stores. J. C. Penney and Macy’s are slowly bringing back departments that they eliminated 30 years ago. And it’s showing signs of success. The answer of whether Neiman Marcus will be successful will come from how well they deliver an amazing customer experience of quality and service. Those who can afford full price at Neiman Marcus will spend the money if and only if they feel it is worth it. So Neiman Marcus has to think about that, and if they can provide the type of experience they once did in today’s competitive environment, Neiman Marcus will not only be… Read more »
Peter Charness
BrainTrust

That “full price” market has a following, but it’s not an endless crowd of shoppers who will go with that model. So yes there’s a market for this, but it’s not and never was big enough for a crowd of retailers all elbowing their way in there.

Lee Kent
BrainTrust

Department stores, whether full-price or off-price, are struggling. Will a focus on full-price, luxury retail really make a difference? I think it will take more than that. For my 2 cents.

Neil Saunders
BrainTrust

I doubt many will follow. While Neiman Marcus has been unable to make Last Call work well, Nordstrom’s Rack business is flying and Macy’s Backstage, while not perfect, has momentum. This move has more to do with Neiman Marcus’s difficulties than a shift in market and consumer preferences.

Doug Garnett
BrainTrust

It’s hard to know whether Neiman Marcus’s move will be best for their stores. But fundamentally, retailers must fight back against the discount-crazy world they’ve helped create.

As a specialist driving sales for innovative products and services at retail, I’m appalled at how dominant price cutting has become.

Back when I sold supercomputers, salesmen found it far too easy to open discussion with, “we have a great computer and we’ll sell it to you at half-off.” But the only successful policy was that no discounts were offered until a potential customer wanted our product for what it was.

Retailers should start every visit to their store with, “here are great products you’ll find unique, innovative and interesting for your life.” Instead, store visits too often start with loudly yelling, “we have great discounts!”

Commerce health (not just brick-and-mortar) requires building margins with good products. Too many seem to have forgotten that.

Joanna Rutter
BrainTrust
2 months 24 days ago

Out of curiosity, I just did some research on Neiman Marcus Group’s code of ethics — so often we see apparel retailers like Gap Inc. who can afford to play with margins because their clothing is made using low-paid labor. Neiman Marcus refuses to work with manufacturers and brands who employ child labor, forced labor or who pay less than minimum wage. (Nordstrom has a similar statement.) If Neiman Marcus is confident in their due diligence, they should proudly stand by this code of conduct. It’d certainly refresh their ho-hum branding. Luxury apparel made ethically always has a place at the retail table, even though its portions may be a bit smaller.

Jasmine Glasheen
Staff

Great information, Joanna! I wonder why Neiman Marcus has thus far neglected to market themselves as an ethical luxury retailer.

Doug Garnett
BrainTrust

Good question. That said, I think it’s difficult to gain much serious advantage based on ethics.

It’s more meaningful for the Neiman Marcus customer. Still, consumers are most driven by “a) do they have the product I want, b) in an environment where I like to shop, and c) with customer service policies (like returns) that work for me.”

In general, assuming there are two options equivalent on those big questions, then consumer will opt for the one they know is ethical.

Companies need to be ethical — that’s a given. All I’m observing is the market doesn’t often give them near-term rewards for it in higher sales.

Ricardo Belmar
BrainTrust

I don’t see this as a potential trend for the industry to move away from off-price concepts as much as Neiman Marcus recognizing what their brand REALLY represents and going back to it. While certainly no stranger to sale/discount pricing (Last Call was originally their big annual sales event post holiday season before it became an off-price store), Neimans is a brand that represents luxury merchandise with an exceptional, personalized shopping experience. Long before we introduced technology for assisted selling, Neimans sales associates were going head over heels to service their customers and that’s what made them keep coming back. It wasn’t about the sale pricing. This action is just a recognition of that brand history.

Department stores in general are going to have to come to the realization that discounts and sales alone will not continue to drive traffic to their stores. Retailers are brands, too, and they have to stand for something for customers to keep coming back.

Craig Sundstrom
Guest

Has the “outlet” model become (over)saturated? Perhaps. Did it just not work, or was it not done properly by Neiman Marcus? Perhaps (although as they are not closing all of them, this seems less likely).

Or perhaps this is just symptomatic of larger problems within luxury fashion in general. There’s seldom a stigma anymore in looking like a slob, and people are increasingly unwilling to pay ungodly amounts of money for a designer name.

Javier Cazares
Guest

This move, if done right, will benefit Neiman Marcus and it could impact other retailers who have focused on an off-price model. These department stores have lost some of the uniqueness its iconic branding used to bring to customers and this is exactly what customers are hungry for today. If Neiman Marcus does this right and brings back its uniqueness along with personalized customer experience, then they will eventually bring their lost customer base and win new customers.

wpDiscuz
Braintrust
"There are probably more reasons this could be successful than reasons why it wouldn’t be. "
"I doubt many will follow. While Neiman Marcus has been unable to make Last Call work well, Nordstrom’s Rack business is flying..."
"Neiman Marcus refuses to work with manufacturers and brands who employ child labor, forced labor or who pay less than minimum wage."

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