Neiman Marcus begins its new life outside of bankruptcy

Discussion
Photo: Neiman Marcus
Oct 05, 2020
Tom Ryan

Neiman Marcus emerged from bankruptcy on September 25 with plans to sharpen its focus on full-price selling and perfect digital clienteling. However, the exit begins with significant reductions in its in-store workforce to adjust for lean sales expectations in wake of COVID-19.

Geoffroy van Raemdonck, CEO, wrote in a letter to vendors attained by Women’s Wear Daily, “This change is substantial and incredibly difficult, but we must ensure we have the right structure and right size team in place that matches our reduced financial forecast.”

Neiman’s plan is to transform “into a luxury customer platform, focused on customer engagement across a luxury lifestyle.” Management is redefining in-store roles as “service ambassadors, digital client advisers and personal stylists.” The retailer has added an NM Connect clienteling tool this year and the “Your Neiman’s” digitally-driven personalized hub to further support omnichannel offerings. Online already accounts for a third of the company’s sales.

Some stores were closed and debt reduced in bankruptcy proceedings, but the luxury sector is expected to fare worse than other retailer channels in the coming months as the recession reduces high-end discretionary purchases and tourist traffic remains at a standstill due to the coronavirus. Arguably, luxury’s high-touch approach presents bigger challenges for social distancing than other channels.

Neiman Marcus begins its new life outside of bankruptcy
Photo: Neiman Marcus

Last week, S&P said it expects Neiman’s sales to decline in the mid- to high-single-digit range through its fiscal year ended June 2021 due to depressed in-store traffic from safety concerns, the recession’s impact and secular department store challenges.

Like other department stores, Neiman’s has struggled to attract Millennials and Gen Z. Beyond digital engagement, Neiman’s will have to deliver experiences and cutting-edge brands that resonate with younger consumers. Vendors, however, are less reliant on shelf space at luxury stores as larger labels such as Prada and Gucci are rapidly expanding in direct-to-consumer channels and start-ups can launch with more authenticity online.

Neiman’s can still capitalize on its legacy and core following. Gene Spiegelman, vice chairman and Ripco Real Estate, told Vogue Business, “Brands go [out of business] because they lose the loyalty and the connection with their customer. That’s the fundamental foundation for Neiman Marcus’s survival.”

DISCUSSION QUESTIONS: How would you assess the strengths and weaknesses of Neiman Marcus? What will be the key to its sustainability in the years ahead? Does management seem to be taking the right steps?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think they need a plan for developing an army of influencers that are tightly connected to luxury audiences."
"It’s not just younger customers that Neiman Marcus needs to attract, it’s the generations of consumers who enjoy luxury product but are not a size 2."
"Neiman Marcus is in a better state than most other department stores, mainly because it has a solid base of loyal customers. However, there are a lot of challenges ahead."

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12 Comments on "Neiman Marcus begins its new life outside of bankruptcy"


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Mark Ryski
BrainTrust

The Neiman Marcus brand has long lost its magic and luster. The financial challenges over the years and now the many negative impacts from COVID-19 mean that the future looks bleak for Neiman Marcus. Management is survival mode, and while I respect that they are trying to save their business, the general strategy that they are offering sounds a lot like what they were focused on before bankruptcy.

Neil Saunders
BrainTrust

Neiman Marcus is in a better state than most other department stores, mainly because it has a solid base of loyal customers. However, there are a lot of challenges ahead. In the near term, demand for luxury fashion will remain very suppressed and, like most other retailers, Neiman Marcus will need to manage that financially. Longer term, Neiman Marcus needs to work on attracting greater numbers of younger shoppers which are its customers of the future. It also needs to grapple with the fact that many more luxury houses are expanding their direct-to-consumer businesses. The key question is: how can Neiman Marcus differentiate and add value against that backdrop?

Brett Busconi
Guest

The key to Neiman Marcus’s sustainability is likely to be how they can connect to the younger clientele and if that connection can form loyalty. When luxury brands have influencers showcasing (or at least representing) their products combined with their increasing looks to sell directly to consumers this seems like a slippery position to try and gain with those age groups for Neiman Marcus. I don’t see what is going to make them any different than the other department stores when it comes to their shared challenges. I will be rooting for them but I don’t have high hopes in this case.

Bob Phibbs
BrainTrust
This topic was the subject of my LinkedIn LIVE last week. I don’t see how this CEO will be here for long. After giving up on their $80 million dollar Hudson Yards store in little over a year and getting a pass on $4 billion in debt – as much as they sell in a year – he agreed to do a spread in a luxury magazine about his opulent lifestyle. Those optics were bad enough but added to the $6 million he is expected to get out of the bankruptcy and the $4 million he got in February, it oddly got worse. The New York Post shared that Neiman Marcus was billing employees for the medical premiums Neiman Marcus had paid while stores were furloughed. When asked what if they couldn’t pay, it was suggested employees take out a loan. You cannot lead a company when you are this out of touch. As to the brand, I have found nothing special about their service, selection or much else in past years that Saks isn’t… Read more »
Dave Bruno
BrainTrust

On paper, I really like all the moves Nieman Marcus is making. To survive they need to completely reinvent their go-to-market approach, and these tactics all feel like they are directionally correct. However as noted in Tom’s article, there is one piece missing in my opinion: a carefully though-out investment strategy for attracting younger people. I think they need a plan for developing an army of influencers that are tightly connected to luxury audiences that can comment on trends, advise Neiman Marcus assortments, and most importantly stay in step with how store personnel will turn their influence into clientele conversions.

Richard Hernandez
BrainTrust

I think one of the biggest obstacles for luxury is relevance. How do you cast a larger net to get a larger audience in a time where people are not spending as much as they were before the pandemic? What will the value proposition be to gain that additional audience? This will take careful research and execution in order to avoid the previous situation.

Gene Detroyer
BrainTrust

Is “Neiman Marcus” and “younger clientele” an oxymoron?

Steve Dennis
BrainTrust
I spent four years at Neiman Marcus as their first chief strategy officer and head of multichannel marketing, so while I have been gone for a while many of the challenges they face remain the same and are now amplified by the pandemic. While Neiman Marcus was slow to break down their organizational silos and embrace harmonized shopping, their online offering has been strong and helps explain why both their e-commerce penetration is so high and why most brick and mortar sales are digitally-enabled. Nevertheless, traditional luxury has been maturing in the U.S. for more than a decade and like much of their competition, Neiman Marcus has struggled to attract younger customers amid growing competition of all forms. To make matters worse, the wearing occasions that drive a good chunk of their business aren’t happening or are greatly reduced for the foreseeable future. Many stores also have a decent percentage of business that is influenced by travel, which is also likely to remain constrained until at least the second half of the near year. In… Read more »
Chuck Ehredt
BrainTrust

I shopped at Neiman Marcus 20-25 years ago when I could identify with the people who worked there. They were middle-class professionals who aspired to a more aspirational lifestyle (like me). I then quit visiting as many employees became snotty.

For them to build a “platform” for luxury, they need to identify the characteristics of their target customers (not only one segment) and deliver value and experiences that makes them want to come back. Loyalty is built on these experiences and the perceived value obtained during each touchpoint.

Most of the information I’ve read about their new plans seems focused on rationalization from an operational perspective and not connecting with different customer segments from an emotional angle. I don’t think enough customers will stay engaged — paying premium prices — unless their emotions are engaged and the experiences are rewarding.

Georganne Bender
BrainTrust

It’s not just younger customers that Neiman Marcus needs to attract, it’s the generations of consumers who enjoy luxury product but are not a size 2.

I stopped shopping at Neiman Marcus years ago after attending a fashion show sponsored by the store. Immediately following I went to buy the designer blazer and skirt ensemble I liked only to be told that it didn’t come in my size. I left after the sales associate suggested I might enjoy a new pair of shoes or a handbag instead.

If Neiman Marcus want its stores to be relevant, it needs to look at the potential customers that are being turned away. The “you can’t be too rich or too thin” model obviously isn’t working; it’s time to try something else.

Craig Sundstrom
Guest

Most of us here probably remember when “Dallas” was big on TV. Coincidentally or not, it seems like it was the time that Dallas’s home-grown luxury retailer was also attracting a lot of attention. Much has changed since then: the series is gone, the store isn’t, but … the world — particularly the luxury world — has become more sophisticated and globalized. I’m not sure Neiman’s quite made it into the big time in those last categories, and it will be difficult now (whether “now” means the e-commerce era in general or the middle of a pandemic, specifically).

I will wish management the best and assume they know — at least as well as anyone — how to run the store … right up until the moment they announce a multi-billion dollar package of BBB debt.

Christopher P. Ramey
BrainTrust

The issue is being relevant to enough affluent clients who will keep them in business. It’s a small pool and they already have a relationship that apparently wasn’t enough in the past.

But fashion is fleeting. They can get their clients back as quickly as they lost them if the merchandising focus and technology are spot-on.

Nieman Marcus will succeed because they understand all retailers are technology firms. They’re ahead of the retail curve in digital and I expect that lead to increase.

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Braintrust
"I think they need a plan for developing an army of influencers that are tightly connected to luxury audiences."
"It’s not just younger customers that Neiman Marcus needs to attract, it’s the generations of consumers who enjoy luxury product but are not a size 2."
"Neiman Marcus is in a better state than most other department stores, mainly because it has a solid base of loyal customers. However, there are a lot of challenges ahead."

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