Why Neiman Marcus Is Where the Young and Wealthy Want to Shop
Inflation and rising interest rates have taken a toll on U.S. CEO confidence. In the latest The Conference Board survey, nearly 70% of CEOs expect a recession to result from the Federal Reserve’s tightening monetary policy – 57% see a short, mild recession coming and 11% a challenging one. Another 20% expect an extended period of stagflation ahead.
While CEOs across the board are more negative than positive in outlook, Neiman Marcus Group (NMG) CEO Geoffroy van Raemdonck is firmly on the positive side where his business is concerned.
“There’s going to be tailwinds and headwinds,” he shared with me, “But we are doubling down on the tailwinds and being cautious and agile where the headwinds are concerned.”
As a leader in multi-brand luxury retail under Neiman Marcus and Bergdorf Goodman banners, van Raemdonck sees the continued growth in the wealth class as a net positive for the company, as well as luxury consumers’ pent-up demand “to live the lifestyle they couldn’t for almost two years.”
The recent volatility in the stock market where most of their wealth is parked is expected to have some impact on business, but overall van Raemdonck sees green lights ahead.
“We believe there is still demand out there ahead of us compared to last fall. We’re very dialed into where we invest our inventory in terms of categories and brands and we can ship inventory from one place to another and from one channel to another. What we learned during the pandemic has given us the agility to adjust quickly,” he continued.
While many other retailers took a hit this year, NMG reports its sales in the most recent quarter grew over 30% compared to this time last year.
In addition, nearly half of Neiman Marcus stores reported all-time high sales volume and overall sales of its top 20 brands have increased over 70% compared to pre-pandemic 2019 levels.
Particularly hot in NM stores were men’s (up over 60%), women’s shoes (up 50%) and handbags (rising 70%).
Given the company’s positive outlook, it plans to invest $300 million to renovate nine stores – Bal Harbour, Atlanta, Westchester, St. Louis, Oakbrook, Houston, Paramus, San Diego and Tysons.
And Bergdorf Goodman with one New York City flagship is leaning into serving online customers, both on a national and international stage, in a partnership with Farfetch Platform Solutions back up by a $200 million minority investment by Farfeatch.
Attracting new, young money
After joining the company in February 2018 and having shepherded the company through bankruptcy restructuring in September 2020, van Raemdonck has worked overtime to make Neiman Marcus a destination for younger shoppers.
By elevating the shopping experience along the lines of “retail-tainment,” offering personalized shopping experiences in its stores and online and adding over 200 new brands, many with strong environmental, social and governance (ESG) credentials, the company’s average customer age is now seven years younger than before the pandemic, moving from the mid-40s to high-30s.
“GenX, Millennials and GenZ customers are now more than 60% of our customer base,” he shared and added that one out of six customers returns within 90 days to shop again.
More notably, he reports that almost a majority of sales come from customers who spend on average $10,000 per year.
“These are customers who are truly buying luxury and engaging with us on a repetitive basis. We have been able to continue to grow with our prior customers and bring in the next generation of wealth as well,” he continued.
Putting people first
Complicating the CEO’s economic outlook are concerns about the tight labor market, with 80% of the CEOs reporting that attracting qualified workers is a challenge. And retaining experienced company workers is another widespread concern.
Many CEOs are discovering that the traditional levers to attract and retain employees – better pay and benefits – are no longer working. Prospective and current employees are looking beyond those things to corporate culture and finding it wanting.
NMG got ahead of that early by implementing a NMG|Way culture program with belonging and ESG principles as its centerpiece. To support this initiative the company appointed Eric Severson as its Chief People and Belonging Officer and Chis Demuth to oversee People Services, ESG, Belonging and Corporate Philanthropy.
The NMG|Way program is delivering results with the company reporting retention is up and time-to-hire down in 2022 compared to 2019.
“People do their best work and have the most impact if they are happy in their life,” he shared. “Making sure our sales associates, creative people and merchants feel they belong leads to growth, both for the company and for each individual. It’s a competitive advantage in retail because everything we do is in service of the customer”
For many years retailers have made customer-centricity their guide. But they are discovering that isn’t enough anymore. You can’t be customer-centric without also being employee-centric.
“The relationships our sales associates have with their customers is critical to our success,” he asserted.
Covid ushered in the future
“Coming out of Covid, it’s a new business and in some ways more complicated than pre-Covid,” van Raemdonck reflected. “But it’s more exciting because we see many more ways to drive demand. The service and experience in our stores are second to none. We’ve gathered so many learnings that will carry us into the future.”
And he concluded, “We will continue to invest to make coming to the store a real immersive experience. And we will continue to invest in technology and digital capabilities to support our associates and deliver luxury to our customers through exceptional and personalized experiences where they prefer to shop across our three channels – stores, online and sales-assisted.”