Neiman Marcus Deal Highlights Wisdom of Its High-End Luxury Strategy

May 4, 2005

Neiman Marcus Deal Highlights Wisdom of Its High-End Luxury Strategy

The sale of Neiman Marcus to Warburg Pincus and Texas Pacific Group for the high price of $5.1 billion highlights the chain's winning strategy of staying at the higher reaches of the luxury market instead of trading down, reported the Wall Street Journal. The store's top 100,000 customers generate $1.2 billion in sales, with each shopper averaging about $11,000 a year.

Instead of introducing more moderately-priced merchandise after the Sept. 11 terrorist attacks on the U.S., Neiman's chose to break from its luxury competitors and stay focused on high priced items. The strategy paid off. Though its customers bought less for a few years, by 2003 they were back to indulging in earnest again. "It showed us conclusively how important luxury and quality is to the customer," CEO Burton Tansky told WSJ. With its reputation for elite luxuries untarnished, Neiman's began to surge ahead. Its sales per square foot are now $555, whereas Saks Fifth Avenue, which introduced lower-priced items after 2001, is only $350.

Neiman's also provides a crucial luxury experience for its customers, said WSJ, which includes keeping on staff a full-time art curator to oversee its expansive 3,500 piece art collection, from Alexander Calder mobiles and Picassos to prominent regional artists. "When you serve customers who can buy anything they want, giving them an experience they can't [get] anywhere else is essential," says Ignaz Gorischek, vice president of visual planning and presentation.

Neiman's other accommodations to high-end shoppers are less showy, but just as important, such as a redesign of the stools at the stores' cosmetics counters. The addition of sturdier backs and an armrest long enough to hang a handbag has resulted in customers doubling the time they sit at the counters.

Finally, the store has also invested heavily in its sales associates. It stresses career-track, full-time jobs that come with commissions. New hires receive about 200 hours of sales training. After that, they get an additional 160 hours annually in professional selling techniques, such as developing relationships, upselling customers and closing sales. They are expected to keep in close touch with clients.

Since part of Neiman's cachet is its limited number of locations, the store was anxious to reassure analysts that it will maintain its exclusivity even while increasing sales. "We're going to maintain the same discipline we always have," said Tansky. He said they would look at every new opportunity to open a store carefully, but that only seven new stores are currently planned.

by Peggy Jo Donahue

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