Comments on: Can Lower Prices Save Neiman Marcus?

By: YM Ousley

YM Ousley — Thu, 29 Apr 2010 12:45:22 +0000

In reply to helena. Thanks for your comment Helena. I hadn't heard about the behind the scenes moves to try to keep vendors away from Gilt and other sample sale sites. It would be interesting to learn more about the practices the different majors have used to try to beat the discounters, before breaking down and deciding to join them.

By: helena

helena — Thu, 29 Apr 2010 06:09:03 +0000

Neiman’s reputation among respected wholesale distributors with-in the industry purportedly is declining. Neiman Marcus Direct, for example, particularly in recent years has reputedly laid down a literal and figurative gauntlet in this segment to their detriment. Allegedly, they as well as others (Macy’s for example) are Notorious for levying spurious Chargebacks against a reputable vendor base. The practice has given rise to further eroding once valued relationships. Albeit, Vendor Chargebacks will continue to pose as an indisputable profit center in their unpublished forecasts. Reading this article makes me truly question how their business model and survival mode strategy impacts the supply chain? Would be curious to know how the new cost of doing discounted business is perceived by large volume vendors v. small? Objectively, would love to be a fly on their wall simply to glimpse numbers crunched/cost analysis etc, no doubt factored into NM absorbing ‘shrink to fit’ margins.

By: YM Ousley

YM Ousley — Wed, 21 Apr 2010 13:41:03 +0000

Thanks for the comment Steven.

Neiman’s is probably in a stronger position than individual designers, and likely other luxury competitors. But the market of consumers shopping at a discount seems to be growing a lot faster than consumers who will buy without regard to price.

Certainly there will always be a consumer who buys on interest in a particular style, and values other qualities more than price. But the deal seekers could be the ones to sustain the bottom line if that group stagnates or gets smaller.

Putting resources into those second brands is certainly going to be important though. Part of Gilt’s success aside from the basic model is likely due to not treating discount sales like the red-headed stepchild (no offense to red-headed stepchildren).

By: Steven Dennis

Steven Dennis — Wed, 21 Apr 2010 12:38:04 +0000

First of all, thanks for the including some of the comments from my blog posting. Second, in full disclosure, while I left Neiman’s in 2008 my team did some of the original work on expanding the clearance centers and I am still a shareholder.

I did want to clarify a few things. Most importantly I don’t think Neiman’s “off-price” strategy is about saving the company. As the luxury market rebounds they will do just fine with their core business. This is a strategy about creating a compelling new business model to drive growth into adjacent spaces. Any one of the luxury players that understands the power of their brand and probes customer needs will quickly determine that you can create a separate, but related business model to go after an affluent consumer that prefer to get a deal. Nordstrom figured this out 10 years ago and we figured out 4 years ago at Neiman’s. The strategy of creating a second brand to extend the core business is valid regardless of the recession, but apparently it has taken the recession–and the emergence of more competition–for Neiman’s, Saks and others to decide to get into the car and drive. The next step will be for these brands to develop a power multichannel presence. I expect–or perhaps it’s more accurate to say I hope–that is what will we see later in the year.

Lastly, a point of clarification. First, the “new” store is actually a reconfiguration of an existing home clearance store. Second, it is very much in a wealthy area. While the strip mall is not nearly as upscale as other not too far away, the zip codes to the east are among the wealthiest in the country.