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In the pecking order of beauty retailing, Neiman Marcus is purely couture.
Executives in Dallas have built a high-toned business that generates a significant share of the store’s sales with a roster of exclusive, high-priced limited distribution brands. The kind of brand favored by Neiman’s counts its distribution in the dozens and perhaps the hundreds. But it certainly never approaches thousands of outlets.
In a world where commercial fragrance launches can start at 1,800 doors, Neiman’s has been known to think of 300 doors as broadly distributed.
Store executives understand the word “exclusive.”
“We remain targeted and focused on the luxury sector,” said Neva Hall, senior vice president and general merchandise manager of beauty, shoes, handbags and accessories.”We are looking to develop more exclusive and limited distribution brands.”
“Our heritage is service,” she added, noting that as a rule, “we believe we must offer more than the customer expects. We have to set ourselves apart.”
In terms of assortment, Hall cited a few lines that “continue to do well for us.” They include Sisley, La Mer, Jo Malone, Creed, Laura Mercier and La Prairie.
Hall said the store is not only selective in looking for fragrance brands with limited distribution and appeal to the affluent customer but those which also have staying power.
She cited Hermès as fitting the Neiman’s mold. Hall declined to provide other details, but according to some industry sources, the women’s fragrance rankings for the first six months of this year had Creed in the top spot. It was followed by Jo Malone from Estée Lauder Cos.; Thierry Mugler’s Angel; Hermès; Aqua di Parma; Kate Spade, also from Lauder; Cartier; Annick Goutal; Boucheron and Michael Kors.
In color cosmetics, the top seller is Lauder’s Bobbi Brown, according to several sources.
Industry executives also estimate that Neiman’s does between 14 and 15 percent of total store sales in beauty, or a little over $360 million a year. Of that, 40 percent is done in skin care, 40 percent in color cosmetics and 20 percent in fragrance, according to estimates.
Hall did not discuss figures. However, she did say that Neiman’s beauty sales are trending well, considering the state of the industry.
During the last fiscal year, which ended Aug. 3, beauty division sales were “up slightly” over the previous year, according to Hall, who added that so far this year, the business is “up more than slightly.”
Hall maintains that Neiman’s beauty business is highly productive, so much so that tough editing is required. “We have to be selective because the amount of floor space forces us to sharpen our pencils,” she noted, adding that productivity growth is what dictates space allocation throughout the 35-store chain. She backed up that contention by pointing out that when Neiman’s renovates its branches in Houston, San Francisco and in Fashion Island in California’s Newport Beach, the beauty departments will be twice as big as they are now. Those projects are due for completion in 2004 and 2005, Hall said, adding that the space expansion will serve as a template for future construction.
As with all retailers and vendors, space can be a touchy issue. One industry executive complained that fragrances at Neiman’s often get squeezed and deemphasized. The store’s contention, once again, is that space allocation is a function of productivity.
Camille McDonald, president and chief executive officer of Parfums Givenchy, American Designer Fragrances and Guerlain Inc., had no comment on space issues but she raved about her collaboration with Neiman’s. “They have been an excellent partner in building a luxury business,” she said, “particularly for Guerlain beauty, Michael Kors and Marc Jacobs fragrances.”
“They have a thorough understanding of the luxury customer and a single-minded focus on recruiting her,” McDonald added. “How they edit the inventory mix shows how the merchandise is focused on the luxury customer.”
“They’ve been very true to the upscale customer and it’s good to have someone maintain that discipline,” said Dan Brestle, a group president of Estée Lauder Cos., who oversees many of the company’s emerging brands, including Stila, Aveda, Bumble and bumble and Jane.
“They are probably one of the most focused retailers out there,” said Ben Gillikin, president of Thierry Mugler Inc., which is owned by the Paris-based Groupe Clarins. “They know who they are and where they want to go — focused on exclusive, unique and expensive merchandise. They’ve positioned themselves right where they want to be.”
One suggestion that McDonald made was that store management should make more efficient use of Neiman’s very able sales staff, rather than depend upon freelance sell-through specialists and makeup artists, which usually are supported by the vendors. “They have made progress, but they have a long way to go,” she said.
“Jo Malone, Crème de la Mer and Bobbi Brown couldn’t have picked a better partner with which to develop their reputation,” said Estée Lauder’s Brestle. “As a manufacturer of three of their major partners, I can appreciate that.” He acknowledged the long-standing nature of Bobbi Brown’s relationship with Neiman’s, which was the first major chain to carry the fledgling makeup line after it launched at sister store Bergdorf Goodman. “They pay attention to these brands.”
“What makes the store unique is its relationship with the customers,” Brestle said, alluding to the commission compensation system, in which the beauty advisers are not employed by the individual brands. “The customers feel like they are being guided to what is best for them.”
Brestle gently suggested that perhaps Neiman’s could continue to expand its focus to include more younger customers. “Like all retailers that are economically driven, they have to continue to strive to make the store acceptable to younger, wealthy customers.”
Another manufacturer asserted that recruitment of new customers is becoming acutely necessary because the luxury fashion and accessories markets have been shrinking. In fact, the executive further stated that one of the challenges facing Neiman’s is to convert more of its fashion and accessories customers to beauty.
Hall pointed out that Neiman’s has been making strides in this area. “The customer who is affluent has been getting younger,” she said. “The average age has been decreasing. She’s getting a bit younger because there is so much wealth in the country.”
She added, however, that Neiman’s is not chasing teenyboppers. “We are not going after the young junior customer,” Hall said, estimating that Neiman’s now has twentysomething customers. Hall made it clear that the viability of the beauty category is important to the store. “It’s an entree into Neiman Marcus,” she said.
Neiman’s competes head on with Saks Fifth Avenue and Nordstrom in the stormy teacup that is specialty store retailing. Industry executives, who manage small brands with high price points and exclusive images praised Neiman’s, not only for providing an incubator for nuturing fledgling brands, but for providing the most prized commodity, the wealthy customer. “They are the only luxury retailer left,” said one executive, speaking not for attribution. “They are very demanding,” she admitted, “but the results are tremendous. If you know how the marriage works, it’s a terrific marriage.”
Not everyone is in love with Neiman’s, particularly those manufacturers who are interested in building a broader business. One manufacturer views Neiman’s as too elitest, “living in the top of the apex of the triangle.” He finds Saks less esoteric. “Saks is a better place, a healthier business. They achieve more balance.”
However, another executive gave Neiman’s high marks for sales productivity per door, driven in part by heavy investment in staffing, and editing of assortment. “They’re tough on assortment. Nothing is mediocre.” He added, though, that “Saks has a wider assortment and does a bigger business.” He estimates that Saks devotes more space and attention to fragrance, putting that store ahead in the category. But Neiman’s excels at treatment. “It’s all about big-ticket skin care,” the manufacturer concluded, adding that when the Neiman’s executives zero in on something special, they’ll act like the smallest brand in the world is Chanel.