In the world of retail, it doesn’t get more upscale than Bergdorf Goodman. No wonder The Neiman Marcus Group saw fit to acquire Bergdorf’s in 1987. The luxury department store, still owned by NMG, is one of the premier purveyors of designer goods in Manhattan. It’s comprised of a women’s store and a men’s store located on opposite sides of Fifth Avenue between 57th and 58th Streets, and with a total of 193,000 square feet of selling space. Both sites house major fashion brands like Chanel, Giorgio Armani and Oscar de la Renta, to name a few, and boast an extremely affluent and fashion-savvy clientele. Last year, sales for Bergdorf’s were estimated to be about $280 million.
This story first appeared in the October 15, 2002 issue of WWD. Subscribe Today.
The 100-year-old specialty store has long had an impeccable reputation due to its exceptional customer service, stellar merchandise and plush surroundings. It was founded in 1901 by Edwin Goodman and tailor Herman Bergdorf.
The Bergdorf’s store had several different locations in the city before landing at its current home on Fifth Avenue. In 1953, Edwin Goodman’s son, Andrew, took over the business and became president and chairman. Under his reign, Bergdorf’s expanded its merchandise selection and its personalized services. In 1972, Andrew Goodman sold Bergdorf’s to Carter Hawley Hale Stores (aka Broadway Hale), which also owned Neiman Marcus. The Neiman Marcus Group was formed in 1987, the same year it formally acquired Bergdorf’s.
Since then, Bergdorf’s has maintained its autonomy while cultivating a strong working relationship with the rest of the group. “We don’t ‘common buy,’ but obviously we communicate at all levels pretty significantly, both in terms of trend category development and partnerships with vendors who are strong or weak,” said Ron Frasch, chairman and chief executive officer at Bergdorf Goodman and formerly a senior vice president and general merchandise manager at Neiman Marcus.
“I think at Bergdorf’s, because of the unique clientele we are blessed with servicing, we tend to lead somewhat in fashion direction both on the upside and downside. We communicate to our sister store any changes in either trend performance or vendor performance, which I think helps them.”
Frasch used the pashmina craze of several years back as an example. “It took off quickly at Bergdorf’s, which allowed us to feed that data to Neiman Marcus so that they knew what was coming down the pike and they could jump on it. At the same time, it dropped with us very quickly, so our team communicated with Neiman’s so they could adjust accordingly.”
But naturally, the benefits go both ways. “They have such a strong position throughout the country, that what they feed back to us allows us to better understand those products that have great commercial appeal,” said Frasch.
However, while both operations are looking at how to grow their businesses overall, their strategies remain separate — unless it’s a viable solution for both. “We don’t lock arms, team up and say we’re going to intensify a particular vendor and we’ll do it together,” said Frasch. “However, if something is extremely strong with either Bergdorf’s or Neiman Marcus and fits within the mix of our assortment pile, we will certainly be all eyes and ears with what’s going on, same with Neiman’s.”
Frasch cited the growth of the brand Akris, which initially began as a relationship with Bergdorf’s, as an example of their synergistic efforts. “I was at Neiman’s at the time, and I didn’t even know Akris, but because Joe Boitano, Ira Neimark [former Bergdorf’s executive vice president and chairman, respectively] and the team at Bergdorf’s highlighted it, we of course developed a business with it, which has become enormously successful for both companies.”
The similarities between the luxury organizations serve their relationship well.
“Generally, it’s a perfect fit within the group,” said Stacy Turnof, a retail analyst at Merrill Lynch. “I mean there is really only one Bergdorf’s — they consider it two because the men’s and women’s are right across the street from each other. In terms of having the high-end designers in their stores in apparel, jewelry and cosmetics, and the synergies between the two businesses, I couldn’t think of a better department store that would fit with Neiman’s.
“But [Bergdorf’s] is not a growing business for them,” added Turnof. “They only have two stores, so it’s small.”
Although Neiman’s does not have a store in New York City, Frasch doesn’t consider Bergdorf’s a flagship for Neiman’s here. “I think it’s unique in that it services a very special clientele in New York. I don’t think Neiman’s considers it to be a New York flagship, so to speak. Bergdorf’s has had a reputation for 100 years as probably the most upscale, unique retail institution in the country. It operates as an independent operation in conjunction with the group.”
Bergdorf’s maintains full senior management and merchant teams that focus on its particular marketplace. The retailer’s customer base ranges from city dwellers, residents of Manhattan suburbs, wealthy clients in key national markets and monied international consumers, according to Frasch.
“To handle this discriminating client in any way other than as a direct operation would probably compromise what the company is all about,” said Frasch, alluding to Bergdorf’s independently run position within the group. “I think the group clearly understands that, particularly Burt, who was ceo of Bergdorf’s prior to going to Neiman’s and has a great appreciation for the unique requirements of this market.”
As far as the clientele is concerned, Turnof pointed out that in order to benefit from Neiman’s rewards program you have to spend $3,000. For the reward program at Bergdorf’s, that figure is $5,000. “That sort of exemplifies that it is a slightly higher income and that the customer is spending slightly more at a Bergdorf’s,” said Turnof.
And most vendors praise Bergdorf’s. Designer Barry Cord, president and chairman at Kieselstein-Cord, has been selling his wares at the retailer for 23 years. “They have the best-dressed women of the world as their clientele and, as far as I’m concerned, it is the premier retail operation in America, maybe even the world.
“Of course, they have changed their product mix over the years to accommodate the styles, and they’ve upgraded their facility. It’s a remarkable environment to work in. Without exclusion, all of the executives I’ve had the privilege of working with there have all been excellent — and gosh knows I’ve worked with enough of them,” Cord said.
The high-end accessories company Lambertson Truex has been selling to Bergdorf’s since 1998.
“It’s a very significant part of our business in many ways, as far as how they represent our collection, rep the line as a whole and their commitment to us,” said John Truex, co-president of Lambertson Truex. “Business has been phenomenal. In my opinion Bergdorf’s is the center of the retail world. Being at Bergdorf’s contributes to Lambertson Truex as a brand and makes us seem prestigious, exclusive, exciting, because the store is.”
For the fall and spring, the retailer is continuing its efforts to set itself apart with its customer service, focusing on its bestsellers and rolling out some extensive store renovations.
In 1999, Bergdorf’s expanded its cosmetics department to 15,000 square feet, doubling its size. Last month, it unveiled its new 7,300-square-foot shoe salon — which also doubled the department’s size. In mid-January, the retailer will begin major overhauls of the main floor and second floor, as well as doing smaller renovations on the third and fourth floors.
“Like all of us right now, we need to get the volume back,” said Frasch. “We’re looking for significant volume opportunities with core vendors. We’ve come off of a very strong first two months of the season and hope that we are on the right track.
“It doesn’t necessarily mean we are going to buy less from everybody, but ensure that where there is defining customer demand for a product, where we have great confidence in the product and in the management marketing initiative of those partners, then we are being very aggressive.”