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Stanley Marcus liked to joke that the founding of Neiman Marcus was based on bad business judgment.
This story first appeared in the October 15, 2002 issue of WWD. Subscribe Today.
Back in 1907, his father, aunt and uncle had the option of investing their $25,000 nest egg in the Missouri franchise for a new bottled drink — Coca-Cola. They refused the risky offer, electing instead to open a store of high-quality women’s fashions in the prairie town of Dallas.
It couldn’t have been that bad of a decision because the company they formed has evolved into the leading luxury retailer. “What’s unique is that a store in Dallas is the number-one upscale retailer in the world, and it’s not in New York or California,” commented Allen Questrom, chairman and chief executive officer of JC Penney and a former Neiman’s ceo.
In 1907, the concept of upscale ready-to-wear was foreign to women of means, who typically had dressmakers sew their clothes. But the founders had a strong vision — and experience in retail and promotion to boot. Herbert Marcus had been a shoe salesman and children’s wear buyer for Sanger Brothers in Dallas, the leading regional department store at the time. His sister, Carrie Marcus Neiman, at the age of 21 was one of the highest-paid women in Dallas, working as a blouse buyer and saleswoman at A. Harris & Co., another local department store. Her husband, Abraham Lincoln “Al’’ Neiman also worked at A. Harris.
In 1905, Neiman convinced his wife and brother-in-law to move to Atlanta to open a sales-promotion business. Two years later, the trio sold the successful enterprise for $25,000 and moved back home to Dallas to open Neiman Marcus.
“We have secured exclusive lines which have never been shown in Texas before, garments that stand in a class alone as to character and fit,’’ claimed their first newspaper advertisement, published in 1907 in the Dallas Morning News. Herbert Marcus, who led the company until his death in 1950, never deviated from that mission.
“Late in his life, when my father was blind, he called the handbag buyer to his office and asked her, ‘What have you found in Europe?’’’ recalled Lawrence Marcus, Marcus’ fourth and only surviving son. “She showed him a handbag, and he smelled it and felt the leather and the trims and asked, ‘Are these the best bags in the world?’ She said ‘No, Hermès are the best.’ So he asked her if she had bought Hermès and she said, ‘No, I thought they were too expensive.’ And he said, ‘How can you represent the best if you don’t have the best? Order Hermès bags.’’’
As Lawrence Marcus pointed out, his father also ensured that the store carried high quality but less expensive handbags “for the minister’s wife.’’ Indeed, the opening ad promised to “meet every taste, every occasion and every price” — a goal that has shifted as Neiman’s transformed into a purely luxury emporium.
It probably can’t be overstated how strange it must have seemed when the fashionable retailer opened its doors Sept. 10 at the corner of Elm and Murphy Streets in Dallas, a rugged town of 87,000. In a serene environment of mahogany-paneled walls and soft green carpeting, Neiman Marcus presented fine fur coats, a $450 wedding dress and beautiful gowns that rivaled those found in New York specialty shops.
While businessmen scoffed at the fancy store and dismissed it as doomed to fail, their wives were enamored. Locals flocked to the store, and those in the hinterlands dispatched their husbands to stop in and pick up fashions for them. Sales were so brisk that within a month Al Neiman was off to New York in search of new goods with a young buyer, Moira Cullen, who became one of the store’s fashion arbiters. Carrie Neiman, the principal buyer, had been sidelined by surgery.
Neiman’s exacting merchandising tactics enabled it to thrive until May 11, 1913, when a fire destroyed the building. The family regrouped quickly, and within 17 days Neiman’s had set up shop in temporary quarters while the founders searched for a new permanent location.
The next year they unveiled a 40,000-square-foot store at the corner of Main and Ervay Streets. The four-story building was constructed so it could accommodate more floors, and it remains the site of the nine-story, 279,000-square-foot flagship and headquarters today.
The company weathered World War I with modest profits and began to boom in 1918, when oil was discovered in west Texas. With its central location among major cities in Texas, Oklahoma and Louisiana, Dallas became a shipping hub. At the same time, local bankers, cotton magnates and businessmen — including a prescient Herbert Marcus — joined forces to develop the city from a nondescript trading post into a metropolis. As Marcus had envisioned, Neiman’s grew right along with the city.
Stanley Marcus, the eldest of Herbert and Minnie Marcus’ four sons, was the first to join the business in 1926 after obtaining a degree from Harvard and completing a year of graduate business school there. All four boys would devote their careers to the family firm, with Edward developing the catalog business, Herbert Jr. buying men’s furnishings, and Lawrence supervising women’s designer clothing and managing the Houston store.
Stanley, who would ultimately lead the company to national prominence, came on board as his father planned to double the store’s size by taking over the adjacent property at Commerce and Ervay Streets.
Strong-willed and aggressive, Stanley began to butt heads over the management of the store with his uncle Al Neiman, who was also having relationship problems with another Marcus — his wife, Carrie. The childless couple divorced, and Neiman sold his share in the store to his brother-in-law for $250,000 in 1928. Barred from opening a competing store in the region, Neiman later opened a boutique and buying offices in New York which failed. He returned to Texas in 1967 and died, impoverished, three years later, his only possession a cuff link in a cigar box.
The company racked up $1.5 million in sales in 1928, the same year Neiman’s got into the men’s business and introduced personalized Christmas gift wrapping that became a signature of the company.
Having lost a partner and a key manager shortly thereafter, Herbert Marcus depended heavily on Stanley to help run the business. The Depression loomed after the crash of 1929, and sales started to shrink in the fall of 1930. The Marcuses slashed expenses to survive, suffering their only year without a profit in 1932. Things started to pick up, however, as the massive oil field in East Texas began to pump money and millionaires into the region.
A cartoon from the period depicts a man and woman watching a gusher come in with the caption, “It’s wonderful, Harry! How late does Neiman Marcus stay open?”
Stanley learned about service and buying from his father and aunt Carrie, who was active in the business until her death in 1952. He later wrote in his book “Minding the Store” that Carrie taught him always to satisfy customers’ unusual requests in order to maintain their loyalty. Her nephew ingrained that tradition so intensely in the company that an employee in the Eighties once located an albino buffalo for a good customer.
Marcus gained such a reputation for going to any length to satisfy customers that one woman even wrote to ask him to find her a husband of a specific age and sexual disposition. (It was one of the few requests he declined.) He installed a red telephone below the desk of his office, with an identical one on the elevator wall on the first floor of the Dallas flagship. Any customer with a complaint could pick up the phone and immediately be put through to him. “I was surprised it has not been used more frequently,” he once said.
“He always read all the letters of complaint,” recalled Julia Sweeney, who worked for Marcus for 18 years. “But he didn’t take the time to read the complimentary ones.’’
Carrie also instructed her nephew to keep an open mind about trends. “It’s a mistake to base fashion predictions on the past,’’ she told him. “There are no rules in the fashion business.”
Insisting that Neiman’s was in the business of selling “satisfaction,” Herbert Marcus affirmed, “There is never a good sale for Neiman Marcus unless it’s a good buy for the customer.’’ Stanley once convinced an insurance saleswoman to buy a $2,500 broadtail coat left over from the prior season when his father strolled by and dissuaded him from selling the coat. It was too fragile for her needs, he said, so Stanley sold her a more durable $695 seal coat instead.
“My father knew full well that in killing the original sale we would undoubtedly have to reduce the price of the broadtail coat, but he was willing to take the loss to preserve his principle of selling satisfaction,’’ he wrote.
Other Marcuses contributed to Neiman’s legacy as well. The tradition of beautifying the store with fresh flowers and exotic tropical plants that continues today was started by Herbert’s wife, Minnie. At one point in the Sixties there were 1,800 plants in Neiman’s two Dallas stores.
Lawrence Marcus, who joined the firm in 1944, helped to raise the women’s designer business to new profit levels through his ingenuity and eye for talent. When fabrics were scarce during World War II and its aftermath, he resourcefully bought upholstery for automobiles, whose production had practically stopped, as well as piece goods from the men’s market and had them stitched into tailored suits and dresses.
Marcus also pioneered the use of silk doupioni for ready-to-wear in the late Forties and early Fifties by importing it from Italy. He was Emilio Pucci’s first customer, and helped launch the careers of James Galanos and Bill Blass.
But Stanley is the best-known Marcus scion because his innovative marketing tactics spread Neiman’s fame. To draw shoppers downtown during the hot summers, Stanley began narrating weekly formal fashion shows in 1926 — the first ever hosted by any American store — in the nearby Baker Hotel. Results were immediate, as the ladies strolled directly to the store to shop, and the ploy ran weekly for 28 years.
“These shows made a great contribution to the enhancement of Neiman-Marcus’ reputation for fashion leadership,” Marcus later wrote.
Marcus decided to advertise nationally in Vogue and Harper’s Bazaar in 1934 in order to cement Neiman’s reputation among its wealthy customers and earn editorial credits in fashion magazines. It was the first time a Texas store had taken the plunge into the big leagues, and it generated plenty of buzz in New York and Dallas.
Marcus also saw how the store could benefit by drawing attention to the designers, beauty queens and perfumers behind the labels, so in 1938 he created the Neiman Marcus Award for Distinguished Service in the Field of Fashion. The inaugural awards were presented in September to eight people, including cosmetics maker Germaine Monteil and dress designer Nettie Rosenstein, in a gala fashion show at the store so popular it was repeated for five nights.
“Customers came from all parts of the Southwest to see the shows, meet the famous names in fashion, and start their fall wardrobes — even though the weather was 98 degrees,’’ Stanley wrote. “We had created a totally new sales promotion device.”
Lester Melnick, who worked as a buyer at Neiman’s in the Fifties and early Sixties, recalled the ceremonies as highlights of his career.
“At those shows they had all the high-profile people in the region plus international celebrities and show-business people,’’ Melnick said. “They would have parties at Edward Marcus’ ranch, and there was a photo of Coco Chanel sitting on the hood of a Rolls-Royce with a cowboy hat on the front page of the Dallas Morning News. Pierre Balmain came with his foot in a cast from a skiing accident.’’
The honor ran annually through 1969 and sporadically thereafter, luring a string of notables to Dallas, including Elsa Schiaparelli and Valentino. The last winners were in 1995, when the company presented it to Stanley Marcus at his 90th-birthday gala and also honored Miuccia Prada, Jean-Paul Goude and Grace Mirabella.
Marcus was an early advocate of blending art with retail. In 1939, he borrowed 20 Gauguin canvases from private collectors to exhibit in the store. The retail hook? He commissioned ballgowns in the colors of Gauguin’s Tahitian series. Every one was sold, plus art lovers and school kids came from all over the state to see the exhibit.
One of Stanley’s biggest marketing coups was the invention of the Fortnight in 1957. The lavish promotion of French goods and culture was intended to drum up business during a perennial lag in mid-October, but it was such a hit that it became an annual tradition for 30 years to spotlight the wares of a nation and was copied by other retailers.
Marcus enlisted the entire Dallas community in the first Fortnight, helping to arrange exhibits of Toulouse-Lautrec paintings and historic tapestries at Dallas museums and to fly in French artists, writers and politicians to speak at social clubs. As for the store, its facade was transformed to look like the Faubourg Saint-Honoré shopping strip in Paris, and French fashions were featured inside.
Traveling to different countries to scout merchandise for the Fortnights prompted Stanley’s lifelong interest in Contemporary Art and the beginning of Neiman’s art collection. But Fortnight became too expensive, and the last one, in 1986, featured Australia.
Neiman’s revived Fortnight’s spirit in 1999 with a monthlong Italian festival in the flagship, co-sponsored by the Italian Trade Commission. Puppet shows, fashion exhibits and Italian merchandise from Fortuny lamps to Missoni knits filled the store.
Stanley Marcus, who was promoted to president and ceo after the death of his father in 1950, opened Neiman’s first branch store on Preston Road in Dallas in 1951. Daringly decorated with a large Alexander Calder mobile that Marcus had commissioned for it, the small store was so successful that the family wanted to expand it but was thwarted by the local zoning board. Instead it was moved in 1965 to a much larger space at the North Park Center shopping center that had been newly built north of downtown. The store remains one of Neiman’s biggest producers.
Neiman’s first store outside its hometown opened in Fort Worth in 1963, prompted by the demands of newspaper publisher Amon Carter Jr., who was tired of the ladies in his family driving to Dallas to shop. Reflecting Stanley’s passion for architecture — and for setting precedents — it was designed by leading architect Edward Larabee Barnes.
That growth was enabled by a merger Stanley negotiated in 1969 with Broadway-Hale, which later was renamed Carter Hawley Hale.
“If I were doing it over again, the only thing I would do differently would be to have merged five years earlier,” Marcus wrote in 1975. “It was a good deal for both our stockholders and for Broadway’s. It gave us the financial ability to enter a large and significant expansion program.”
With the capital infusion, Neiman’s went nationwide with its concept of fine merchandise and outstanding service, opening its first store outside Texas in Bal Harbour, Fla., in 1971. Seven more stores followed in the Seventies in Atlanta, Beverly Hills, and Northbrook, Ill., a suburb of Chicago.
Stanley Marcus retired in 1975 to form a consulting company and was named chairman emeritus of Neiman’s. Ever active, he published several books and consulted for retailers and other businesses until his death in January. He also continued to advise Neiman’s executives and employees.
Upon Stanley’s retirement from Neiman’s, the chairman’s office was filled by Richard Hauser, a former Bloomingdale’s executive. Stanley’s son, Richard, was promoted to president. Richard Marcus had grown up in the company, working in everything from delivery to cashiering. He joined full time after finishing college and a short stint at Bloomingdale’s.
Hauser left Neiman’s a year later and Angelo Arena was assigned from Carter Hawley Hale to be Neiman’s ceo. When Arena resigned in 1979, Richard Marcus was named chairman and ceo. He supervised the company’s continued expansion in the Eighties, when it opened 11 stores in such cities as Las Vegas, San Francisco, Chicago, Boston and Denver.
During that period, the company broadened its merchandise mix to better-priced lines in order to compete with department stores with mixed results.
In 1987 General Cinema bought Neiman’s and Bergdorf Goodman from Carter Hawley Hale, and in 1988 Marcus left to pursue his interest in software and Internet development.
A series of high-profile chief executive officers assumed company leadership after Marcus left, beginning in 1988 with Allen Questrom. In 1990 Questrom refucused the chain on designer and bridge collections and introduced the young contemporary business. He left to steer Federated and Allied stores out of bankruptcy and was succeeded at Neiman’s by Terry Lundgren, currently president and chief merchandising officer of Federated Department Stores. Lundgren developed Neiman’s career and bridge businesses before moving to Federated in 1994.
He was succeeded by Burt Tansky, who had been chairman and ceo of Bergdorf Goodman. Tansky continues to head the company as chairman and ceo.
Under Tansky’s leadership, the chain and its catalog and e-commerce division have expanded Neiman’s longtime emphasis on top-tier luxury goods. The stores have elevated the opening price points, though NM Direct still offers a broader price range because its customers are more price-sensitive.
The company’s increasing focus on luxury somewhat dismays Lawrence Marcus, who is saddened that the founders’ original intent to dress a broader demographic swath has been abandoned.
“We kept that anachronistic posture for many years and what does it mean?” he asked. “That with all our arrogance that we devoted to high-price merchandise, we had humility. It was symbolic. It was not the most profitable thing, but it was our way of proving our humility and gratefulness to customers for coming in to shop.”
Neiman’s continued its nationwide push by opening eight stores in the Nineties in such markets as Scottsdale, Ariz.; Short Hills, N.J., and Honolulu. The company has long displayed original art in the stores as a legacy of Stanley Marcus, but during the Nineties Neiman’s focused on buying pieces from artists who lived in the same region as a given store, and hired a full-time curator in 1992.
In 1991 General Cinema bought publisher Harcourt, Brace and the parent company was renamed Harcourt General. Harcourt General spun off Neiman Marcus stores, the NM Direct catalog and e-commerce business and Bergdorf Goodman to shareholders as a separate entity in 1999, forming Neiman Marcus Group.
Neiman Marcus kept up its tradition of innovation in 1994 by dispatching a holiday train packed with merchandise that traveled to 16 cities in the South and Midwest where Neiman’s didn’t have stores. Billy Payton, who supervised the project, recalled getting a call from Stanley while he was on the train in New Orleans. “He said, ‘This is what we used to do at Neiman’s,’” Payton recalled.
The ploy got a lot of publicity and was successful enough to warrant an encore tour in 1995, but the logistics of it were so complicated that Neiman’s abandoned its rolling retail store.
As the availability of markets that could support a new full-line Neiman Marcus store diminished, Neiman’s launched a test of smaller cities in 1998 with a 9,000-square-foot store in suburban Cleveland, The Galleries of Neiman Marcus, devoted to precious and designer jewelry, gifts and home goods. Two more Galleries units opened in 1999 in Scottsdale, Ariz., and Seattle, but results have been disappointing, and the Seattle store closed this year.
“They had strength in fine jewelry but you can’t build a business on that alone, and home goods wasn’t developed enough to make it an interesting presentation,’’ reasoned Richard Marcus. “Abbreviated versions of the real thing are traditionally a challenge anyway. When you try to go to a light version, a ‘Neiman’s Light,’ they don’t work. It is hard to pull them off.’’
Neiman’s has concentrated on Florida over the past three years, opening stores in Palm Beach in 2000 and Tampa in 2001. Last month a unit opened in Coral Gables, and another store will open Oct. 18 in Orlando, for a total of 35 full-line stores in 17 states. Neiman’s also operates 12 Last Call clearance centers.
The company is throwing a 95th-birthday bash for itself Nov. 23 with a black-tie “Comfort & Joy’’ themed gala benefiting two charities. Exhibits commemorating the retailer’s history and celebrating the holidays will be displayed in the store through Christmas Eve, and the store’s facade will twinkle with 8,000 lights.
The monthlong festivities will reflect Neiman’s historic goals to be innovative, elegant and tasteful.
“We’re different beings than an ordinary business,” affirmed Lawrence Marcus. “It’s a spirit and culture that has to be fostered.”