Neiman Marcus to Invest $100M in Omnichannel

The company said the cost of the project will be spread over the next three to five years.

Neiman Marcus Group Ltd. said it will invest $100 million over the next three to five years to expand its omnichannel capabilities.

This story first appeared in the October 11, 2013 issue of WWD.  Subscribe Today.

The retailer plans to develop a single merchandising platform across all brands and channels to improve inventory visibility and delivery, according to a filing Thursday with the Securities and Exchange Commission. The company said during fiscal-year 2014 it plans to begin the design and configuration of the new platform, which is being targeted for implementation in fiscal-year 2016.

“The lines have completely blurred between brick-and-mortar and e-commerce,” said Jim Gold, president of Neiman Marcus Group, speaking at Texas A&M University’s Retailing Summit at the Westin Galleria in Dallas. “The great challenge for retailers today is how to make the experience seamless.

“Every aspect of our business is being transformed by technological advancements,” Gold said. “It is critical to the mission of the business. So we are spending a lot of time on technology.”

Gold explained that the Direct division and the stores had operated with separate staffs, markdowns and business cadences and the customers said they didn’t care about different divisions, they wanted it to be seamless. So “we’ve had to integrate everything we do and it’s really challenging, the most challenging thing…it’s an enormous competitive advantage so we are working diligently to create that experience,” he said. “What’s different from three years ago?  When you buy something online it might be pulled from the store or e-commerce and you won’t know. You can return wherever you want. We’re just about to turn on that you can buy online and pick it up in the store.”

Gold also discussed the huge change from clientele books to iPhones for sellers, noting this makes it much easier to stay in touch with peripatetic customers who have multiple homes on multiple continents. Recently an associate made a $250,000 sale of dinnerware by sending images to a woman on her yacht.

“It’s a new day,” he said. “Big data is sort of the new frontier.

“It’s kind of scary what companies are able to do today,” Gold added. “And what they are able to know about everyone out there. The challenge is you have information, and the question is how do you do it in a way that doesn’t spook the customer, so we’re all kind of feeling our way through this right now. Because if you do it the right way, we can do things that will make customers very happy. For example, the day is near ­— if it hasn’t happened already — when you will walk into a store and you’ll get an offer from a store that is right next door. Because store A is going to know you’re in store B and they’ll make you an offer that if you come in within the next hour, we will give you $100 off a pair of shoes. It’s great for the consumer because there will be all kinds of deals.”

Neiman’s stepped-up investment in omnichannel initiatives comes as the company is taking on more debt due to its planned takeover by Ares Management LLC and the Canada Pension Plan Investment Board. Last month the two investors said they would acquire Neiman’s for $6 billion. Neiman’s debt will rise to $4.6 billion from $2.7 billion following completion of the buyout.

Retailers have been busy boosting their omnichannel capabilities. Karen Hoguet, chief financial officer of Macy’s Inc., said at the Telsey Advisory Group Fall Consumer Conference in September that the company is testing its order-online, pick-up-in-store program.

“We had the technology to tell us we had that item in the system and we could ship it to you,” she said. “But now it’s got to be in a central location in X hours in order for you to be able to do that. So far, the technology is working.”

Currently in-store pickup is being rolled out to Bloomingdale’s 36 department stores. Macy’s has never broken out the size of its e-commerce business, which is estimated to have accounted for more than $1.7 billion of the retailer’s 2012 sales of $27.69 billion. In Macy’s 2012 annual report, it said its Internet business rose 41 percent last year and was responsible for 2.2 points of the overall comparable-sales increase of 3.7 percent.

At Saks Inc.’s annual meeting in June, Stephen I. Sadove, chairman and chief executive officer, was bullish on the retailer’s omnichannel potential.

“We believe firmly that omnichannel and bricks-and-mortar linked to the digital is the longer-term winning strategy. The lines are blurring between channels, and it’s one of the reasons we don’t report the Internet sales anymore,” Sadove said.

The company even extended the responsibilities of its top merchants to cover both saks.com and stores.

Sadove said the objective is to have “one view of the customer, one view of the inventory, one view of the product to be seamless in the way that we operate. It’s a major undertaking in which we’re spending well north of $100 million over a four- or five-year period to get that capability. That’s going to be a major competitive advantage going forward.”

He said Saks had spent $70 million of the $100 million so far, much of it on the Oracle enterprise system for a range of functions, from planning to human resources to merchandising.

Nordstrom Inc. also has invested heavily.

In the company’s first-quarter earnings call in May, chief financial officer Mike Koppel said the retailer plans to invest $900 million in e-commerce and digital programs through 2017. And Blake Nordstrom, president, said on the same call that the retailer added more than 100 new features to nordstrom.com during the first quarter.