What to Know About Neiman Marcus' Potential Bankruptcy

Hey big spender — you’re not the only one who counts at the Neiman Marcus Group.

The Dallas-based NMG is doubling down on personalization initiatives targeting those spending under $10,000 annually at its stores and web sites and to win over new customers.

In an exclusive interview with WWD, chief executive officer Geoffroy van Raemdonck detailed Neiman’s new personalization strategy. It’s complex, cross-functional, and involves unorthodox technology partnerships, mining shopper data in different ways, being agile with inventory and changing how associates interact with customers.

“When I joined the Neiman Marcus Group we set out to drive profitable and sustainable growth. If you don’t have a differentiated competitive advantage, the only way to grow is through promotion which is margin dilutive and just not sustainable. We are looking to move away from that,” van Raemdonck said.

“We have tons of data and artificial intelligence we can use to scale to more people and provide personalized experiences not only to the happy few but to a broader set of customers. We are leveraging data, technology and Google to do that.”

Last spring, the company formed a “personalization agile team,” called PAT for short. PAT, a kind of internal think tank, “solves a problem and focuses on getting the data,” van Raemdonck said. It devises solutions and actions to challenges posed by management and includes managers designing personalized store and web site experiences; events specialists figuring out ways to host customers; store reps training associates on reaching customers they don’t know; creatives composing all sorts of communications, like e-mails and invites to customers, as well as merchants, and most importantly, analytics experts and data scientists.

Those spending less at Neiman’s don’t get the same rewards or special attention big spenders get. Nevertheless, focusing on luxury shoppers exhibiting relatively reserved spending is seen as crucial for improving profits. Business hasn’t been easy, and servicing the company’s huge debt load has been digging into the bottom line and cap-ex allocations.

In its first fiscal quarter, which ended Nov. 1, NMG performed slightly above expectations in the tough, promotional retail climate. Adjusted earnings before interest, taxes, depreciation and amortization declined to $117 million in the quarter, from $135 million in the year-ago period. Adjusted EBITDA represented 11.2 percent of revenues versus 12.3 percent in last year’s first quarter.

Comparable sales rose 0.2 percent and total U.S. revenues rose 0.5 percent, marking the retailer’s seventh positive quarterly sales comp out of the last nine quarters. Men’s wear was a standout area, rising “double digits due to targeted investments,” NMG said.

U.S. gross margin was stable at 37 percent versus 37.2 percent in the year-ago period; selling, general and administrative expenses rose 120 basis points, and the inventory position “significantly improved to appropriate levels” for Q2.

“We ended the quarter with available liquidity of $354 million, up from $347 million in the fourth quarter due to diligent cap-ex and cash management, balancing inventory and a focus on investments,” van Raemdonck said. “We expect liquidity to increase through the holiday.”

Geoffroy van Raemdonck  Masato Onoda

Neiman’s “big spenders” are considered those purchasing over $10,000 annually at NMG. Over the last 12 months, that group accounted for $1.7 billion in revenues. The $5 billion NMG operates the Neiman Marcus and Bergdorf Goodman stores and their associated web sites, and the Horchow and Mytheresa direct-to-consumer businesses.

Van Raemdonck sees new personalization efforts and lavishing greater service and attention on modest spenders as a key part of his overall transformation agenda aimed at evolving NMG into a “luxury platform,” which is defined as encompassing omnichannel operations and services, luxury fashion and luxury non-fashion products, and new experiences. Company executives say NMG can no longer be defined as a department store.

“When you think about being a luxury customer platform, you think about the need to innovate the customer experience,” van Raemdonck said. “We have put different initiatives in place. You test, see what works and quickly double down on that and scale.”

Citing one of several tests conducted over the last six months, van Raemdonck said PAT this year addressed the challenge of how to get those spending less to visit the store more often and buy more. “In October, we basically gave a targeted list of customers spending less than $10,000 to sales associates and instructed them to call those customers, have them come to the store, dine with them or have cocktails, and get them into the fitting rooms. It was a curated luxury fitting room experience. There were 20 consumers per store engaging with personal shoppers and sales associates who compiled an assortment built on data indicating what that customer would want. Some women are all about handbags and shoes. Some are about logo-ed brands. Some women are about beautiful products with no logos. Analytics predict what they want.”

On average, the guests spent $10,500 per visit. “It was remarkable considering they previously spent less than $10,000 for the whole year. We are rolling out this program. Every store every month will have this approach.”

Last October, the PAT took on the challenge of how to expose customers to designer brands they don’t shop but could based on their spending habits. In Scottsdale, Ariz., where the Neiman Marcus store does not carry Dior, the PAT identified customers that potentially could shop Dior, based on their purchase history involving other brands.

“We invited roughly 20 people over four days for one-on-one experiences viewing the beautiful collection of Maria Grazia Chiuri (Dior’s women’s artistic director) and we generated over $250,000 in four days,” van Raemdonck said. “Dior partnered with us in making the experience really special. Every assortment we curated was different for each customer.

“It’s an amazing avenue of growth if we can predict what brand should be in what store for what customer. It’s a very productive use of the inventory we own. The Dior merchandise was full-price fall product that arrived to other Neiman’s locations in August and was shipped to the Scottsdale store for the four-day event. We had support from Dior, our best Neiman Marcus Dior specialist came from another store and we created an incredible partnership between people who know the products and people who know the customers. Dior is an example of how we do an experiential trunk show,” the ceo said.

Last spring, Neiman’s became one of five retailers from different sectors such as electronics and food, partnering on a special program with Google. Neiman’s, which advertises on Google, has been blending its data with Google’s to identify non-Neiman’s shoppers with profiles and shopping behaviors or interests similar to Neiman’s shoppers. They could be art collectors, wine connoisseurs, Ferrari lovers, or even those who shop heavily for holiday gifts but not otherwise. “Using the power of the computer, we can literally find a needle in a haystack,” said van Raemdonck.

The partnership with Google has spurred changes in Neiman’s web sites. As he explained, “We all realized that the speed of our site needed to be improved. If you shop online and it takes a long time to load a page, at some point a customer will exit the experience. We are improving how quickly you can move from one page to another.”

At the end of October, a summit with Google was held in the Silicon Valley town of Mountain View, Calif. Google and the five retailers shared learnings. “The power of combining our data was amazing. We are just peeling the onion of how we can leverage the Google data and algorithm to be more efficient in recruiting customers. Google recognizes we have to have a very data- and technology-driven transformation. This is no longer just a commercial relationship. There is so much learning on both fronts.”

Neiman’s personalization drive is spreading online, where a team of digital stylists is growing and getting equipped with new technology.

“These stylists are basically personal shoppers online,” said the ceo. “We started with seven in August 2018 and by February we had 55, identified the best customers online and matched them with digital stylists. Digital stylists will create outfits for you, send photographs, access information on the availability of products, utilize WhatsApp and predictive algorithms to determine which products suit which customer. Digital stylists are generating about $1 million each a year, as much as personal shoppers in the stores generate…We began this about 16 months ago, recognizing those who shop online don’t necessarily want the experience of being in the store but want a digital luxury experience.”

A proprietary clienteling tool provided to digital stylists is being provided to in-store sales associates. By the end of July, many of the 4,000 store sales associates will be equipped with the tool so they can engage with shoppers when they are not in the store and focus on digital sales.

“It’s about making every interaction magical and emotional where products, service and experience are really unique,” van Raemdonck said. “Am I able to personalize the experience to more people, engage with customers in all channels, and retain and engage them better?”

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