NM GROUP OPENING ITS WALLET TO BUILD PRESENCE ON THE WEB

Byline: James Fallon

London — Neiman Marcus Group will invest at least $10 million annually over the next few years in a continual evolution of its online shopping division, NeimanMarcus.com.
Neiman’s was one of the first upscale retailers to go live online, launching its Web site in October 1999 with 500 products. It now offers more than 3,000 items in women’s, men’s and children’s wear; accessories; beauty; gifts; and home furnishings, said Jo Marie Lilly, senior vice president of Neiman Marcus Direct, Neiman Marcus Online and NeimanMarcus.com, at a conference on e-commerce and luxury organized here by the newsletter Luxury Briefing and e-commerce consultant Equire.
“We have been thrilled with the results,” Lilly said of the site’s expansion. “We are getting 15,000 to 20,000 visitors a day, have five million to six million page views per month, and have gathered over 200,000 e-mail addresses.”
But while Neiman’s plans to launch a new version of the site, at neimanmarcus.com, this fall, Lilly stressed the number of products won’t increase exponentially. While saksfifthavenue.com plans to carry about 100,000 items when it launches in September and ashford.com carries about 25,000 products, she said, “That isn’t what Neiman Marcus is about. We will introduce enough products to keep it interesting but it will be an edited assortment. Our customers want an even more edited selection online than is in our stores.”
Neiman’s Online will expand the categories of goods it carries this fall with the introduction of more departments, including one for fine jewelry. It also will increase the number of designer boutiques on the site to about 16 from the current six — including designers whose merchandise is not for sale via Neiman’s Web site, Lilly said.
“We try to work with brands that are uncomfortable about being on the Internet,” Lilly said. “Giorgio Armani and Donna Karan have been on the site from the beginning, for example, but we don’t sell their products via the Web. It’s a drive-to-store business.”
As noted, Giorgio Armani is set to launch a Web site this week at giorgioarmani.com. The site will not yet conduct e-commerce but will function as a marketing vehicle.
Lilly stressed that Neiman’s sees its online business as only an extension of its 33 stores, its mail-order business and its other subsidiaries, Bergdorf Goodman and The Horchow Collection. Not surprisingly, Neiman’s believes the Internet gives it the potential to broaden its reach to areas where it doesn’t have stores.
Bergdorf’s probably will launch its own site within the next 12 to 18 months, which will have links to neimanmarcus-.com she added.
Neiman’s also is looking for partnerships to expand its site from simply being an apparel and accessories e-tailer to one offering all areas of luxury. Lilly declined to provide specifics but indicated the partnerships could be struck in areas such as travel, auctions and fine wines.
“This fall we want to add hotels, travel, leisure and more editorial [content] about fashion trends,” she said. “We want to establish the Neiman Marcus brand as a premium lifestyle site.”
Lilly declined to provide sales figures for the site but said the average transaction size is similar to that of Neiman’s mail-order operation, which generates sales of about $285 million a year. In the site’s Shop for Her section, about 50 percent of users visit the accessories category and its bestsellers are shoes and handbags, she said. Manolo Blahnik is one of the best-selling brands on the site.
“Neiman Marcus is committed to multichannel retailing. We call it ‘clicks, bricks and slicks,’ and it gives us a huge advantage. We will sell to you on the Web, through our catalog, or drive you to our stores. We shouldn’t care how the customers want to shop; we simply want to offer them a seamless experience and the best customer service.
“To us customer service is paramount,” Lilly added. “If there is a bad experience, 50 percent of people will never buy from your Web site again — and 30 percent won’t go back into your stores.”
Other speakers at the conference stressed Neiman’s attitude is the right one, although some expressed skepticism that such areas as designer apparel will ever be successfully sold on the Internet.
That is one reason Francesco Marini Clarelli, chairman and chief executive of LuxLook.com, decided to focus the site on luxury accessories. The site plans to launch in the U.S. in August, followed by the U.K. and Germany this fall, Italy and France in November, and Japan in February 2001.
It so far has reached agreements to offer accessories from about 11 brands including Bulgari, Dolce & Gabbana, Etro, Gianfranco Ferre, Vivienne Westwood, Paul Smith, Versace, Valentino, Missoni, Moschino and Loro Piana. Each brand will have its own ‘shop’ created in its own image. Under the terms of his deals with the brands, Clarelli noted, consumers will not have the ability to compare products from different brands side by side.
Each LuxLook.com shop will carry between 200 and 600 items per designer, Clarelli said. The company does its own buying but has agreements with the brands giving it the chance to shift unsold merchandise through their outlet stores or to hold online sales promotions. LuxLook.com will respect the brands’ regional pricing policies, with prices in the local currencies.
LuxLook.com has raised a total of $36 million so far and plans to raise another $30 million by fall. The site expects to have about 10 million visitors in the first year, with a core 3.5 million who will buy. LuxLook is projecting first-year sales of about $27 million and gross margins of more than 60 percent. It expects to ship about 110,000 packages and about 132,000 items in the first year, Clarelli said.
“What we are trying to do is cater to those people who wish they could go to a (luxury) shop but don’t have one in their town,” he added. “We are trying to create a new market.”
Differentials in pricing between regions will be a major issue over the next few years as online sales grow, several speakers pointed out. “In this self-directed medium, differential pricing will become obvious and unacceptable,” predicted Peter Matthews, chairman of Equire.
“E-commerce luxury brand retailers are brand managers,” he added. “The challenge is to manage it across multi-channels so the answer is to go back to basics. It’s about the intrinsic qualities of brands, especially luxury ones.
“It’s ridiculous to assume that companies can spend $50 million and build a brand in six months.”
For this reason the companies most likely to succeed in the e-luxury market are the existing brands with their own sites, or the “clicks-and-mortar” e-tailers like NeimanMarcus.com or Harrods.com, said Claire Kent, chief luxury goods analyst at Morgan Stanley Dean Witter.
“Clicks-and-mortar sites are the best positioned and consistent, and failures among the pure-play sites are inevitable,” she said. “We also see considerable consolidation of sites, especially in the beauty area. We think most of those sites will probably fail because they’re not getting the Estee Lauders and L’Oreals and so are all selling the same small brands.”
Established luxury brands have the ability to leverage their existing marketing budget to benefit both their stores and their Web sites. Many publicly held luxury goods companies spend between $50 million and $170 million annually on marketing and advertising, which would dwarf the $29 million spent by Ashford-.com and the $11 million a year spent by Bluefly.com.
Kent, who recently completed a comprehensive study on luxury brands and e-commerce, projected that the upscale categories that will be the most successful online are accessories, beauty, gifts and repeat purchases. She was less optimistic about high-priced designer apparel, however.
“We believe e-tailing sites like Fashion500.com aren’t going to work,” Kent said, “because there is so much importance attached to fit and fashion when women buy high-priced clothing.”
One underdeveloped segment of luxury business online, though, is business-to-business sites. Kent believes there is significant potential for brands to put their raw materials sourcing, logistics and billing onto the Internet and realize substantial cost savings by doing so. “Sadly, [luxury] companies don’t seem to be looking into B2B at all,” Kent said. “They’re all focusing on B2C.”

load comments
blog comments powered by Disqus