Though Burt Tansky has scaled the heights of retailing, rising to president and chief executive officer of The Neiman Marcus Group, he’s not always perusing the pages of the ultraexclusive Neiman Marcus magalog or touring the luxurious Neiman Marcus stores. On occasion, the 40-year retail veteran shops mainstream department stores.
This story first appeared in the November 17, 2003 issue of WWD. Subscribe Today.
“I know personally the travails of shopping department stores,” Tansky said during his keynote speech. The last time he visited one — and he was diplomatic enough not to disclose its name — “It was difficult to find someone, anyone, to take my money. Let alone answer a question.”
The speech quickly developed into a diatribe. “I have noticed cashier areas have sprouted up in the middle of the store — a development that signals a surrender to personalized service that I find rather remarkable.” He also said the merchandise in department stores wasn’t differentiated enough, communications to consumers are too focused on price cuts and coupons, buyers have the wrong priorities and there’s little service.
Tansky recalled a time when consumers bought all of their essentials at department stores. “When was the last time you did that?” he asked the crowd. “Certainly not in the last three decades. The department stores have effectively forfeited their stature as the store of choice. They abandoned selected businesses, compromised their position and lost their grip on the customer.”
But through all the bashing, Tansky never said the “D” word — dinosaurs. Others in the industry have long labeled department stores as a dying breed, though Tansky took a surprisingly hopeful turn in his tone about the sector. “Department stores have an opportunity to regain market share and capture customer loyalty. How? By again placing renewed emphasis on developing long-term customer relationships, rather than a continued reliance on transaction volume driven by price breaks and discounts.
“Customer service…the store environment…the merchandise…and the marketing converge to create the shopping experience. In today’s retailing sector, it’s the depth of the customer experience that essentially separates and distances specialty stores, such as Neiman Marcus and Bergdorf Goodman, from department stores,” Tansky said.
“Quite honestly, I am not so sure that this necessarily has to be the case.”
Tansky speaks from experience. He’s a survivor, having grown up in the ranks of department stores, holding management positions at Kaufmann’s and Filene’s. Later, he became a senior vice president and general merchandise manager at I. Magnin and joined Saks Fifth Avenue in 1977, where he rose to president. In the early Nineties, he became chairman and ceo of Bergdorf Goodman and in May 1994, became chairman and ceo of Neiman Marcus. Five years later, he rose to the helm of The Neiman Marcus Group.
His leadership has been paying off, particularly this year, which has been marked by a run of strong comp-store gains, 5 percent or greater since May. For the fiscal year ended Aug. 2, the company eclipsed $3 billion in sales for the first time, and income rose 9.8 percent to $109.3 million. The company is positioned to achieve operating margins of 8.5 percent this fiscal year, a level not seen by the company since 1998.
During Tansky’s tenure, there’s been more highs than lows and a sustained “trading up.” Nothing at Neiman’s is priced below the bridge range, and relationships with top-priced designer brands have strengthened through in-depth presentations and marketing partnerships.
Neiman’s and Bergdorf’s were hit hard by the recession and 9/11, and things were looking bad for a time. But as Tansky said, “We did not deviate.” The company stayed its course, selling luxury labels in all their glory, showering shoppers with service and emphasizing regular prices. Consistency is considered a primary reason for NM’s above-average track record over the long haul.
There also has been steady investment in upgrading and renovating stores, including about $70 million that is being spent on restoring the town house elegance of Bergdorf Goodman. Department stores, too, are pouring money into their boxes, as Tansky noted. He cited a published report indicating that department stores are investing $1 billion over the next three years on interiors. He called that pace and level of spending “unprecedented and certainly a start.”
But it’s just a start, and merely one component necessary in the formula for creating a positive shopping experience and turning things around, Tansky said. “I suggest that department stores follow the example of specialty stores and reintroduce shopping and service amenities to entice the customer back into their store.”
In Tansky’s book, what makes Neiman’s, a specialty business, stand out from department stores is unique merchandise, attentive service, innovative marketing and imaginative presentations involving uncluttered fixtures, creative window displays and mannequin displays. Each store, he said, has a dedicated visual team. The company also has an extensive art collection, started by the legendary Stanley Marcus, and each store in the chain exhibits works from the collection.
The bottom line: “Our stores have a distinct allure,” Tansky said.
He also underscored the importance of knowing the customer. “I attribute a lot of our success at The Neiman Marcus Group to the fact that we thoroughly understand our customer. We are in touch with how they live, their lifestyles and their aspirations. Our customer is well educated, well traveled, sophisticated, fashion savvy and affluent. Our potential customer base, though, is small — less than 2 percent of the U.S. population, with a high disposable income.”
Tansky stressed retailers must thoroughly train their sales associates. “Our training programs reinforce our customer-relationship philosophy and service model,” he said. “By the end of their first year, each new associate has received over 160 hours of orientation and training. Topics include relationship management, telephone selling, service standards and product knowledge. They are kept current on fashion and trends at frequent meetings conducted by store management. A tenured Neiman Marcus and Bergdorf Goodman sales associate receives over 120 hours per year of continuing education.
“Our training is just one aspect. We also know the importance and value of recognition. Recognition programs reward performance, sales and service. Our sales leaders are recognized at the half-million, million-dollar and above levels. We give them everything from dinners at five-star restaurants to personalized stationery, cellular phones, personal assistants and expense accounts. It is no coincidence that many of the rewards are also tools to enhance an associate’s ability to build sales.
“Customer service distinguishes and to a large extent, drives the specialty store business. I believe the department store customer also wants service. They want to be waited on. They want their questions answered. But after a few visits where they may leave empty-handed and feel neglected, they take their business elsewhere.”
The selling function is supported by how merchandise is distributed and purchased on a store-by-store basis and replenished according to need “so that we never miss a sale — almost never,” Tansky said.
“More than anything, our merchants are entrepreneurs. They work directly with our vendors and designers to develop exclusive product offerings,” whereas department store buyers work directly with manufacturers to get better prices, Tansky contended. At Neiman’s, price rarely dictates purchasing decisions.
At Neiman Marcus, regular price thrives, with sales per square foot at about $500, “the highest in the industry,” Tansky said. Customers are encouraged to return frequently to the store through the chain’s “frequent buyer” program that rewards them based on their spending level.
“I do not believe that convenience, service, suggestive selling and an inviting environment should be the bastion of the affluent. I believe that every customer, regardless of their socioeconomic status, would appreciate a welcoming shopping experience and atmosphere.” Customer loyalty is earned “to a great extent because of the attentive service we deliver time and again.’’
He defined service as “the art of developing and valuing customer relationships and the essence of the specialty store business.” It’s also “a deficiency endemic to the department stores of today. I believe that the moderate customer also wants service. I am certain that they want to shop in an environment that is welcoming and has a service attitude. They want to matter and be recognized as being an important part of the total approach.”
Tansky also wondered if department stores would get more shoppers if they offered a greater degree of differentiated merchandise. Instead, the offering is “very similar and often presented in a very identical way.” Consequently, the merchandise appears as a “commodity,” he said.
“Just think what today’s department store customer would do if the merchandise was engaging and the service was attentive,” Tansky said. “I believe that they would pay higher prices and not just shop the sales. To regain market share, the department store must have the conviction of saying, ‘This merchandise is special, if you want it, buy it now. It’s not going on sale.’
“At the Neiman Marcus Group, we know this to be true and to be very doable. Merchants can create assortments that motivate the consumer to want to purchase at full price. It can be done. Try it.”