Neiman Marcus is neither a department store nor digital pure play. Rather, it’s a relationship business — and the model is paying off. Despite a bumpy patch in 2020 culminating in a Chapter 11 filing, its fiscal year 2022 was up 30% over 2021, and the first quarter of the current fiscal year was up 6%.
Not only that, but 2% of its customers generate 40% of its revenues; that loyal base shops an average of 25 times a year, spending $27,000. It makes the business predictable, but there’s always opportunity to grow that base.
“Revolutionizing luxury experiences: A conversation with Neiman Marcus Group CEO Geoffroy van Raemdonck” at NRF 2023: Retail’s Big Show explored just how that “relationship” mindset works for the luxury specialty store. Phil Wahba, senior writer, Fortune magazine, sat down with van Raemdonck for the conversation.
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“We spend time focusing on a few clients who have the potential to engage with us and build that relationship, so that we ultimately drive customer lifetime value,” van Raemdonck said. “And we do the same thing with the brands.” The company focuses on true luxury brands, whether established or emerging, and builds relationships that allow NMG to represent them at their standard of integrity, as well as introduce them to new customers.
The highly differentiated business model anchors on integrative retail and a seamless experience; customers who engage across channels, he said, spend five times more than if only shopping one channel.
There’s also an understanding that luxury is a considered purchase. “When you look at buying something that’s going to create this magic emotion, and that is a commitment, you’re looking for someone to guide you, inspire you, to tell you it fits, to tell you that you can stretch further.” That emphasis on relationship doesn’t just impact customers; it also impacts associates.
The average tenure of the company’s roughly 4,000 sales associates is nine years, and 1,000 of those associates sell more than $1 million a year. He uses those numbers, he said, as a “measure of the connection they have with their customers, because they’re paid on commission. They’re there to really do what’s right for the customer, and it’s fascinating to see how far they go.”
"They’re there to really do what’s right for the customer, and it’s fascinating to see how far they go."Geoffroy van Raemdonck, Neiman Marcus Group
He told the story of one associate who had an ongoing text conversation with a customer about coping during COVID-19. The conversation had nothing to do with sales, until the customer asked how he might thank his wife for her efforts to keep the house going during the pandemic. That resulted in the purchase of a seven-carat diamond.
“When the customer said, ‘I want to buy something,’ the trust was there,” van Raemdonck said. “It’s so beautiful to see that we can be in the intimacy of families, and then be there when they want to experience the emotion of luxury.”
The conversation also touched on the ongoing importance of stores and the immersive experiences they provide. “At the end of the day, we are all social creatures,” van Raemdonck said. “We want interactions. We want to touch the product. We want the advice.”