Since Neiman Marcus Group filed for bankruptcy in May 2020 and emerged four months later with $4 billion in debt, it has largely gone off our radar. The time-lapse has allowed the company time to right its ship without the prying eyes of journalists, but it’s also kept the company and the leadership of CEO Geoffroy van Raemdonck from getting any recognition for how he’s transforming the company.
Neiman Marcus draws crème de la crème luxury consumers, with the company reporting last year that nearly most sales came from customers who spend on average $10,000 per year. And they are hardly the old-fashioned ladies who lunch crowd. More than 60 percent of its customer base are Gen X, millennials, and Gen Zers.
Behind the Curtain
Three years ago, van Raemdonck said, “With the successful implementation of our restructuring, Neiman Marcus and Bergdorf Goodman will continue to be the preeminent luxury shopping destinations for years to come. We emerge from Chapter 11 as a stronger, more innovative retailer, brand partner and employer.”
Well, he’s been true to his word. NMG has reinvigorated the shopping experience in its Neiman Marcus and Bergdorf Goodman stores and online for its well-heeled loyal customers. By so doing, it’s become an even more vital partner for premier luxury brands. The key to its transformation is the focus placed on its 10,000+ associates in its mission to “Make Life Extraordinary” for what the company calls its “believers” – customers, associates, brand partners, investors, and the communities where it does business.
Luxury Department Stores Endure
In some quarters, department stores, luxury or otherwise, have been largely written off as a relic of the past. Their falling market share seems to support that claim. For example, luxury department store retail dropped from 18 percent in 2019 to 15 percent share of market in 2022. And it is expected to continue its downward trajectory to between 11 to 13 percent by 2030, according to Bain-Altagamma Worldwide Luxury Goods Fall 2023 report
. Seven years from now mono-brand retail and its online portals will account for between 62 to 66 percent of the market.
But if you write off the luxury department store as a place, there’s a danger in writing off the well-heeled people who shop there. Boston Consulting Group reports
that 40 percent of sales in the luxury market are made by only 5 percent of customers. These true-luxury customers spend on average a whopping $43,000 per year on luxury. A back-of-the-envelope calculation suggests each one could represent somewhere between $5,000 to $6,000 annual spend in department stores.
This contrasts with the remaining 95 percent of luxury customers who account for 60 percent of industry revenues. They spend less than $2,200 per year on luxury which would work out to some $300 per year in luxury department stores. So, it’s not the volume of customers who shop in luxury department stores but their quality that keeps this channel relevant.
Even more to the point, the people who shop there are about twice as loyal to their favorite store as they are to the luxury brands the stores carry, according to a recent study by The Affluent Consumer Research Company. It surveyed 200 affluent consumers (average income $325k) who claimed loyalty to one or more luxury brands or retailers. On average 8 percent reported being loyal to one of the 13 luxury fashion brands included in the survey while the average for luxury department stores was 15 percent for the five retailers listed, including Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue, Nordstrom, and Bloomingdale’s.
These four retailers each have over a century of serving luxury shoppers’ needs. They’ve consistently earned that high level of loyalty making them a vital part of the luxury ecosystem. By curating the best of the best luxury items under one roof, these department stores expose influential customers to new ideas and brands and provide touchpoints for engagement and trial. Luxury department stores are also part of the virtuous circle that builds credibility and desire for luxury brands.
Making Luxury Matter
In the department store hierarchy, Neiman Marcus draws crème de la crème luxury consumers, with the company reporting last year that most sales came from customers who spend on average $10,000 per year. And they are hardly the old-fashioned ladies who lunch crowd. More than 60 percent of its customer base are Gen X, millennials, and Gen Zers.
Narrowing that perspective further, van Raemdonck revealed
at the 2023 NRF Big Show that two percent of its customer base generates 40 percent of sales, and its 20 largest brands represent half of its revenue. And those two percent of customers shop 25 times at Neiman’s annually and spend $27,000 on average.
“We are truly in a relationship business,” van Raemdonck said. “And that means that we spend time focusing on a few clients who have the potential to engage a lot with us, and we build that relationship so that we drive customer lifetime value.” While the company doesn’t reveal the number of its in-store customers or its InCircle loyalty members, Similarweb reports Neiman Marcus averaged 15 million online visitors each month this year.
Neiman Marcus Group understands that it needs the very best brand ambassadors to build and maintain those customer relationships. So, it’s put that belief into practice with its “Power of One
” people project to identify what matters most to the company employees so that they bring their best selves to the job every day to do the best for their customers.
“At NMG, we embrace a model that is not ‘one size fits all’—but ‘one size fits one.’ This concept is what we call the Power of One — the way that we at Neiman Marcus Group empower each individual to be her best self, thereby fueling our greater collective strength,” stated Eric Severson, chief people, ESG and belonging officer, in the company’s first people report.
It’s based on a simple philosophy that makes the difference in how NMG delivers personalized experiences to customers by giving the same experience to its employees who are tasked with its highly personalized customer mission.
“Our corporate purpose is to ‘Make Life Extraordinary’ for customers, associations, brand partners, investors, and the communities in which we do business,” he continued. “Our approach to delivering on our purpose is to ‘Revolutionize Luxury Experiences’ in ways that are unique to each group.”
Serving All Your Stakeholders
The Power of One project kicked off in 2019 before Covid with an employee survey that revealed they wanted on-the-job flexibility, opportunities for career development, total rewards, including enhanced benefits and rewards for a job well done, and a corporate culture that promotes belonging, sustainability and philanthropy.
“We built our People strategy in January/February 2020, before the world fell apart from Covid in March. Fortunately, we were ready when the world opened up again,” Severson shared with me. It put NMG out in front of other employers that faced the same problems that accelerated after the pandemic: record levels of people withdrawing from the workplace, quiet quitting, and record high unemployment levels.
“We bucked all three of those trends over the last two years,” he added. “We’ve had positive retention but, more importantly, record high engagement with our employee net promotor score up 34 percent.” It’s also improved the time to hire by 31 percent and received multiple awards as the best place to work for women and the LGBTQ+ community.
How Did They Do It?
Already in the plans pre-pandemic but even more important afterward was the introduction of a new hybrid work model that allows employees to choose when, when and how they work with centralized hubs to support them as needed. Its experience with working from home during the store closures, including sellers serving customers remotely, gave it confidence that its hub workplace concept would work “Our organization is more than two-thirds female and all independent surveys show they are disproportionately impacted by work-life conflict. Our leadership knew flexibility was so important to them,” Severson said.
Each store operates as a hub with separate hubs in Dallas and New York, which are designed to provide privacy spaces, collaboration spaces and socialization or connection spaces. “It gives us a unique value proposition,” he said adding that its hub model made the difference in hiring the company’s new CFO, chief legal officer, and chief brand officer. “Our corporate hub model grew out of the idea that we don’t need a corporate office to be the center of the work universe where they have to go five days a week. Instead, the customer and the associate are at the center of the Neiman Marcus Group’s model. It’s empowering people to work when, where, and how they need to,” which enables the company to make work more gratifying for employees and more cost-effective and productive for the company. It also helps the company to better meet the needs of customers.
The NGM Way to Work
Severson explained that the hub model supplies essential support for the four pillars of the NMG’s “Way to Work” strategy.
1. I work smarter by seeking out value-adding work and challenge anything that doesn’t advance the company’s goals. Working smarter means being one’s most productive self where, when, and how they are working.
2. I am present to actively contribute and collaborate with customers and team members no matter the location. Being present means if one is on a call, they give their full attention and not get distracted.
3. I integrate life and work allowing employees to organize their work and personal life to excel in both. “If people aren’t taking care of things in their home, they can’t be present at work,” he said.
4. I empower and am empowered. To work smarter and to integrate life and work, the employee must have autonomy to best meet the needs of customers, coworkers, and the business, as well as their needs at home. Empowerment also means one accepts accountability for delivering results.
NMG is aspiring to be a role model for all retailers. “As a humanist, I want to do something meaningful to improve work for everyone in the workforce. I wish every company would do something like this,” Severson shared. “But then, I find there is so much resistance to this idea that it’s become a competitive differentiator, which is great for us but doesn’t help the rest of the world.
“Think of what a difference it would make if a company like Walmart, the largest retail corporation in America, did something like this and how it would influence everybody else,” he continued. “That’s why we published this information to inspire others and set an example for others to follow.”
Making Retail Resilient
To the best of our knowledge, no other major American retailer has committed this deeply to what it takes to make its workforce happy and productive. After all, it’s only common sense to nurture the most important capital asset you have that can make or break a company’s business performance.
Almost every retailer releases ESG and DEI facts and figures, but the data tells an incomplete story. Retailers need to give as much attention to understanding the perspectives of their employees and align the corporate management structure to empower everyone from the shop floor up so that everyone can give their best to the company’s overall mission: serving customers not just selling them more stuff.