Tale of Nieman Marcus

Since 2013, the company has struggled to service interest payments, let alone its debt principal. Last summer, the company refinanced to push out due dates for its loans to 2023 and 2024, but that also increased debt expense to some $300 million annually. In April, it failed to meet its $5.7 million interest payment, setting up today’s filing. Some say that the company came too late to understand the implications of digital retail after the recession. While Neiman Marcus dragged its feet in digital, chief rival, Nordstrom, was aggressively pursuing it. As a result, NeimanMarcus.com’s monthly visitors track less than half that of Nordstrom.com’s since 2017, according to data compiled by SimilarWeb. Several causes are owed to their downfall. A few of which were:

Concerns after coronavirus

In a situation when customers are afraid to go to a store, the technologically lagging Neiman Marcus had to face a setback. When their families and friends are threatened both physically and financially, it was hard to find people willing to spend. When the very act of dressing in luxury-brand finery underscores the widening chasm between the haves and the growing number of have-nots, it will create a societal gap and hence an impact on the sales.

Dragging digitally

In the last decade, new realities, like channel expansion and the luxury consumers’ unexpected comfort level with digital retail, have eroded the value of personalized service and expertise, which was an unwavering focus for Neiman Marcus. Delivering a harmonized cross-channel retail experience required adopting new technologies and analytical infrastructures and a different breed of buying teams with the skill needed to identify unknown risks and opportunities and react to them quickly.

Culture devolved from entrepreneurial spirit to managerial process

With the changes in both leadership and ownership over the last decade or so, Neiman Marcus devolved from its originating entrepreneurial spirit to a corporate mentality. The result: it lost the passion. In the eyes of Neiman Marcus’ best customers, its leadership in style began to disappear and led to a homogenization of luxury retail. And as Neiman Marcus became less differentiated in the eyes of its customers, it took its eyes off the real prize: Getting a more significant share of wallet from the most elite customers. The digital tools at its disposal should have made that possible, but the company either didn’t exploit them or didn’t know how to use them effectively.

Neiman Marcus seemed unable to pivot its core strengths with sufficient readiness to retain (or gain) the interest of an increasingly distracted and disloyal consumer. In essence, Neiman Marcus lost the customers’ loyalty because the company lost its loyalty to its customer. Mining data instead of minding the store Perhaps Neiman Marcus’ management was focused solely on the customers’ profile data, which only reveals who the customer is. But for understanding who they want to be, those insights can only come from time spent on the sales floor interacting personally with the customers. Considering all these details, it brings us to a thought about what should be the next course of action for these industries. For the past 30 years, the luxury sector has created value, thanks to its creativity and innovation. In addition to supporting core competencies such as design, marketing, and merchandising, luxury businesses now need to build the managerial talent to support the CEO in resilience and transformation. As stores remain closed in many parts of the world, e-commerce is a crucial channel for keeping sales up, communicating with customers, and forging a community around a brand.