Neiman Marcus Group, an early purveyor of the customer-always-comes-first mentality and a retailer that still lavishes big spenders with luxury and service, wants to become even more “customer-centric.”
Central to what executives described as their new operating model, the Neiman Marcus Group is reorienting its buying approach. Merchants will now be more intensely focused on customer data and insights, and the company has formed a marketing strategy and customer analytics team.
NMG has also created new senior management roles and consolidated certain responsibilities to eliminate silos that typically limit interactions between different business functions and slow the execution of plans.
Among the exec changes, Stefanie Tsen Ward has been appointed chief integrated retail officer, a new role in which she leads the digital, stores and remote selling teams in an effort to encourage multichannel shopping. She previously held the title of chief retail officer for the Neiman Marcus brand and will now report to Ryan Ross who last February became NMG’s head of customer insights while continuing as president of the Neiman Marcus brand. According to the company, for the 12-month period up to the conclusion of NMG’s second fiscal quarter this year, multichannel customers spent five times that of single-channel customers.
Ann Marie Janke has become NMG’s chief technology and information officer. These were two roles before, and Janke had been NMG’s chief information officer. She will be involved in advancing tech products, such as Neiman’s proprietary Connect clienteling tool, and IT, which is all about the data. Her appointment follows last February’s change with Darcy Penick, who became NMG’s head of product and technology while continuing as president of Bergdorf Goodman. Janke reports to Penick now.
In addition, Andrew Floyd has been named vice president of marketing strategy and customer analytics, a new role in the organization. He will lead the new marketing strategy and customer analytics team, reporting to Ross. Floyd had been vice president of acquisition and growth. And Amanda Martin was promoted to chief supply chain officer, continuing to lead supply chain transformation and operations.
WWD has also learned that NMG has triggered another round of personnel cuts at the corporate offices, not at the stores. Less than one percent of the total workforce are affected, or under 100 individuals.
In February, NMG announced it was laying off hundreds of workers, representing just less than 5 percent of its total workforce, which at the time was approximately 10,000 workers. That included about 100 workers at NMG corporate and a few hundred workers at stores and other areas of the business.
In its last fiscal report, the company reported a deceleration of the business, citing the tough economic climate and shifts in affluent customer spending toward travel and other experiences. The Dallas-based luxury retailer has become increasingly “surgical” (to quote NMG’s chief executive officer Geoffroy van Raemdonck) in managing expenses, focused on marketing to its top-spending customers shopping across channels and changing how it operates including enabling staff to work remotely, which has helped recruit and retain talent.
An improved financial performance would help NMG owners Davidson Kempner Capital Management, Sixth Street Partners and Pacific Investment Management Co. cash in on their investment, possibly through a public offering of NMG or a sale of the company or parts of it to another retailer, or to private equity. While there has been media speculation about what the owners could do, a transaction does not appear imminent.
“In this new operating model we are going to pivot to buying for the right audience — the customers who are loyal to us or have potential to have a high customer lifetime value,” van Raemdonck said in an exclusive interview.
“Historically, we bought the product that we thought was the most attractive in the market. Historically, merchants have looked at what brands are growing and that gives you one answer. Now they’re really looking at the most attractive customers and what they are buying,” van Raemdonck explained. “How do we buy more for that type of customer to either grow business with those customers or recruit customers” with similar profiles. “So it’s really applying this customer-centricity.
“We’re not looking to gain market share. We’re not looking to gain transaction. We’re looking to gain share of wallet of the customers who are in a relationship with us. That is the pivot we are facilitating by really framing the role of the merchant differently, and supporting them with a new team which we call ‘customer analytics’ with a VP to provide them with much more insight.” This new team, the CEO said, “will be figuring out what we need to do in terms of what we buy and then how we create activations, events and marketing for the customers that we want.”
NMG’s shift in its buying approach began on a pilot basis last spring for fall with a handful of categories including women’s designer ready-to-wear and shoes. It’s being rolled out to other categories. But evolving the operating model started more than a year ago when van Raemdonck outlined efforts to concentrate marketing and selling efforts on the top Neiman’s shoppers.
According to the company, 2 percent of Neiman’s customers drive about 40 percent of the volume and there’s a 90 percent retention rate among the top customers, who on average spend more than $25,000 annually. Van Raemdonck reshaped top management by assigning Penick at Bergdorf’s and Ross at Neiman’s to group-level responsibilities, for faster decision-making.
With Janke’s appointment to chief technology and information officer, “We’re really merging the technology and the IT teams together, which we believe is important because we’ve got significant investment in technology,” van Raemdonck said, citing new supply chain systems, re-platforming Bergdorf online, and customer relationship management (CRM) and loyalty programs. Blending the two functions will lead to much faster execution, van Raemdonck said. “The focus there is about stronger collaboration and increased execution.”
Asked about the latest round of cutbacks, van Raemdonck said they were geared to remove redundant roles and are “a byproduct of organizing ourselves to be more customer-centric, more agile and execute faster. It’s to break silos.”
This week’s changes reflects the next phase in evolving NMG’s operating model, he said.
“I always say there are three things that differentiate our business model. We believe in integrated retail. We believe in assisted selling and the power of our sales associates, and we believe in curated assortments. And by bringing the organization together, breaking any silos and facilitating the customer journey across our three channels (stores, online and remote selling by associates), that will accelerate our growth. The journey we are on is to amplify our strategy, to maximize our differentiated business model.”
Van Raemdonck did acknowledge that “Sometimes we buy for customers who buy one time with us and don’t come back. We are trying to move our assortment towards the categories, the brands and the classifications that really resonate best with customers in relationships with us, and entice them to buy more from us, and it’s literally based on a better set of analytics that shows at the category level, the classification level, the brand level and the price points that our customer wants. Not surprisingly, it’s the brands that are more luxury, that have the best offering. It starts from the data the merchants are using. We have refined and upgraded the way we analyze the data and make it available,” van Raemdonck noted. “It’s really providing insights to our merchants. And so now are we buying for an audience versus buying what we think we can sell.”
“We are not buying less. We are buying better,” van Raemdonck clarified.
There can be differences between what brands want to sell to retailers and what retailers want to buy, and big brands exert a lot of pressure in the negotiations.
Van Raemdonck said NMG sells “an enormous amount” of designer ready-to-wear and other luxury categories and often penetrates much deeper than the brand penetrates themselves in those categories. “The brands look at us as the gateway to the luxury customer in the U.S.,” he said.
“And so with that we’ve had a great response with brands, when we show them the quality of our customer, and how, by buying this way, and by having them do more exclusives with us, we can give them access to more of the true luxury customer in the U.S. We don’t pretend to tell them what to sell. But we do give them very informed guidance as to where the white space is in their offering. And then usually many brands develop an exclusive with us that addresses that segment. That’s the value we bring in. I actually personally spend enough time with brand CEOs globally to talk about what our customer buys, and what they could provide more of to get that luxury customer to buy more from them. So it’s part of a conversation.”
Coincidentally, Saks, the e-commerce business of the Saks Fifth Avenue brand — and NMG’s arch-rival — is also changing its work culture. Similar to Neiman’s strategy, Saks executives last month said the company is breaking down silos and has repositioned teams for closer collaboration and greater agility, and to apply data insights more effectively to the buying, planning and marketing.
The goal is to capture greater market share and provide a better online experience for customers. Key changes at Saks.com involve the creation of 10 “pods” for the different categories of business with each pod consisting of individuals on category growth, buying and planning teams working together, and an enhancement of the category growth function to closely monitor what’s happening on the website from an analytical standpoint and a merchandising standpoint.