Does Neiman Marcus have too many eggs in too few baskets?
In a keynote presentation at the 2023 NRF Big Show, Geoffroy van Raemdonck, Neiman Marcus Group’s CEO, was asked about the benefits and risks of the retailer’s high concentration levels. Two percent of Neiman’s customer base generates 40 percent of dollar sales, and its 20 largest brands represent half of its revenue.
Addressing the customer-concentration risks, he said the two percent still represents “thousands of customers.”
The benefit to focusing on those high-heeled customers is being able to deliver a more personalized experience. “The value is really that as you get to know someone, you’re able to really provide them what’s right for them, and know their family, know what moments are important to them, and surprise them,” Mr. Raemdonck said.
“We are truly in a relationship business. 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,” he added.
For Neiman Marcus, the benefit is that those two percent shop 25 times at Neiman’s annually and spend $27,000 on average, with 90 percent retained. Since they’re loyal, they’re less promotionally-driven. Said van Raemdonck, “It means that our business is quite predictable because year on year, we start with a solid base of customers.”
Regarding the concentration of vendors, he said Neiman has a core group for brands “that have multiple years of excellence in delivering beautiful product experiences to customers and those thrive in a good economy and they thrive almost better in volatile times.”
He said, “These are brands that resonate, that have integrity, that really appeal to the luxury customer. They’re also brands that sell well. So our business again is quite stable.”
Mr. Raemdonck said Neiman’s also remains committed to stocking emerging brands to support discovery and curation, but the top luxury brands have expanded as part of the mix over the last year due to the exposure and insights Neiman’s provides. He said, “We can represent them at the level and the standard of integrity that they have, but also introduce them to a customer they don’t have today.”
DISCUSSION QUESTIONS: Is the concentration of its customer base and vendor base a concern for Neiman’s? What does the high concentration say about success drivers of the luxury model?