By Tom Ryan
Neiman Marcus, which has long thrived by going after the Ladies Who Lunch crowd, is experimenting with a new retail concept, Cusp, targeting younger hipsters.
Neiman's has been challenged attracting shoppers in their 20s and 30s in its own stores without alienating its core customers - primarily baby boomers, 45- to 64-years old, with household incomes in excess of $200,000. Since last summer, three Cusp boutiques have opened in Los Angeles, Washington, D.C., and McLean, VA.
Cusp is "focused on a customer with a contemporary point of view who likes to mix and match her wardrobe from various designers," Burton Tansky, chief executive of Neiman Marcus Group Inc., told the Wall Street Journal. This stands in contrast to traditional Neiman Marcus shoppers who tend to dress nearly head-to-toe in a particular designer's goods.
Instead of the chandeliers, marble floors and grand artwork Neiman Marcus stores are known for, Cusp stores are smaller (7,000 to 8,000 versus 130,000 for a typical Neiman Marcus store) and much more informal. For instance, the Los Angeles boutique has a natural theme with garments displayed on twig fences, jewelry in wooden bowls, and necklaces placed atop dried lentils.
The product mix is trendier. Roughly 70 percent of the goods now at Cusp can also be found at Neiman Marcus but the overlap eventually will fall to about 50 percent and Cusp will have its own separate buying team.
Pricing is lower. Tops can be had for under $100, such as Ed Hardy t-shirts for up to $84, or Tokidoki tops for $44. Among its highest priced items is a $750 Tory Burch sequin tank dress for summer and an $805 See by Chloe dress for fall. In contrast, merchandise at Neiman Marcus stores can be priced in the thousands of dollars, such as a $3,290 Akris zip jacket for fall.
Karen Katz, president and CEO of Cusp, said Neiman Marcus is learning the habits and preferences of 20-something shoppers through Cusp. For instance, Cusp shoppers pick up items on Thursday, Friday or Saturday to wear that night, unlike Neiman's average 50-year-old shopper, who tends to buy in advance for each season.
The WSJ noted that Cusp is targeting a strong part of the apparel market. According to NPD Group, sales of the "contemporary" fashions rose 10 percent last year, a pace nearly double that of women's wear overall.
But Cusp also faces competition from other major retailers launching shops selling contemporary looks in informal settings. These include Pacific Sunwear of California (One Thousand Steps), J. Crew Group (Madewell), Polo Ralph Lauren Corp (Rugby), Tiffany & Co. (Iridesse), as well as Barneys Co-op.
Neiman Marcus also hasn't done well with retail offshoots. Its Galleries of Neiman Marcus jewelry and home décor experiment was closed, and it has also sold stakes in Kate Spade and Laura Mercier since going private. Further back, it sold Contempo Casual to Wet Seal in 2001 after constant struggles.
Finally, Cusp could cannibalize Neiman Marcus's own sales to younger shoppers. A fourth Cusp boutique opening in August outside Chicago will be 100 yards away from a Neiman Marcus at Northbrook Court mall.
"Cannibalization is not of concern to us," Ms. Katz told the Journal. "Cusp is a free-standing store with a different target market, a unique merchandise mix, and distinctive architectural and visual elements."
Discussion Questions: Do you think Neiman Marcus is making a smart move in targeting a younger, contemporary audience or should it stay focused on its niche of older fashionistas? What do you think will be Neiman's primary challenges in reaching this contemporary consumer?