Why is the high-end department store Neiman Marcus reportedly restructuring its debt and maybe even seeking a buyer? It turns out that catering to very rich people isn’t a guaranteed way to keep money coming in, since even rich people are turning to online bargain-hunting.
Neiman Marcus and its Bergdorf Goodman sibling stores used to have a very simple approach to making more money, The Wall Street Journal explains. The chain began in oil-rich Texas at the beginning of the 20th century.
“I’d rather have one customer spending $5 million, than five million customers spending $1,” former CEO Burt Tansky liked to say. Its shoppers have historically not been people who were sensitive to prices.
However, the world’s wealthiest shoppers have realized they don’t need to pay more — or even leave the house. The fanciest luxury brands are now all available online, sometimes for less than what you’d pay in a swanky boutique or high-end department store.
“Even a very rich person can say, ‘Enough is enough,’ when it comes to price,” the chain’s former men’s fashion director told the WSJ. Those very rich people instead go shop for their favorite designer brands online, or make the even more shocking move of buying a classic handbag and using it for multiple seasons instead of buying a new one every year.
“Back in 2007, there were young women who would skip meals to save money to buy the latest Marc Jacobs bag,” a former marketer at Neiman Marcus and competing high-end department store Nordstrom told the WSJ. Now, those same women have only one nice bag, and splurge on experiences and on meals out.
Neiman Marcus is trying to adjust to this new reality without actually going downscale, a move that has included opening off-price stores to attract younger and less affluent customers, and a chain called Cusp designed for shoppers who have money, but who don’t have $5,000 ball gown money.
These moves aren’t quite working, and the chain remains almost $5 billion in debt.