Different Fate of Two Luxury Brands Neiman Marcus vs.Saks

Because of the name of luxury

Neiman Marcus was founded in 1907 and Saks Fifth Avenue was founded in 1924. The latter faded under the former's image. In 2006, Saks announced his advancement to Shanghai's beach. The spotlight seems to have given some light to the Pearl. However, reputation is not just equal to flash.

About the luxury goods industry, there is a key word - Reputation. The prestige of a luxury retailer affects its profitability to a large extent. The name, in this industry, is closely related to the word Li. Obviously, Neiman Marcus's eyes only recognized the richest people, and the richest people praised it with Neiman Marcus's meticulous service.

According to a survey released by the Industrial Institute in 2006, the Neiman Marcus has a long-standing reputation. The LBSI has four main pillars of value: stably maintaining top quality, unique characteristics, social status symbol, and service level that enables customers to feel their premium status. In these four items, Neiman Marcus has taken the lead in the top quality and service standards. How to become the top leader in the top luxury retailers, Neiman Marcus let Saks take the plunge. At the "name" mark, Neiman Marcus won!

Standing behind Neiman Marcus is a person, Burton Tansky, a conceited, conservative, snobbish, CEO who from time to time proclaims "I like the rich". He may have been accused of criticizing his employees for lunch "too lavish." However, he is undoubtedly contributing to Neiman Marcus’s status as the top leader of the Fortune Pillar.

Accurately and uncompromisingly grasping the highest-end positioning is the weapon that Tan Siqi won the prestige of the industry. The industry is required to maintain a network of good relationships with celebrities, stars, wealthy and lofty guests. At this point, Tan Siqi has done a great job. The retail customer positioning of luxury goods is a group of people with an annual income of at least US$285,000 and net assets of at least US$750,000, especially the "rich woman" group aged 45-65. Tan Siqi knows the bottom line, and he pays more attention to celebrity heroes. For the entire brand's influence to enhance the function, that is, the wealthiest group of the richest guys.

For centuries, the Neiman Marcus Award was presented to celebrities such as Coco Chanel, Miuccia Prada, Grace Kelly, and Grace Mirablla. The fancy is also the key role of this group of rare and beautiful people in building their influence. As for the creation of customer loyalty, there is the InCircle award. Neiman Marcus knows that the luxury circle needs a sense of identity.

The operation of the luxury goods industry needs influence, the influence needs to be changed, the sensational effect is needed, and the ability to achieve “exclusive luxury” has become an important indicator of industry reputation. Neiman Marcus’s skill in this area is always on the go. Take a look at its Neiman Marcus Christmas Book. From the $400,000 robots to the $1.45 million bowling alley to the $10 million airship, this is an unsurprising list. The nebulous words of luxury, Neiman Marcus know this.

It is the precise meticulous positioning and customer focus, the innovative approach to brand value excellence, and the excellent intuition and feeling of the operating team on the luxury word that has made Neiman Marcus's luxury pearl shine.

The fate of Pearl

Good birds choose to live and dark pearls should not be cast dark. Another luxury retailer, Saks Fifth Avenue, was once hailed as the crown jewel. However, the fate of Saks Fifth Avenue (SFAE) ushered in a turning point in 1998. This year, Martin (Brad Martin) led the stock agent Proffitts to buy Saks Fifth Avenue for $2.82 billion. Since then, this once brighter industry "Pearl" is considered increasingly "dust."

Contrast with Tan Siqi, various comments on Martin are obviously not good. The man from Tennessee's political circles seemed to be unable to play in the fashion celebrity circle. A pair of snobbish eyes had already noticed "rough, teacher-like" shoes on his feet. In fact, it was this Martin that allowed the mid-end department store Proffitts to rapidly expand from its initial five stores to the scale of 232 companies, and went on the market with great momentum. It finally acquired the prestigious Saks Fifth Avenue. It also changed its name and changed the name, using the new name of Saks Incorporation as the group's signature. This group also includes Proffitts, McRaes, NDSG, Parisian and other names.

The problem is that the team led by Martin was described by the industry as an "accountant" team, thinking that they only know how to use the financial data to make a fuss, but they are only sensitive to the dull intuition and lag of the luxury goods industry. Some commentators pointed out that Saks's senior management "a kitchen, but there are several chefs", ultimately has its own starting point, personnel turmoil, including the outflow of "knowledgeable" professionals, and ultimately caused its positioning confusion. In the 1990s, Saks extended to the mid-range market. This is certainly a self-destructive signboard failure for the love-seller-like luxury market snobbery.

Personnel, strategy, positioning, these interlocking chains, not only affect Saks's industry reputation, because in this fame and fortune industry, reputation and profitability are closely related. In 2004, Saks’s luxury retail brand Saks Fifth Avenue increased its sales by 10.8%, while its end-user department store business only increased by 1.6%. Saks Fifth Avenue has become the main shaping power of the Saks brand and is the main pillar of sales and profits in recent years. Its flagship store on Fifth Avenue in New York City contributed 8% of sales to the entire Saks Group. Martin's aggressive expansionist thinking is clearly not suited to the unique genes of the luxury goods industry. The beautiful management terms such as expansion, acquisition, integration, and speed must be analyzed concretely in the luxury industry.

Ultimate interest

A bad signal is that the gap between Neiman Marcus and it is getting bigger and bigger - in terms of sales, Neiman Marcus grew by 8.6% in 2005, while Saks Fifth Avenue had only 3.1%; in terms of operating profit, Neiman Marcus's operating profit margin in fiscal 2004 was 9.7%, while Saks was only 3%. In terms of sales per square foot, Neiman Marcus reached $555, while Saks was only $350.

The consumer market in the United States is increasingly like an hourglass. Both ends are expanding and the middle is constantly losing. The growth in the high-end market is particularly evident. The luxury market has grown at an annual rate of 14% in the past five years, and as the baby boomers gradually move into the middle-aged and elderly, between the ages of 45 to 65, and the family’s annual income is more than 200,000 US dollars. Is growing at an annual rate of 8% - the luxury industry's spending and profitability space continues to increase, where will Saks go?

This is first and foremost a matter of choice. No one can sit in the middle of an hourglass. Focusing on the high end is an inevitable choice!

Saks is making bold cuts in department stores that are less valuable and have less growth. Proffitts, McRaes, NDSG and Parisian have all incorporated the sale plan. Saks will be left with only Saks Fifth Avenue and discount retail brand Off Fifth! At this point, Saks’ determination to fully capture the luxury market has been revealed. How does Neiman Marcus respond to the new round of “highland” challenges of the old rivals? Focus on high-end, insist on luxury - is where Neiman Marcus's core competitiveness lies. Neiman Marcus's business structure is quite simple: it is mainly stores and direct sales. The direct sales department is mainly responsible for directory mail order sales and online sales.

In 2006, Neiman Marcus also ushered in a turning point. Private equity firm Texas Pacific Group and Warburg Pincus LLC joined forces to bring it to US$5.1 billion. Neiman Marcus changed from a listed company to a private company. However, not everyone agrees with the privatization of Neiman Marcus. Will private equity companies use Neiman Marcus as a cash cow? There are industry views that the TPG and Warburg acquired it just to re-list it and make a full profit. In fact, Warburg's co-President Charles Kaye said: "At some point in the future, Neiman Marcus will implement the decision to re-list, but in the near future will not be implemented twice." The period of private equity investment is generally 5 to 10 years Whether its decision-making will affect Neiman Marcus's long-term development plan is still full of unknowns.

If the private equity is profit-making, in the Neiman Marcus implementation of high-speed growth strategy, all over the branches will certainly affect its luxury image, the Saks Group is a lesson. On the other hand, Neiman Marcus's profitability has reached the top level, and there is limited room for cost control. How to expand steadily and moderately has become the only way to increase profitability. This is a formula of scale, brand, and profit. After a single mistake, the whole team loses. Neiman Marcus, who has a new owner, will no doubt have to take advantage of this balance beam. In the next three years, Neiman Marcus plans to open 5 new stores, and Neiman Marcus has submitted an application for issuing 1.2 billion U.S. dollars of bonds. In 3 years and 5 years, Neiman Marcus has also been expanding, but he has not given up on his steady growth. As for the listed company Saks Incorporation, the actual head has also been circling the "vulture" of private equity, it is learned that Bain Capital and KKR two private equity companies are eyeing it.

Saks, who lost in the American hometown, is looking around the world and looking for new strongholds. In this regard, Neiman Marcus can't keep his eyes on it. The latter still sticks to the local market. Going out is an important part of Saks' new expansion plan. Saks has now set up an authorized store in Saudi Arabia and Dubai, and its next stop will be Shanghai, China. Recently, Saks has publicly stated that it will authorize Roosevelt China Investment Corp. to open six stores in Mainland China and Macau in the next three years, while the Shanghai Bund store will have an area of ​​300,000 square feet, second only to it. Fifth Avenue's flagship store.

In 2006, Martin, who criticized the luxury industry, will resign from the chairmanship at the end of the year, while Fred Wilson, the former CEO of Saks Fifth Avenue’s subsidiary, will also step down. Stephen I. Sadove was promoted to CEO of the group. Shadow made it clear that the gap between Saks and rivals lies in the strength of profitability. He said: “We have a great opportunity to control costs. Our weakness lies in low profit margins, not the products sold by Neiman Marcus. Better than ours."

Losing homeland does not mean losing all. Perhaps, going overseas, taking another path will make it regain its leadership. Data shows that the annual growth rate of the luxury consumer market in China has reached 20%. By 2015, China will replace the United States and become the second largest consumer of luxury goods in the world. Annual sales will reach 11.5 billion U.S. dollars, accounting for 29% of the total global luxury goods consumption. Its scale is second only to Japan. Perhaps, when Shadow and Tan Siqi face each other, he would swear: "Gentlemen take revenge, ten years not later."