Luxury department store chain Neiman Marcus has announced plans to open its first-ever New York City store in 2018, a 250,000 square-foot location that will anchor an ambitious new real estate project being developed by Related Companies in Hudson Yards on the far West Side of Manhattan, an up and coming part of town.
Neiman Marcus Group, which also owns the famed Bergdorf Goodman store on Fifth Avenue, always hesitated to open a store in the world’s capital of luxury shopping under its own banner for fear of cannibalizing Bergdorf. But Neiman’s change of heart comes as rivals from Nordstrom (JWN) to Saks Fifth Avenue to Macy’s (M) double down on luxury’s explosive growth in New York, fueled by a surge in international tourism.
Neiman has bested other luxury department stores in terms of sales performance, reported a comparable sales increase of at least 5% in all but one of the last 17 quarters. But New York is too important to pass up to keep that kind of growth going for any major retailer.
Neiman Marcus Group President and CEO Karen Katz spoke with Fortune on Thursday about why the time was ripe at last for a Manhattan store.
Fortune: You’ve said for a long time there was no need for a Neiman Marcus in New York City. What made you finally change your mind?
Katz: What’s changed in New York, and what made us really change our thinking about New York, is that the different neighborhoods are becoming more important as shopping destinations than they used to be. Fifth Avenue and Madison Avenue were the most important areas for a long time. There’s been a change in where populations are moving, where luxury apartment buildings are being constructed.
Stores such as Tiffany & Co (TIF) and Saks have reaped a bonanza from the enormous jump in tourism to New York. How important do you expect international visitors to be to the new Neiman Marcus store?
It’s hard to project what percentage will come from tourism. There is no question that international tourism is on the rise- we see it at Bergdorf Goodman, we see it in Miami. And we hope that because of the location of Hudson Yards, and what Related has envisioned, that it will be a place that tourists are going to put on their list of things to visit while they’re in New York.
Why is having a Manhattan flagship so important?
This opportunity in Hudson Yards gives us the opportunity to do a few things- we get to, for the first time, build a flagship Neiman Marcus store in Manhattan- that alone is enough to get all of us very excited. I do think it will put our name ‘Neiman Marcus’ on the map from an international tourism point of view. (Katz added that internal research shows high brand recognition for Neiman Marcus abroad.)
Will a Neiman store possibly cannibalize Bergdorf Goodman’s business?
Bergdorf Goodman is positioned at the very top of the luxury pyramid, and I think that as we go through this next phase of renovation, we’re going to elevate it even further. There is a part of the luxury market that is a little bit broader, and Neiman Marcus fills a space that Bergdorf just can’t because of where we’ve positioned it.
Do you think luxury’s fast growth in New York City can continue?
The demographics and the psychographics show that there should be over the longer term a continued growth in the numbers of customers who will be shopping for luxury goods both domestically, as well international tourists come to the United States.
