Neiman Marcus’s CEO is done wooing the less than wealthy as luxury heads for a slowdown: ‘We are no longer about selling everywhere on the price spectrum’

Geoffroy van Raemdonck, CEO of Neiman Marcus photographed on January 19, 2023 at Bergdorf Goodman in New York, New York.
Photography by DeSean McClinton for Fortune

Luxury’s torrid growth coming out of the pandemic was bound to fall back down to Earth. But Neiman Marcus Group CEO Geoffroy van Raemdonck has a plan to deal with the sector’s slowing momentum: focus on the biggest spenders and win over more shoppers from the jet-setting millionaire cohort.

Neiman Marcus, for decades the go-to retailer for affluent fashionistas who won’t bat an eye at shelling out $15,000 for an Alexander McQueen lace dress, gets about 40% of its annual $5 billion revenue from only 2% of those shoppers. And in that clientele, most have net worths of at least seven figures.

But van Raemdonck, who steered the Dallas-based retailer, which also owns Bergdorf Goodman, out of a painful bankruptcy-court-approved reorganization in 2020, says the strategy positions Neiman Marcus as a retailer for the well-heeled, much more than for those aspiring to be part of the exclusive group, and he makes no bones about it.

His top customers shop at Neiman Marcus on average 25 times a year and spend a total of $27,000. With such stats, he wants more of them and less of the churn that comes from casting too wide a net of customers he wooed by offering products with a broader appeal, dispensing with the idea of aspirational luxury, which is somewhat a contradiction.

Revenue rose 30% in the fiscal year that ended last summer, but Neiman’s growth slowed to the single digits in the summer quarter as it did for other luxe retailers. There are plenty of signs of a luxury slowdown:Nordstrom reported a 1.7% drop in sales at its upscale business over the holiday season, a smaller dip than the one at its Rack discount business but a decline nonetheless, while Saks recently announced layoffs.

Van Raemdonck, Neiman’s CEO since 2018, believes getting through any slump requires winning over a greater number of wealthy shoppers at a time the rich are getting richer. But it also requires much more personalized service to keep them and cultivate loyalty.

“The focus is ‘How do we recruit more people who have that potential?” van Raemdonck tells Fortune. “It’s all about doubling down and asking our teams to strengthen customer relationships.”

This interview has been edited and condensed for clarity.

Fortune: Neiman gets some 40% of its revenue from only 2% of customers, which is by design. Is there a risk with such concentration that makes you dependent on a sliver of your clientele?

If our goal is to do and find what is right for you, the more we get to know you, and the more we engage with you, the better. We’ve decided that we are no longer about market share, and we are no longer about selling everywhere on the price spectrum, from clearance to high-end jewelry. The business value of this approach is we get to know our customers better. The economic value is I avoid churn, and the price is no longer the main consideration. We retain 90% of these customers.

Are you not worried this is too niche a market?

There is a very large number of high-net-worth individuals, people worth more than $5 million to $10 million. And 2% of our customers are still a fraction of that population in the U.S. I see much more risk in having a one-time transaction where I don’t know if you will ever come back. Many customers shop at Neiman Marcus 25 times a year and spend $27,000.

One of your biggest moves as CEO was to close the Neiman Marcus Last Call outlet stores that had allowed you to reach a more discount-oriented shopper in 2020. Are you missing out on shoppers who could “graduate” to Neiman Marcus later?

We looked at the numbers and couldn’t see customers who shopped at Last Call and then became Neiman Marcus customers and built a relationship with us. We made a clear choice that we’re going to do one thing and do it well. We believe luxury is about uniqueness and emotion. 

Let’s talk about brands. You get some 50% of sales from your top 20 brands. You closed the discount stores partly to elevate your relationships with them. Did it do that?

When I go and talk to a brand now, I talk about newness and brand exclusivity, not discounting. I don’t talk about, ‘What do I buy from you at full price, and what products can you sell me at a discount but at a lower quality?’ That used to be how I spent a third of my time as CEO. Now it’s, ‘How do I make your brand more desirable?’

Your top 20 brands generate half of your sales, but luxury customers also want to be in on the next big thing. How do you reconcile those competing pressures?

We’ve added 200 brands this fall that are new and emerging. Our customers know the big brands, but they’re also looking for something other retailers don’t have. Louboutin, Brunello Cucinelli, and Akris are among our top brands, but they got their U.S. starts with us. If we hadn’t invested in them early, we would not have them in our top 20 brands. It’s important for our long-term growth that we always have the next winner in our stable.

What’s the case for top brands to still sell through Neiman Marcus when they are opening their own stores and have e-commerce businesses?

We can complement their growth. They realize we are luxury experts and have a unique customer base they can’t necessarily access. How we add value is a choice for the customer. If you’re going to buy shoes or if you’re going to buy an outfit, you’re not going to find what you need from head to toe at one brand’s store. Also, most brands were late to digital commerce—we have a $1.5 billion digital business.

You do indeed have a sizeable e-commerce business, yet you also have a new partnership with Farfetch, the luxury retailer and a fierce rival. Isn’t it risky to partner with such a direct competitor?

The luxury market is big, and it’s growing, and there are different pockets for different companies to play. There is minimal overlap between Farfetch and us. But the partnership is not linked to anyway—it’s linked to Farfetch technology, which powers and other brands. There was value for us because we wanted to put the Bergdorf Goodman website on a proven platform that they’ll constantly upgrade. We will be able to go international with it within 12 months. And for Farfetch, the investment in Neiman Marcus Group is a way to benefit from the growth of luxury sales in stores, which they don’t have.

With the luxury market poised to slow down, what’s your focus now?

When we look at our customers today, figuring out how to migrate them to make ourselves their destination of choice is even more pressing. Fiscal ’23 is all about making choices, doubling down, and asking our teams to really focus in a volatile environment to strengthen customer relationships.

Get to know van Raemdonck:

  • Van Raemdonck is Belgian and studied at the Université Catholique de Louvain. He received his MBA from the University of Chicago Booth School of Business.
  • His rise in the luxury industry included senior jobs at Ralph Lauren and Louis Vuitton and CEO of St. John Knits, a high-end women’s knitwear maker. Earlier, he was a consultant at Boston Consulting Group.
  • Van Raemdonck became Neiman Marcus Group’s CEO in 2018, guiding it through a Chapter 11 bankruptcy protection process, and became the rare CEO to stay with a company post-reorganization.

Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.

Read More

Great ResignationDiversity and InclusionCompensationCEO DailyCFO DailyModern Board