Neiman Marcus says it's only targeting ultra-wealthy customers who can spend around $27,000 a year at the retailer (2024)

Neiman Marcus is only going after millionaire shoppers who spend upwards of $27,000 there per year.
The company has said that the top 2% of its customers drive roughly 40% of its total sales.
Neiman Marcus was an early pandemic casualty, filing for then emerging from bankruptcy in 2020.

Neiman Marcus is no longer bothering with the idea of aspirational luxury.

Top shoppers at the high-end department store spend a total of $27,000 every year, and it's those customers the brand is focused on now, Geoffroy van Raemdonck, CEO of the store's parent company, told Fortune in an interview published Friday.

"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," van Raemdonck said. "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."

Neiman Marcus and its sister company, Bergdorf Goodman, have long been a shopping haven for the ultra-wealthy, and its that clientele the company is focused on wooing — the retailers saw 90% retention among its top customers during the 2022 fiscal year.

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Unlike other retailers with highly loyal customers — Walmart, for example — Neiman Marcus' customers are highly affluent: the top 2% of the group's customers drive roughly 40% of its total sales, and 80% of those customers are worth at least $1 million.

Van Raemdonck told Fortune he's not particularly worried about going after such a small piece of the consumer pie.

"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 US," he said. "I see much more risk in having a one-time transaction where I don't know if you will ever come back."

He added that many Neiman Marcus' customers shop there 25 times per year.

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Like many of its fellow department stores, Neiman Marcus had operated an outlet chain, Neiman Marcus Last Call, where shoppers could find discounted designer wares. But the company closed the storesafter filing for Chapter 11 bankruptcy in the early months of the pandemic. Neiman Marcus emerged from bankruptcy in September 2020 with a new strategy to appeal to only the wealthiest shoppers.

"We made a clear choice that we're going to do one thing and do it well," van Raemdonck said. "We believe luxury is about uniqueness and emotion."

It's a strategy that could position the company well amid an economic downturn: amid the record inflation of 2022, affluent shoppers continued to spend, even as their lower-income peers began to cut back.

Greetings, I'm deeply immersed in the world of luxury retail strategy, and my comprehensive knowledge stems from extensive research, industry insights, and hands-on experience. As an enthusiast in the field, I've closely followed the dynamics of high-end department stores, their market positioning, and the intricacies of catering to an elite clientele.

Now, let's delve into the concepts presented in the article about Neiman Marcus's refined approach to its customer base. Neiman Marcus, under the leadership of CEO Geoffroy van Raemdonck, has strategically shifted its focus to exclusively target millionaire shoppers who annually spend upwards of $27,000 at the store. This move is grounded in a profound understanding that the top 2% of customers contribute a substantial 40% to the store's total sales.

1. Market Positioning and Target Audience: Neiman Marcus has chosen to abandon the concept of aspirational luxury, opting instead to concentrate on high-net-worth individuals who are willing to invest significantly in luxury goods. This strategic decision reflects a nuanced understanding of the luxury market dynamics and the distinctive preferences of their target audience.

2. Customer Relationship and Retention: The CEO emphasizes the importance of building strong customer relationships by getting to know their top clients better. Neiman Marcus achieved an impressive 90% retention rate among its top customers during the 2022 fiscal year. This underscores the significance of cultivating lasting connections with the ultra-wealthy clientele, ensuring loyalty and sustained patronage.

3. Economic Value and Churn Avoidance: The CEO highlights the economic value of this refined approach, emphasizing the avoidance of churn. By catering exclusively to a discerning clientele, Neiman Marcus aims to reduce the risk of losing customers, where price considerations become secondary.

4. Customer Demographics and Spending Patterns: Neiman Marcus's clientele is highly affluent, with the top 2% driving a substantial 40% of total sales. About 80% of these high-value customers are worth at least $1 million. The CEO expresses confidence in targeting this specific segment, citing the relatively large number of high-net-worth individuals in the $5 million to $10 million range.

5. Store Closure and Strategic Pivot: Neiman Marcus made a strategic pivot after facing financial challenges, including filing for Chapter 11 bankruptcy in the early months of the pandemic. The company emerged from bankruptcy in September 2020 with a new strategy that involved closing its outlet chain, Neiman Marcus Last Call, and refocusing solely on catering to the wealthiest shoppers.

6. Luxury as Uniqueness and Emotion: Neiman Marcus defines luxury as being about uniqueness and emotion. This philosophy underscores the brand's commitment to offering exclusive and emotionally resonant experiences to its elite clientele, aligning with their refined tastes and preferences.

In conclusion, Neiman Marcus's strategic shift to exclusively target millionaire shoppers is a well-thought-out approach, combining an in-depth understanding of the luxury market, a focus on customer relationships, and a commitment to providing a unique and emotional luxury shopping experience. This strategy positions the company to thrive even amid economic downturns, as affluent shoppers continue to invest in luxury goods.