Digitization of Luxury with Neiman Marcus Group CEO

In this episode of TD Cowen’s Retail Visionaries Podcast Series, Geoffroy van Raemdonck, CEO of Neiman Marcus Group, joins Cowen’s Retailing Broadlines and Department Stores Analyst Oliver Chen. They discuss how Neiman Marcus integrates digital touch points throughout the shopping experience. A business transformation that helps them engage with the younger luxury consumer.

We also release this episode in conjunction with Pride month. To help bring increased awareness to diversity and inclusion strategies among CEOs. Press play to listen to the podcast.

Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas, shaping the world around us. Join us. As we converse with the top minds who are influencing our global sectors.

Oliver Chen:

The finest and most unique merchandise the world has to offer. You can find it at Neiman Marcus. This is Oliver Chen I’m Cowen’s managing director in senior equity research analyst, covering retail, new platforms and luxury goods. And in honor of Pride month, we’ll be talking to Geoffroy van Raemdonck, the CEO of Neiman Marcus Group, about the Neiman Marcus business transformation and the company’s dedication to diversity and inclusion.

Oliver Chen:

Neiman Marcus has been serving customers since 1907. It’s in the midst of revolutionizing luxury experiences. It’s one of the largest multi-brand retailers in the US, with brands including Bergdorf Goodman, Last Call and Horchow. Neiman Marcus delivers a luxury experience across three channels; in store, e-commerce and remote selling, and has 37 Neiman Marcus stores in the US and two Bergdorf Goodman stores in Manhattan. The company is innovating heavily in the online digital experience.

Oliver Chen:

Geoffroy van Raemdonck has been CEO since 2018. His focus since joining the Dallas based luxury retailer has been to reinvent the customer experience, invest in the online platform and digital. He brings years of experience within the luxury sector. Having worked as president of Louis Vuitton, Southern Europe division, leading St. Johns’ as chief executive and serving as group president of Europe for Ralph Lauren. Geoffroy, thanks for joining us today.

Geoffroy van Raemdonck:

Hi, Oliver. It’s a pleasure to be here with you.

Oliver Chen:

Neiman Marcus is a storied brand known for being at the pinnacle of luxury. At the same time, retail has undergone rapid transformation. What should we know about Neiman Marcus today and your key goals?

Geoffroy van Raemdonck:

That’s a great question, Oliver, because I do you believe there’s a transformation that is happening in the industry, in how brands are creating and how customers are engaging and consuming luxury. And first, what we’ve set out to do at Neiman Marcus Group for both our NM and VG brands, is to revolutionize luxury experiences. We believe the customer is expecting something different and we are providing a unique and differentiated offer. It’s very much focused around a couple of things. Our business is targeted around luxury. And you mentioned, we are really at the pinnacle of luxury. We focus on the luxury customer and the customer who has the ability to come and repeat their purchase, which means that it’s not a transaction business. It’s really about styling and a relationship business. And obviously we had that relationship with a customer, but also with the brands.

Geoffroy van Raemdonck:

And in there, what everyone should know is that we have three differentiating elements of our value proposition. First, we believe in curating the assortment, which is a wholesale based model supplemented by different alternative to that model. But most importantly, we curate the brands that you see and the assortment that you see so that we can provide what’s right for you as a customer. The second thing is we fundamentally believe in integrated retail. Some people talk about omnichannel connected retail. We believe it’s about integrating the channels, which the pure place cannot do, because they don’t have physical present at scales. And [inaudible 00:03:42] by separating is creating friction, or disincentive for having that integration. And then the brands are aiming to create integrated retail, but they still have a very, very small digital footprint. For us, more than 30% of our sales are digital. And we are the largest e-commerce platform in the US.

Geoffroy van Raemdonck:

And then the third element is really that luxury is a considered purchase. And at the end of the day, sales associates giving you advice, really help you build the best wardrobe. And we have 3000 sales associates who engage with our customers in stores and remotely. And so what we believe is that, that business model drive profitable and sustainable growth, because it’s differentiated the economy of that business model make a difference. Today, you mentioned it, we are in a very different position than in the past. We have a balance sheet that is very clean. We have more than a billion dollar of available liquidity. And we’ll talk more about this today. We are investing in the long term, we’ve set out 600 million of investment over the next three years to support our stores, or connected technologies in our supply chain.

Oliver Chen:

Geoffroy, you mentioned curation, what would you say sets Neiman Marcus apart from competitors from this angle?

Geoffroy van Raemdonck:

So it’s really the composition of our brands. When you look at our top 20 brands, they’re growing at disproportionate rate, we haven’t reported the spring quarters, but they grew at 60 plus percent in the holiday season. And we really play with the true luxury brands. Many of whom are exclusive to us be Tom Ford, be Goyard, or be it Van Cleef & Arpels. And then for a lot of, and the majority of our brands, we are the biggest brand partner or retailer, which means that they do unique things for us, which can be unique launches, unique assortment, unique activation.

Geoffroy van Raemdonck:

We are actually kicking up this week, a unique collection that is activated in two of our stores in digitally with Prada, which is something that they’ve not done with anyone else in the world regarding that activation. And so what’s unique, I think is really we partner with the brands, because they know we have access to a true luxury customer, to provide collections that are not available or presented the same way. And that’s the curation, which is different from giving access to the base inventory. This is giving access to things that customers cannot find somewhere else.

Oliver Chen:

Yeah. That’s so important to have money can buy experiences. Geoffroy, you have a really powerful footprint of stores with great relationships. So what does experiential retail mean to you? How are you approaching your footprint and investing in the connected store experience?

Geoffroy van Raemdonck:

You mentioned it, we have a very strong footprint. We have 37 Neiman Marcus stores that are located in the geographies where the high net worth individual live. And they’re in the best mall of America. I would say 30 plus of them are leading in their market by a big stretch. And we have two Bergdorf stores that are in this iconic location of the corner of 57 and fifth avenue. And then we have the largest e-commerce platform in the US. So what we’ve done is really invest in the stores and we’ve committed to invest 300 million between this year and the next two years in our stores, as well as investing in our supply chain, another 120 million and another 200 million in connected technologies. When it come to stores, it’s really about how does the experience in stores make you feel you have an immersive experience. That’s at Neiman Marcus, what we’ve invested in and are investing in welcome points.

Geoffroy van Raemdonck:

So it’s when you arrive to the store, there’s a place where people welcome you, assist, guide you on where you want to go, or assist you in any of new channel transactions, or any services you are looking for, such as alterations. The second thing is really pushing services. Services can be beauty services. They can be alteration. They can be supporting circular economy with our partnership with Fashionphile.

Geoffroy van Raemdonck:

It can be also the restaurants we have and we have 50 restaurants or cafes or bars. And what we know is that, customers who engage in services are coming back three times more often than those who don’t. And every time they come, they spend 13% more. And so it’s really creating a world where you have the product, but you have experiences around it. And then it’s all the curation of personalized experiences, which is small activations in the stores, events that launch new products, or personal experience in the fitting room that can be physical or virtual. And I think that ultimately, what I’m talking about is [inaudible 00:08:45] experience that leads you to buy a product, but along the way makes you discover and enjoy the moment you had, while in all four walls.

Oliver Chen:

Motions are so important and also having a great service experience is the future of retail. Geoffroy, One of the big themes we have here at Cowen is bricks plus clicks plus even portals and Metaverse. What about digital and investing in partnering with Farfetch, what’s happening to Neiman Marcus group digitally?

Geoffroy van Raemdonck:

So digitally, as I mentioned, we started early on in 1999, and that led us to have a business that is on its way to 1,500,000,000 as a group of online eCommerce sales. And that is a business that accounts for 30 plus percent of our group sales, where when we look at what’s next for us, we realize that there is the ability to go globally, digitally. And to ultimately the goal we have is to take a Bergdorf Goodman brand that has unprecedented awareness globally and expanded as fast as we can to other geographies. The partnership with Farfetch is really a partnership around Farfetch platform solutions, which is using their technology solution to power the bg.com experience. It’s invisible to the customer. They shop on bergdorf.com, but it’s powered by this technology that they have that is and supported by all the service they can offer.

Geoffroy van Raemdonck:

And so as we look to go international, they can provide turnkey solution that provides you with taking payment in local currency, translating the site in a different language, having a call center in a different language, that allows you to quickly be at scale at a much lower cost, because you are using that technology and you don’t use your own CapEx to get there. And at a much faster rate, because as I mentioned, it’s turnkey. And so really excited about the partnership and excited also that through this partnership conversation, they realize the power of Neiman Marcus Group and decided to invest 200 million as a minority shareholder in our common equity.

Oliver Chen:

Congrats on that deal, Geoffroy. Geoffroy, another question we have is about the younger luxury consumer. As I walk Bergdorf stratification, digitization, sustainability, these are all key topics in the minds of younger consumers. How is Neiman Marcus Group positioned here? What are your thoughts on the younger luxury consumer?

Geoffroy van Raemdonck:

Well, luxury is something that every generation buys and historically it was correlated with age. What we realized is that the power of purchasing and the interest of luxury has really expanded with the younger generations. And so we very focused on first providing the right fashion, because frankly fashion is not drastically different across the spectrum.

Geoffroy van Raemdonck:

When you have the right brands being established brands or emerging brands, you attract every generation, including the younger generation. And so we’ve expanded our distribution with the top luxury brands. And I would say the big groups and largest brands by 500 points of sales over the last 12 months, which is significantly beefing up the luxury offering we offering in each of our locations and we’ve added last fall and this spring, each season, 130 new brands, the majority of them being exclusive to us and those are available in our stores and digitally.

Geoffroy van Raemdonck:

And so the first thing we’ve done is providing access and curation of the brands that are relevant today. The second thing is really being there in the way the customer wants to shop, and the younger generation look for multi points of interaction, and they don’t only rely on one source of truth being the sales associated.

Geoffroy van Raemdonck:

And so we’ve increased our activity on social media or representation of brands and content online, and then developed a proprietary clientele tool called Connect, where the sales associates sends looks and suggestions to customers digitally. And what we’re seeing is that the younger customers really enjoy the digital interaction, which then ultimately leads to a store experience. That has led to us attracting a younger customer. We do 60% of our sales with gen X, millennials and gen Z customers. And when you look at the customers who spend $10,000 or more a year with us, the ones we had and you compare the ones we had pre COVID and post COVID, the post COVID customers that we recruited are seven years younger than their 30s in average age, versus an average age in the low 40.

Geoffroy van Raemdonck:

And so that’s a significant proof of our ability to drive younger customers. What we believe have entered luxury during the pandemic, because they had different disposable income and they were influenced by digital communication. And we believe they’re going to stay there and be a massive force of growth for the industry

Oliver Chen:

Geoffroy, it’s also exciting to be here with you during Pride month to discuss topics around diversity and inclusion. It’s very important to us here at Cowen as a key theme, I’m also a gay analyst. So this is personally relevant. Last year during Pride, Neiman Marcus Group announced several initiatives to support inclusivity. Could you tell us about those and why it’s important to you?

Geoffroy van Raemdonck:

I would say it’s very important to me personally, as being one of the few openly gay CEOs. And so the commitment we have to the LGBTQ+ community is part of a broader commitment we have, which is, we are an inclusive place where we expect everyone to show up as their authentic selves, and we are supporting or associating that journey, because we believe that diversity of thoughts, the diversity of backgrounds is really critical from a social standpoint, but for also from the business standpoint.

Geoffroy van Raemdonck:

And so when it comes to the LGBTQ community, we’ve partnered with HRC and realized that there were a lot of places where we could make progress, progress in the policies we have, discrimination of sexual identity and sexual expression is not fairly supported and protected everywhere universally. And so we’ve put that in our code of conduct. We’ve improved the benefit of same sex couple and domestic partners to mirrors the one of married couple and we’ve provided support to the transgender community in all the healthcare benefits that support their needs.

Geoffroy van Raemdonck:

And that ultimately has led us to participate for the first time in the HRC Corporate Equality Index. And we had a perfect score of a 100 of a 100, making us one of the best place to work for LGBTQ+ community. And I think that’s really important, because commitment needs to be demonstrated by action and ultimately by results. And we can speak today about the LGBTQ+ community, because it’s Pride months, but we have similar initiatives around the woman representation in our organization, as well as racial and other diversity representation in the organization.

Oliver Chen:

Geoffroy, could you elaborate on that? What do you see ahead for diversity and inclusion within your workforce? And also as you think product assortments and creative, what are some aspects of the future? As customers think about gender fluidity, body positivity and other issues as well.

Geoffroy van Raemdonck:

So I think there’s a lot of stereotypes out there. And the thing that is important to me is to demonstrate internally and externally, that we are an inclusive community of work and playing in the community in an inclusive way. When you look at our organization, we are majority women, majority non-white, and we have a boardroom that is 57% led by women, 70% of our SVPs and above are woman.

Geoffroy van Raemdonck:

We are led by a CEO who’s openly gay and have representation on our leadership team of different ethnicities, different religions, sexual orientation as I mentioned, majority women. We’ve shown the world that you can have CFOs, chief supply chain officer who are woman, which is not the majority of people in those positions. And so I think it’s really about breaking the stereotypes, so that everyone can believe that they have a chance to grow and everyone can believe that their voice is heard.

Geoffroy van Raemdonck:

I do think it’s a journey and we are at the beginning of the journey. There’s a lot of actions that we need to continue to do. And I think for us, it’s very focused on recruiting, making sure we recruit a diverse state of candidates, which is the best predictive element of having a diverse slate of recruits. It’s having partnerships with the right organization.

Geoffroy van Raemdonck:

Prospanica, is one of them. And then it’s constantly providing mechanism for that diverse workforce to feel that it’s okay for them to show up as their authentic self. And that when we have diversity of thoughts of backgrounds in a conversation, it is actually something that strengthen us rather than divide us.

Geoffroy van Raemdonck:

When it comes to what you mentioned about gender fluidity, body acceptance and representation. We are very mindful when we look at shooting our assets, selecting brands, to make sure that we have diversity of representation and we have two sustainable edits, [inaudible 00:18:40], that basically identify the brands that have companies that are diverse in their workforce, that reinvest in their community, that are woman founded, or that support the environment and the sustainability of the fashion industry. And we believe that customers more and more will want to shop knowing that filter. And we allow customers to search filtering with that, as the first element, rather than fashion element.

Oliver Chen:

Geoffroy, allyship is also an important topic. There are many allies listening to this podcast as well. What are your main ideas there? What are your recommendations? And what’s on your mind, in terms of driving some of these themes and looking for great partners across all stakeholders?

Geoffroy van Raemdonck:

I agree with you. Allyship is really important as an organization. It is also very important as an individual and I’ll touch on both. I look at my own journey. When I started my career in consulting, and then later on in fashion, I didn’t see openly gay CEOs at the top. I didn’t see role models. And what I realized is that by coming out and by being openly gay, I allow people to basically become my ally, to understand me, to support me and I put out there the desire to be embraced. And I also create a role model for others, either part of the LGBTQ community, or those who can become allies to recognize that we all are stronger together. I think the allyship is really a two way street, it’s for us to find allies that can support our causes and we are stronger together.

Geoffroy van Raemdonck:

It’s for us to invite people to ask questions, so that they can understand us, so that they can support us. And then it’s for those who want to understand another community to not be afraid to jump in. I think it’s really difficult when you look at the Mother’s Day and the Father’s Day, that span across me and in June, if you are same sex couple family, these are every same sex couple family deals with those differently.

Geoffroy van Raemdonck:

I so much appreciate friends who ask us, how do you celebrate Father’s Day Mother’s Day? Who call us and congratulate on those two special parent days. And I actually think that the more we are all out there, showing our authentic selves and by asking questions or inviting questions, the stronger we can collaborate. And then at the corporate level, what we found is partnership with other organization makes it much stronger.

Geoffroy van Raemdonck:

We are part of 50 organization in Texas that wrote a letter to the governor of Texas, to ask him to stop writing anti-discrimination bills against the gay community. And I think the power of 50 corporations that employ people in Texas and serve the Texan population makes it much, much stronger. So I agree with you, allyship is really at the core of how we can make things advanced for our communities.

Oliver Chen:

Yeah. That’s a lot of great themes there. If you can see me, you can be me, being your authentic self and thinking about purpose. Geoffroy, you’ve had some great comments on authenticity and being yourself. What’s really important there, and how might you link this to business performance? And Geoffroy, would love to hear about your background in coming to Neiman Marcus Group. You have a lot of really in depth experience with brands and now you’re at a retailer.

Geoffroy van Raemdonck:

So the first part of being your authentic self, I think life is too short to play the role of someone else and to play the role of who you’re not. And if you are playing a role that is not the right one for you, you cannot be at your best. And so fundamentally I believe that when you show your authentic self and you have nothing to hide, all your energy goes into being at your best, and that is directly linked to your performance. If you’re hiding, then you’re spending a lot of energy behind that and you prevent people to break through and connect with you. And at the end of the day, people want to be led. They want to do business. They want to trust someone who’s authentic and they can connect to, not someone who has a veil or some smoke and mirrors in front of them.

Geoffroy van Raemdonck:

And so it is very freeing to be yourself. And I think it’s the main unlock to be at your best and at your full potential. It is not an easy journey. It’s filled with fears. It’s filled with conviction and forever, I’ll be grateful for people who stood up in front of me, because there were moments where I didn’t feel accepted.

Geoffroy van Raemdonck:

There were moments where I felt that I didn’t have the same chances, but there were also moments where people eager either lend me a hand, or basically gave me the confidence to continue, and to just persevere. I think diversity comes also in your experience and you talk about having spent a lot of time in brands and not being in a multi-brand retailer. And I think fundamentally what I learned from working with brands is, what’s at the heart of what they’re trying to do, which is build, develop and protect a beautiful brand and bring it to customers.

Geoffroy van Raemdonck:

There’s a creative genius behind it. There’s a brand

[inaudible 00:24:11]

behind it, but is also a challenge to access the customer and to know the customer. We at Neiman Marcus, we at Bergdorf Goodman, we know the customer, we have relationship with them. We do 40% of our business with customers who spend $10,000 and more.

Geoffroy van Raemdonck:

And so the diversity of experience allows me to explain what we can bring to the brands. And some people talk about competition. There is no competition. We coexist when the brand has a store in a mall and we have a present and they have a presence with us, because some of the parts is bigger. And I think the unlock and the success we have with the brands right now, being their preferred brand partner and multi-brand retailer, is because it’s about a partnership. It’s not about commerce. It’s about how do we bring the beauty of their brand to the best customers. And I think it takes a lot to understand what it could feel to be on the other side of the table. And the more we are able to have that empathy, I think the better we can be.

Oliver Chen:

Geoffroy, that was really helpful. Last question, would love to hear about the most exciting challenges you have ahead, with respect to business strategy and diversity and inclusion, and any closing remarks you may have as well.

Geoffroy van Raemdonck:

The biggest opportunity we have, which comes with a lot of challenges in itself is, we’ve built a team that is fundamentally diverse, diverse in backgrounds and diverse in thought. We have people coming from

[inaudible 00:25:44]

companies and we have a culture and a strategy that unites us. But how it all comes together in flawless execution, that is really our biggest opportunity and our biggest challenge. And a lot of our time internally is spent on the culture, and how do we have people practice working together? How do we have people listen to other ideas and embrace and amplify them? And if I look at my time as a CEO, with the team we set out a strategy, but most of my energy is in bringing people together towards daily execution. And it’s all built in trust. I trust you do your part.

Geoffroy van Raemdonck:

I’ll trust, I’ll do my part. And together, the movie comes together in the execution. And in retail, we are judged in every single experience and every single one of them needs to be flawless. And so that is really a human element is believing in diversity, I think unlocks enormous potential, but it does take time and effort to bring people together, when they start from different angle.

Geoffroy van Raemdonck:

And I would say as closing remarks, I am really excited about the business we have right now, reported high single digit comm growth compared to ’19 in the fallen holiday. And that was on inventory that was double digit down. We now have inventory that is up to pre COVID and have seen accelerated growth and accelerated performance in the spring. And I think it really stems from the fact that we have a strategy that is focused on the luxury customers and the partnership with the best luxury brands and that we are uniting ourselves.

Geoffroy van Raemdonck:

And ultimately, I think we’re in the world of emotions. I think customers feel the emotion and have a relationship with us, because it’s an authentic relationship. And that links back to, we can only have an authentic relationship with our customers, if we allow everyone to bring their authentic self. And every moment that I spend with the focus on belonging, with the focus on being a better organization and leading with love, is a 100% correlated with driving performance. And that’s a strong belief that it’s not an or, it’s an and. You can lead with love and drive [inaudible 00:28:07] performance.

Oliver Chen:

Well, Geoffroy, congratulations on the Momentum Magic and Logic. That’s the class I also teach at Columbia. It’s very evident at Neiman Marcus. These ideas around collaboration, your competitive advantages, including curation, the connected stores and community and breakthrough and authentic connections. It was great spending time with you. Thank you.

Geoffroy van Raemdonck:

Thank you, Oliver.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

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