Neiman Marcus and a decade of (mostly) misses
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Neiman Marcus filed for bankruptcy this week. The bankruptcy was the direct result of two leveraged buy-outs and a failure to grow new stores, customer counts, or per customer spend. The company had a debt load of $5 billion, a sum that makes it challenging for any strategy to work. But opportunity costs are real, and Neiman Marcus spent the past decade on strategic initiatives that didn’t yield the results it needed.
First, they embraced partnerships, even after the model showed marginal benefits at best. Their splashy Target x Neiman Marcus collaboration was widely deemed a flop, failing to produce the store stampedes or product sell-outs of previous match-ups. From that point forward, Neiman Marcus’s embrace of partnerships were viewed as a desperate effort to appeal to younger shoppers. “Can Rent the Runway Shop-in-Shops Keep Neiman Marcus Relevant?” Ouch.
They said yes to partnerships that made little sense, like their tie-ups with luxury resale platforms, including The RealReal and Fashionphile. They tested the sale of vintage watches. The benefit to the resell sites was clear: they gained brand legitimacy and name recognition with Neiman Marcus customers. The benefit to Neiman Marcus was less evident. They sent out press releases announcing partnerships with phone charging start-ups, spilling company ink to advertise a third-party, rather than demanding such kiosks (possibly convenient?) be outfitted to match their in-store aesthetics. These partnership announcements were a Neiman Marcus feature throughout the 2010s, and they unfortunately made public the trial-and-error floundering of a former retail titan trying to find its way.
Then there was the off-price segment. At the start of the last decade, Neiman Marcus waded further into the bargain waters by expanding its network of Last Call stores, matching moves by Saks Fifth Avenue (Off Fifth) and Nordstrom (Nordstrom Rack). But the product mix was never right, and brand dilution was an active part of Last Call’s merchandising strategy. There is a reason luxury giants like LVMH and Richmond refuse to play in the off-price waters: it’s really hard to get back on dry land. By 2017, Neiman Marcus was closing 25% in Last Call stores in an attempt to reassert itself as a luxury retailer.
Neiman Marcus was also dogged by a rosy outlook that prevented it from taking the steps that many outsiders saw as crucial. Its past was tied to the romance of the Texas oilman and his socialite wife. But the brand ignored other capitals of American fashion. Its retail absence from Manhattan was a constant source of head-scratching among many fashion industry insiders. Saks Fifth Avenue opened a boutique in Neiman’s backyard in 1997. It would take twenty years for Neiman Marcus to return fire. “Neiman Marcus Finally Arrives in New York at Hudson Yards.” The new store was lauded, its restaurant written up in the New Yorker. Maybe Neiman Marcus had spent so many decades hyping the brands whose couture gowns and luxury accessories it sold, that it forgot about its own brand. After all, it was on the Neiman Marcus name that those two private equity deals were signed. It’s sad, really, that just as the company was starting to turn the corner on a decade of missteps, it was undone by force majeure and a $5 billion debt load.
The company will likely emerge from the restructuring. It will be interesting to see what happens to its 43 doors, but we’re most curious as to the fate of its two crown jewels: Bergdorf Goodman and MyTheresa.
Word on the Street
Boeing’s need to conserve cash while weathering the dual crises of COVID-19 and its 737 MAX’s grounding leave it with few good options, and all of them wreck the firm’s long term strategic goals. (We talked about Boeing’s challenges a few weeks back.)
Tourism officials in rural states are pitching their wide open spaces as the perfect post-pandemic destination.
Alphabet is throwing in the town on its ambitious tech-focused neighborhood in Toronto, shifting gears to address “large scale infrastructure problems of the future.” Judging by the investment amount, this isn’t a critical Alphabet strategy so much as a fact-finding moonshot mission.
Internal organization is the secret sauce of good strategic execution, and reports that Google is uniting all of its communication apps into a single team could portend a massive value unlock in the future.
ProPublica has an investigative story about how Amazon penalizes sellers who don’t prioritize its channel, an issue that became apparent when its fulfillment business drastically increased its restock requests for certain items. It’s a pretty damning sign of monopolistic intent, but maybe that’s the point. The only Amazon strategy we’re interested in right now is how it handles the coming anti-trust fight.
In what is seen as a shot across the bow at Amazon’s e-commerce supremacy, Shopify launched a consumer shop app, Shop. Its a logical step for Shopify to build out a product ecosystem to keep its sellers in-house. Last year they launched an email platform to compete with the likes of MailChimp.
Strategies live and die by how their implemented, and the EU is taking steps to improve its cookie tracking consent policy.
The illustrated story of how a butcher eliminated the hassle of counter service with meat vending machines is a delightful diversion.
$AMC - AMC Entertainment Holdings, Inc.
If you would have told us that the Troll dolls of our youth would tear apart the motion picture industry one day, safe to say we would not have believed you. Despite the industry’s long tradition of separation between producers and distributors, extended lockdowns are tempting those that make movies to try new ways of distributing them.
The latest Trolls film became a flash point when its creator, Universal Pictures, released it direct to consumers as a digital rental. Latest figures have the film’s gross at more than $200 million, straight to the studio. Obviously, Universal is keen to try this model again.
Traditional distributors, however, are not amused. AMC Theaters CEO Adam Aron said that his chain would stop showing Universal features as a result of the action, claiming that it violates years of discussions about distributors’ right to exclusivity.
Exhibitors like AMC have seen declining attendance in recent years, blamed on everything from streaming to the studios’ own tent-pole strategy. But AMC is seen as especially vulnerable, with many observers seeing signs of an imminent bankruptcy restructuring. Whatever the future of movies holds, there may not be a place for the nation’s largest distributor for long.
Bookshelf
Anna Wiener’s Uncanny Valley feels like the perfect dissection of life inside the tech industry for this moment of societal reflection and recent past critique. Its literary style and refusal to name names (“the social network everyone hated”), imbues it with more heart than brain, which is not to say that it isn’t wryly intelligent. We especially appreciated its reference to Jeff Bezos as “a chelonian ex–hedge funder.”
She Said It Best
“I think that is a false dilemma, because you can do so many things with technology that are not invasive of your privacy. I think that, very often, when people say it’s only doable in one way, it’s because they want the data for their own purposes.”
— Margrethe Vestager, the European Union’s Commissioner for Competition, on the tension between privacy and public health.
That’s all for now.
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