For most of its history, Neiman Marcus has focused on the 100,000 customers who spend the most (i.e., today, more than $12,000 per year) in its stores, because these buyers account for half of its sales. But the other half is growing, and so the retailer is increasingly turning its attention to younger, less affluent customers.

This shift in attention is evident in several trends. For example, salesperson training now includes the suggestion to show customers less expensive options, not just upsell them. The chain also plans to open more Last Call clearance centers than regular department stores in 2011. Overall, it is pursuing a lower average price point by adding less expensive brands to its racks. In so doing, it can rely on designers, many of which already have introduced less expensive lines, such as Z Zegna for Ermenegildo Zegna or Z Spoke for Zac Posen.

These changes may seem remarkable for a firm so firmly connected to luxury images. During the years between 2003 and 2007, Neiman’s revenues were astounding, reaching $650 in sales per square foot. The growth came mainly from price increases, especially in the shoe and handbag categories, and the company announced that it hoped to encourage at least five customers to spend $1 billion per year at Neiman Marcus stores.

This goal seems like a pipe dream today, in an era in which even shoppers who still purchase luxury brands simply are not buying as much. Accordingly, the retailer must increase the number of new and different customer in its stores. At the same time, the service-oriented Neiman Marcus cut its staff by 20 percent, as sales declined more than 30 percent during the recent economic crisis. It still has not regained its pre-recession revenue levels.

Discussion Question: Conduct a SWOT analysis of Neiman Marcus’s current positioning.

Rachel Dodes, “Neiman Marcus Opens Customer Door Wider,” The Wall Street Journal, February 15, 2011.