Neiman Marcus Puts Digital Transformation at the Center of Its Bankruptcy Emergence Plan

Key Insights Neiman Marcus is leaning into the importance of customer relationships in luxury retail. The retailer hasn't been dormant during Covid-19, rolling out new ways to drive sales and keep associates employed. Neiman Marcus is preparing to emerge from bankruptcy by the end of September after receiving court approval for its reorganization plan last Friday, which reduces debt and adds liquidity to its balance sheet. The restructuring follows a Chapter 11 filing in early May and is key to the luxury retailer’s turnaround, providing it with both the time and resources to complete a digital transformation strategy underway before the pandemic. Center stage of that plan, which will be implemented beginning this fall, is a new digital marketing campaign titled "Neiman’s State of Mind," which will replace its print magazine The Book, at least for the near future. Opting for digital versus print made sense during a time when consumers are engaging more with online content, according to Lana Todorovich, the company’s president and chief merchandising officer. The aim of the campaign is to deepen Neiman Marcus’ personal relationships with customers by “leaning into” the changes wrought by Covid-19. “For us, luxury has been about the personal relationship, and we see that in how our customers are loyal to us,” Todorovich said. "Neiman’s State of Mind" will also serve as the retailer’s digital hub for its ecommerce efforts and as the “umbrella” for its messaging, according to Todorovich. The idea is to tell a cohesive story about life at home during Covid-19. That story will be unveiled in chapters, giving customers a reason to continually return to the website and engage. “Luxury is not just about doing and owning the best, but it’s [also] about feeling connected and being understood,” Todorovich said. Chapter 1, for example, is about "The New Normal," alongside a story around key pieces for fall, with forthcoming chapters on beauty and the "finer things in life." Images of customers sequestered at home populate the messaging. One shot features a young woman wearing a velvet jacket and pants by designer label Akris while sitting on her kitchen counter eating takeaway Chinese food, surrounded by pizza boxes. The luxury retailer is replacing its print magazine The Book with a digital campaign for the fall. The fully integrated campaign, which was created in-house and is brand- and product-driven, will appear in multiple channels including paid media and in-store and online experiences. With that in mind, there is a focus on categories such as casual luxury and sustainable luxury, items such as loungewear for relaxing at home and beauty products for “camera” time, whether with loved ones or for work. Like other retailers, Neiman Marcus is also seeing a significant increase in its sales of home furnishings as well as items such as sneakers, of which it sold 35,000 pairs in one month to men alone, trends that the retailer recalibrated for in its merchandise assortment, Todorovich noted. The campaign is just the latest of Neiman Marcus’ efforts to begin the transition to life post-Covid-19 and post-bankruptcy. Earlier this year, the luxury purveyor rolled out Neiman Marcus Connect, a service that links up customers with its nearly 5,000 sales associates, which generated some 1.5 million interactions either via email, phone calls, video calls or text messages during the three months when physical stores were closed due to the pandemic. It also resulted in $60 million in sales in addition to the revenue from NeimanMarcus.com, according to Todorovich. The ultimate goal is to provide a high level of customer service, no matter how customers shop, she said, encompassing personalized services such as appointments either in the store or online as well as matching customers with a style adviser or "soulmate" via Stylist Match, who will be on hand either in the store, online or via FaceTime. There is also the Neiman Marcus app, which offers tools such as the Memory Mirror that lets customers record and review try-ons. Stores, as well, will continue to play an important role, Todorovich said, as Neiman customers visit physical locations an average of 46 times per year (they also shop online 110 times). As a result, Neiman Marcus sees both its digital operations and its stores as part of a larger ecosystem. So far, the retailer has held on to a vast majority of its namesake stores, though six locations are earmarked for likely closure. As of Sept. 8, it operates 43 Neiman Marcus locations, two Bergdorf Goodman stores and five Last Call locations. Before the pandemic, the retailer said it would close a majority of the off-price banner’s stores, which turned out to be 17, a number finalized after its bankruptcy filing. The Chapter 11 reorganization will help reduce more than $4 billion in debt along with eliminating around $200 million in annual interest payments. The primary equity holders will be Pacific Investment Management Company, Davidson Kempner Capital Management and Sixth Street Partners, which became independent of its parent private equity firm TPG in May. In addition, those key institutional investors will provide $750 million in exit financing that will refinance the debtor-in-possession loan put in place near the beginning of the process, as well as provide additional capital. A group of commercial banks led by Bank of America will also provide Neiman Marcus with a $900 million asset-based loan, providing additional liquidity to fund operations and the reorganization.