Jim Gold has a sweater he’s worn a hundred times, and it still looks new.
It’s a classic V-neck with a ribbed hem and cuffs.
Most guys’ wardrobes include a couple of these pullovers, usually one in navy or gray. It’s a piece that gets a lot of wear over the fall and winter. After a year or two, the pilings get bad enough that a wife, mother or close friend replaces it with a new one in a gift-wrapped box at Christmas.
Gold, who is stores division president of Dallas-based Neiman Marcus Group, says his sweater is at least 8 years old and doesn’t need replacing. The sweater is cashmere, a Brunello Cucinelli, that’s made in Italy and retails at Neiman Marcus for $645.
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Plenty of cashmere sweaters can be bought elsewhere for $99 or less, he said, but after you wear one four or five times, it will start to look shabby.
Gold is building a case for luxury, a term he says is batted around too loosely these days.
“Too many companies and brands claim to be in the luxury business,” he said. “They aren’t following the strict definition.”
At Neiman Marcus, the litmus test is quality, scarcity and longevity — a product that can stand the test of time, Gold said. “That’s our core business.”
“An important part of what we do every day is to educate people about our products. Neiman Marcus merchandise doesn’t cost more because we unilaterally decide to charge more,” he said. “Quantities are in smaller numbers because there’s more craftsmanship and a whole lot of talent behind creating things.”
The core Neiman Marcus customer already knows that.
But a broader base of customers is evolving, and some shoppers are a harder sell, said Pam Danziger, president of Unity Marketing, a Pennsylvania-based research firm that focuses on the affluent shopper.
“I would disagree with that value proposition. I don’t think the consumer is buying that story,” Danziger said. “You can still buy a cashmere V-neck sweater that’s just as good at $300, and there are more premium brands out there now, like a J.Crew, that are fine quality and last a long time.”
Danziger believes there’s been a shift in the makeup of the luxury consumer market. Based on her ongoing tracking study of affluent Americans, households with income levels of $100,000 to $249,999 — known as the Henrys, for high earners, not rich yet — aren’t playing as big a role in luxury spending as they did before the recession.
“They shop everywhere, and they view themselves as middle class. They shop at Nordstrom and Neiman Marcus, but they shop widely and they are the heavy lifters in the overall economy,” she said. “They also shop at J.C. Penney and Costco and Wal-Mart and Macy’s and the dollar stores, and on occasion they shop at Neiman Marcus.”
The Henry factor
The Henrys, an acronym coined by Fortune magazine writer Shawn Tully, are a key demographic for luxury retailers because future ultra-affluent customers usually start out as Henrys.
The top 2 percent of the ultra-affluent households, with incomes above $250,000, and the top 1 percent, with annual incomes of more than $380,000, don’t have huge buying power as a group because there aren’t as many of them, she said. There are about 2.9 million in those two categories, and 1.2 million are in the 1 percent.
The Henrys have big numbers, with about 21.6 million U.S. households.
In late 2010 and early 2011, Danziger predicted that the post-recession U.S. market could no longer support the large number of stores that resulted from the pre-recession boom in luxury.
This year and last year, Saks Fifth Avenue and Barneys New York closed multiple stores in Texas and throughout the U.S. Last summer, even Neiman Marcus closed a full-line store, its only one in Minneapolis.
Another post-recession year is coming to an end.
With just weeks left in the holiday shopping season, Americans, on average, now estimate they will spend $740 on Christmas gifts, according to a poll from Gallup on Thursday. That is in between consumers’ more positive October estimate of $786 and their less positive November estimate of $704.
The December estimate puts the season’s increase in the range of 2.3 percent to 2.7 percent, below the industry’s estimate from the National Retail Federation of a 3.9 percent increase.
That means that as a whole, Americans are operating with more of a recessionary mind-set than one inspired by the soaring stock market or recent reports of improved economic growth, Gallup said.
Research and consulting firm Bain & Co. estimates that the U.S. luxury personal goods market, which doesn’t include cars, boats and travel, will grow 7 percent this year to $95 billion. Bain also forecast that worldwide holiday sales of personal luxury goods will be up a modest 2 percent, but it didn’t break out the U.S.
Unity Marketing polled 1,208 affluent consumers with average household income of $267,100 in early October about expectations for future luxury spending over the next 12 months. Only 20 percent of those surveyed plan to spend more, down from 31 percent a year ago, Danziger said.
Also at Neiman’s …
While Neiman Marcus continues to cater to the wealthiest consumers, Gold said there are plenty of ways that people with lower incomes can experience the store, by buying a $25 lipstick or a $200 pair of jeans that really fit.
“It’s like driving a Porsche. Once you do, you don’t want to drive a Volkswagen,” Gold said.
Steven Dennis, founder of SageBerry Consulting and a former Neiman Marcus senior vice president, said there’s more complexity to the luxury consumer than retailers like to talk about.
“If you grew up in a middle-class family, you went to someplace like Macy’s for your nice stuff, then you’re working for a hedge fund or you become a doctor and you can step up,” Dennis said. “It’s not obvious to you right away why you should spend $4,000 for a nice suit.”
Gold says Neiman Marcus will continue to cater to the highest-end customer in the world. But for most who aren’t in that group but have the good fortune to come into some money, say with a new job starting out that pays $75,000, there are still plenty of ways to experience Neiman Marcus, he said, “if we’re doing our job right.”
Date: 14 December 2013
