NM’s partnership with ‘cheap-chic’ retailer Target risks confusing customers and diluting its luxury brand positioning   

Retailing news has been filled with the story of how luxury retailer Neiman Marcus has decided to shake up its merchandise offerings and its reach through a perhaps-unexpected partnership.  This partnership, with “cheap chic” retailer Target, will feature a limited-time selection of designer fashion offered in both stores, with co-branded labels featuring both Neiman Marcus and Target. 

Coinciding with the Neiman Marcus/Target announcement came news from Nordstrom that it was partnering with London-based Topshop to offer some of its affordable, trendy styles in Topshop-branded boutiques.  The two examples are in contrast to one another for effectiveness and protection of the value of a luxury brand. 

Get Inspired>> Learn why Neiman Marcus may be making a needless misstep by partnering with Target

On one hand, I applaud Neiman Marcus for trying to shake up consumer expectations of the traditional upscale department store, inviting younger, hipper consumers to experience their brand and product offerings. While Neiman Marcus has always been an attractive retail destination for ultra-affluents, our research consistently shows that HENRYs (who earn $100K-$250K), are the heavy-lifters of the economy, and these are the consumers most likely to have changed their consumption patterns as a result of the recession. By reaching out to this segment of the population, particularly the younger affluents who are likely to be more comfortable in Target than Neiman Marcus, the upscale retailer is showing an interest in reaching a new demographic and extending the longevity of its own brand.

However, I am concerned that this move may ultimately wind up damaging Neiman Marcus’ luxury brand beyond repair. What the retailer seems to have forgotten is that luxury is about more than just price or product line. The luxury of Neiman Marcus comes from the entire shopping experience as created by the store environment in addition to the product selection and quality. By exporing its designer brands to Target while importing Target-quality product to its stores, Neiman Marcus is effectively erasing its luxury edge and democratizing the ‘class’ NM luxury brand with the masses represented by Target.

The move may also be damaging to the designers involved, such as Diane Von Furstenberg, Derek Lam, Rodarte, and Tory Burch. While many designers have successfully bridged the gap between luxury fashion and discount retail, customers have a clear understanding that the quality of designer goods at ‘cheap chic’ retailers like H&M don’t come close to that found at their premier retailers, like Saks Fifth Avenue, Barney’s, or Neiman Marcus. But this partnership, where Target-quality designer goods are sold at upscale Neiman Marcus, will seriously confuse the customer. If the quality difference between Target and NM is obscured, why bother paying a premium for the NM designer brands?

Finally, the Neiman Marcus partnership with a “cheap chic” retailer sends an unfortunate message to Neiman Marcus’s current and potential customers. Although everyone loves a bargain, even the affluent, Neiman Marcus’s work with this retailer known for discount prices communicates the idea that Neiman Marcus’s product selection has always been over-priced, and that perhaps they have earned their derogatory nickname “Needless Markup.” 

Of course, this NM/Target partnership could be a trial balloon for a partnership that would extend far beyond a limited range of jointly branded items.  Time will tell on that possibility, so keep your ears to the ground…

Take Action>> Create partnerships based upon shared brand values so that partner brands complement, not compete 

In contrast to the potentially destructive Neiman Marcus/Target pairing is Nordstrom/Topshop.  Nordstrom is inviting London-based Topshop to inject some of its edgy style into their department stores via boutique shops that carry the Topshop look and feel. 

I like this partnership because there is little chance of diluting the Nordstrom brand.  I predict it will be win/win for both partners.  Nordstrom is bringing something new and different to their U.S. customers, rather than borrowing low-end products off a discount retailers’ shelves as NM is doing with Target.  Nordstrom also maintains control of the in-store experience.

This partnership will work for Nordstrom because it is teaming with a brand largely unknown to U.S. consumers and one that has a strong and unique offering:  an edgy London fashion vibe which is especially hot now because everyone’s eyes are on London thanks to the recent Queen’s Jubilee celebration and the upcoming Olympics – not to mention it is the home of the world’s latest fashion darling, Princess Kate.  U.S. shoppers will look only to Nordstrom for Topshop style rather than changing their retail destination. 

Retailers must learn to balance their desire to reach shoppers with interesting partnerships and great bargains with their long-term need to control their brand experience.  If you find yourself struggling with these questions, I invite you to do the following:

• Learn the Basics:  My latest book, Putting the Luxe Back in Luxury (Paramount Market Publishing, 2011), discusses in-depth how consumer values are redefining the way we market luxury.  It gives a great overview of the theory and data behind the most effective luxury marketing.  For example on the effect of discounting on a luxury brand, I write,” “Discounting isn’t necessarily putting a nail in a luxury brand’s coffin, but it can create the perception that the brand isn’t worth the full asking price.”
• Find Out Where You Stand:  To go further in-depth, participate in Unity Marketing’s Luxury Brand Tracker.  This service will allow you to see how your luxury brand stacks up against competitors and potential partners so you can devise a truly competitive marketing strategy or build a brand partnership that complements rather than competes.

• Let Me Help:  To create a custom marketing strategy for your luxury brand, contact me at (717) 336-1600 or email pam@unitymarketingonline.com.

This entry was posted on Tuesday, July 17th, 2012 at 5:34 am and is filed under Retail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.