Despite surviving both the Great Depression and the Great Recession, not even enduring luxury retail giant Nieman Marcus could escape COVID-19’s interruption of indoor shopping. When Neiman Marcus emerged from bankruptcy after a tumultuous 2020, the company smartly pivoted towards a new plan for targeting consumers.
The 115-year-old luxury retailer would laser-focus on their most profitable market: millionaires. No longer would the company sell products for the entire price spectrum, but instead, it would only be concerned with those who spent $27,000 or more annually at their stores.
For Nieman Marcus, targeting the top 2% of their customers who contribute around 40% of their sales was enough to turn the tables. After this bold decision, Nieman Marcus saw a 90% retention rate for those affluent customers in 2022, which the CEO attributes to more intimately understanding customers and focusing less on pricing.
But is that hyper-focus on millionaires really the full story behind Nieman Marcus’s success?
Nieman Marcus could capitalize on a customer segment less disturbed by economic downturns, but not all brands are luxury brands. Yet, those non-luxury brands – such as Walmart and Target – have rallied without excluding their less affluent customers. If you can afford to hyper-focus on your most profitable segment to improve your understanding of their needs and desires, then that’s an excellent plan for personalizing your marketing efforts and ramping up retention. The other side of that success story is that current market research shows affluent customers prefer online shopping even more than the average customer does: surveys showed 63% of affluent customers preferred online shopping compared to 56% of all other customers.
The downfall of brick-and-mortar department stores during the pandemic had much more to do with stores lacking an impressive user-friendly online shopping experience among other no-contact conveniences for their customers than it did with customer segmentation. A combination of lockdowns, persisting fear of crowds and public places, and an overall trend towards digital-first preferences all led to where retail now stands. At the same time, consumers desire more control throughout their buyer journey, so customer-centric experiences that allow most of the research, shopping, and buying to occur online almost always prevail.
Most department stores have now learned their lesson and implemented a digital platform for shopping. Neiman Marcus has online shopping, too. Even further, online ordering for conveniences like curbside pickup and delivery have thrust department stores like JOANN back into the spotlight.
The nature of ever-evolving consumer demands and digital innovation promises more to come for retail. We imagine the future looks like a hybrid retail landscape with seamless order management, virtual reality showrooms, AI scanning and virtual imaging, virtual styling, exciting customer loyalty programs, and so much more. It also means not just collecting data but analyzing it for business intelligence to strengthen relationships with your customers.
To launch your customer experience into the future, tap into Perficient’s expertise surrounding digital solutions for retail.