September 10, 2004

Neiman Marcus vs. Saks Fifth Avenue

neiman_marcus_saks_fifth_avenue.gifIs a complacent Neiman Marcus about to be schooled by a newly aggressive competitor in Saks Fifth Avenue, as each firm competes for dominion of the $62 billion luxury market?

    Over the past decade, the Neiman Marcus Group has cornered the market on luxury goods, turning the business of selling expensive handbags, alligator pumps and Chanel suits into a fine art.

    Now, its closest rival, Saks Fifth Avenue, which for years had been sidelined by poor management, is trying to make a comeback, setting the stage for a Gucciesque battle that could rock the fashion world.

    The contest is poised to take on a uniquely personal twist, pitting two former colleagues Burton Tansky, the CEO of Neiman Marcus, and Fred Wilson, who holds the corresponding position at Saks against each other for command of the $62 billion luxury market.

    The two men once worked side-by-side, as buyers in the early 1970s for Rike's, a Dayton, Ohio, department store that is part of the Federated Department Store chain.

    The similarities end there.

    Tansky, who at 66 is considered an elder statesman of the industry, has earned his fashion stripes many times over, first as president of Saks, then as CEO of the Neiman-owned Bergdorf Goodman store, and, now, as chief executive of the group, which includes the namesake department stores, an online business and the Kate Spade and Laura Mercier brands.

    Known affectionately in the industry as a big teddy bear, Tansky has also drawn criticism from colleagues, who chastise him for a seeming complacency and old school ways, including a tendency to scold employees for spending too lavishly on lunch.

    To his credit, Tansky has taken Neiman ever more upscale, making it the place to shop for the very wealthy, even as other department stores courted the middle market in the 1990s.

    He is unapologetic about Neiman's exclusiveness, often remarking, "I like rich people."

    Wilson, by contrast, eight years Tansky's junior, is more like a bulldog, compact and coiled with energy. Employees said he willingly throws out old ideas, and spends amply to make a statement, including a planned $150 million renovation of the Fifth Avenue flagship to be designed by Frank Gehry.

    After toiling in relative obscurity for 19 years at DFS, the specialty retailing division of LVMH Moet Hennessy Louis Vuitton, Wilson only recently grabbed the attention of the fashion world when he was named CEO of Donna Karan International, another LVMH division, in 2002. He assumed his duties as CEO of Saks in January.

    "There's a competitive rivalry that goes back to the days of Rike's," said one executive who knows both men. "Here they are 35 years later going head-to-head. It could be a war zone out there."

    Tansky was unavailable to comment.

    Wilson would say only that he is too focused on his company to worry about the competition.

    Like good ambassadors, both Tansky and Wilson are scheduled to make selected appearances in the tents of Bryant Park for Fashion Week, helping to promote the image of their respective stores and confer with buyers.

    Saks has been criticized in the past for lacking a specific viewpoint, a problem Wilson and his team have begun to address, sources said.

    In a strategy that more closely mimics Neiman's approach, buyers now have the leeway to stock up on key looks, these people said. In the past, Saks buyers often acted more like accountants, using their spreadsheets rather than their instincts to make decisions.

    Some apparel manufacturers said they are noticing a difference.

    "I've seen a much more aggressive approach to the Saks Fifth Avenue buys," said Michelle Stein, senior vice president of sales and marketing for Aeffe USA, which sells clothes under the Moschino and Narciso Rodriguez names, among others.

    Buoyed by a resurgence in luxury goods, Saks reported a 17.2 percent increase in sales at stores open at least a year in the most recent quarter. Neiman reported a 10.2 percent jump for the comparable period.

    Still, observers like retail analyst Maggie Gilliam said the contest remains too close to call.

    One major disadvantage facing Saks, observers said, is a sales staff that has become increasingly less service oriented over the years.

    By contrast, sales people at Neiman are famed for their ability to woo customers, often calling them at home when new designer shipments arrive in stores.

    Neiman executives, for their part, seem unfazed by the changes at Saks.

    "Neiman executives think Saks is crazy, making big orders that they'll never sell," said one Neiman insider. "But they're making a mistake in not taking Saks seriously."

- Arik

Posted by Arik Johnson at September 10, 2004 04:03 PM | TrackBack