the Insiders


September 20, 2012 10:50 AM


Neiman's 4 Cent Web Incentive

Here's what e-commerce means for Neiman Marcus: 4 extra cents of operating profits out of each sales dollar....

Here's what e-commerce means for Neiman Marcus: 4 extra cents of operating profits out of each sales dollar.

It doesn't sound like much, but it's enough to make an accountant's heart flutter.

Everyone talks about the great virtues of e-commerce, but most retailers are content to point to their Web site, say nice things to Wall Street and hope the good feelings transfer to the rest of their business by osmosis.

Neiman's is a case apart, having backed into being more transparent about its Web operations than most.

The luxe firm started referring to its direct marketing division as "online" for the fourth quarter ended July 28. The switch was logical since even a year ago, 86.3 percent of the division's revenues came from the Web.

So let's have a look-see at how the Neiman Marcus, Bergdorf Goodman, Neiman Marcus Last Call and Horchow Web sites are faring.

Online revenues rose to $878.8 million for the fiscal year, 20.2 percent of the company's total take. And those sales produced divisional operating profits of $132.4 million -- prior to general corporate expenses and amortization.

That means 15 cents of every dollar consumers spent on Neiman's Web sites went right to the company's operating profits last year.

The firm's stores only sent only 11 cents from each sales dollar to operating profits.

Neiman's Web businesses, at least on an operating basis, are 35 percent more profitable than its stores.

Who wouldn't want more of that action? That's why Neiman's is launching a full-price Web site in China this year.

There are other factors to consider, of course. The cost of shipping packages to online customers continues to vex e-commerce sites. And the competition is growing all the fiercer.

But the intense growth of Web sites at all of the major players and the money they're apparently making tells me that "omnichannel" -- the next supposed evolution of retail -- will be more of an intermediary phase.

At this rate, how long will it be until the stores are a supplement to the Web instead of vice versa?

Maybe it's still semicrazy to say that in the case of Neiman's, given the chain's strength and its position in the luxe psyche.

But how crazy would have it sounded a decade ago if someone said Neiman's would get one-fifth of its revenues from the Web and make more money doing it? Wasn't the Web supposed to be this place where you bargained shopped, where service didn't translate?
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