Many question the role of multi-brand department stores in the evolving luxury ecosystem. With so many luxury brands amping up their direct-to-consumer online and brick-and-mortar strategies, department stores appear to be fading into irrelevancy.
In 2014, department stores accounted for 26% of personal luxury goods sales, according to Bain-Altagamma. In 2022, they were down to 15%; by 2030, it is estimated that department stores will only have an 11% to 13% share.
In the U.S., traditional department stores have also been losing their grip. In 2014, department stores generated $59.4 billion in sales. By 2019, they’d fallen to $39.5 billion and last year to $32.7 billion, nearly a 50% drop in eight years.
Yet, while brands are abandoning the department store channel in droves, Brunello Cucinelli remains committed to it, having forged a strong and lasting partnership with Neiman Marcus Group, arguably the premier multi-brand luxury retailer in the country.
“Neiman Marcus is the most beautiful multi-brand department store in luxury worldwide, and this is really undisputed,” Brunello Cucinelli said to the Dallas Morning News. “Thirty years ago that was the case and it still is today.”
The partnership’s success is credited to each focusing on their specialty – creating the luxury goods that the other sells – and a shared leadership philosophy.
Exclusive Access To The Best Customers
“Multibrand retailers are the guardians of the brands,” said Massimo Caronna, North America CEO for Brunello Cucinelli, in an interview with McKinsey. “We still very much believe in the multi-brand business, even if we now have 125 retail stores around the world.”
The company benefits through its partnership with Neiman Marcus by getting a broader and more nuanced perspective on what luxury shoppers are looking for across the entire competitive landscape. These are insights that can’t be gathered in its own retail stores where they can’t learn from shoppers that walk past their door.
Being featured in a store like Neiman Marcus closes the gap. “Who’s better than them to tell you if your brand is on trend or not?” he added.
And the NMG, which includes NYC’s Bergdorf Goodman, delivers the goods. It attracts the highest-potential, most demanding luxury customers.
In its most recent quarter, NMG reported the gross merchandise value of its top customers grew nearly 20% over the same period in fiscal 2019 and it reports retaining 90% of those customers. Its top 20 brands, like Brunello Cucinelli, are the beneficiaries, with GMV up over 50% this year compared with 2019.
To keep those loyal customers coming back, Neiman Marcus works with its leading brands to create exclusive offerings, like the Brunello Cucinelli 39-piece capsule Icon Collection reflecting the brand’s quiet, true luxury style.
Growing Against The Grain
By marching to its own drum, and not following the pack, Brunello Cucinelli has avoided the downturn many other luxury brands have recently experienced in the U.S.
In the Americas, which accounted for just over one-third of total revenues, the brand advanced 22% in the first nine months of the year, compared to Kering’s Gucci, which fell by the same percentage this year.
Wholesale, which generates nearly 40% of company revenues, were up 17% year over year and nine-month revenues worldwide rose nearly 30% year-over-year, from $686 million to $873 million this year.
“Very positive results were achieved in both sales channels in North America, where there is still a solid and growing demand for absolute luxury clothing, oriented toward special garments with high craftsmanship content,” the company said in a statement.
Rather than cannibalizing each other, its owned retail stores benefit from the brand being introduced to new customers in a store like Neiman Marcus, which recently honored designer Brunello Cucinelli with its 85th anniversary Neiman Marcus Award for Distinguished Service in the Field of Fashion. He joins the ranks of Christian Dior, Coco Chanel, Ralph Lauren, Karl Lagerfeld and Yves Saint Laurent, who also received the award.
Leading Luxury Into The Future
As distinguished a designer as Cucinelli is and as impressive as his brand’s performance, his visionary leadership sets him and his company apart. He presented his leadership philosophy, humanistic capitalism, at the 2021 G20 Leadership Summit in Italy, where he outlined the ten guiding principles of his people-and-planet-before-profits approach to business.
“I believe in a form of contemporary Humanistic Capitalism where fair profit is pursued by trying to cause as little harm as possible to Creation and humanity,” he wrote.
“I like to think of an inclusive sustainability encompassing material and spiritual values, a real place where the environment, the economy, culture, technology, the spirit and morality coexist, complementing each other in the concept of Human Sustainability,” he continued.
It’s a leadership philosophy that NMG CEO Geoffroy van Raemdonck shares. It’s given the two men and their companies common ground to build a partnership.
“Good leaders build relationships,” van Raendonck shared with me. “Retail is a relationship business and its foundation is the human element. Ours isn’t a transaction retail business; it’s built on relationships recognizing we all need that human touch.”
Putting People First
Following NMG’s emergence from bankruptcy and the disruption of the Covid pandemic in September 2020, van Raemdonck has propelled a cultural transformation. He’s put the company’s people at the center, so they can bring their best self to work each day to deliver the best service and experiences to customers.
“For our people to embrace uncertainty, like what is happening in the world right now, they have to feel supported. That lets them take risks, something as simple as telling the customer that the item they are trying on doesn’t fit quite right. That honesty builds trust, and trust is critical to relationships.”
Some 1,100 of NMG’s sales associates have built such deep personal relationships with their customers that they write over one million dollars in business each year, a 40% increase over pre-pandemic levels.
Putting people first is a value that both Cucinelli and van Raemdonck share, fostering a powerful relationship between the two companies.
“Leadership is really about empowering people, giving them confidence and creating a setting where they can excel,” van Raemdonck said. “That’s why I believe so much in corporate culture and values. Culture is the terrain where people can flourish and shared values bind them together.”
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