Neiman Marcus Shows Issues with Distribution

With a big luxury retailer like Neiman Marcus, the last thing you want to experience is an issue with distribution for high-end commodities.  However, this is what the retailer has released information about, incurring significant losses this year.

Neiman Marcus announced that it had first fiscal quarter losses for 2017 and it was due to the distribution problems that it is facing.  The article via Internet Retailer discussed how the retailer had challenges implementing a new cross-channel merchandising system, which costs Neiman Marcus up to $35 million during its fiscal first quarter.  It reported online sales accounted for 29.2% of overall sales in the first quarter, which ended October 29th.  This equates to $315.1 million, down from $315.7 million during the same time last year.In a filing with the U.S. Securities and Exchange Commission, Neiman Marcus revealed problems that related to the implementation of NMG One, its new cross-channel merchandising and distribution system.  It resulted in a negative impact on online and offline sales.  More specific numbers mentioned in the report were Neiman Marcus’ earnings, which  included:

  • A year-over-year total comparable sales decline of 8.0%, compared to a 5.6% decline last year.
  • Net revenue of $1.079 billion, down 7.4% from $1.165 billion.
  • A net loss of $23.5 million, compared to a net loss of $10.5 million.

Neiman Marcus stated, “These issues primarily related to the processing of inventory receipts at our distribution centers, the transfers of inventories to our stores and the presentation of inventories on our websites.  These issues prevented us from fulfilling certain customer demand in both our stores and websites that we estimate resulted in approximately $30 to $35 million of unrealized revenue.”  In a now technology-driven retail industry, traditional warehousing and distribution is not able to keep up with the demand for better omnichannels to facilitate online and offline sales.  There has to be a shift into more sophisticated distribution, which a retailer can experience a level of growing pains.

Some department store retailers are utilizing their physical store locations to act as close proximity warehouses and opting to implement Same-Day Delivery to meet online demand.  Macy’s for example, partnered with Deliv and now has same-day delivery in San Francisco, Los Angeles, Seattle, Houston, Chicago, New Jersey, Washington DC, and other major US cities.  Its sister company Bloomingdale’s also rolled out the service in cities like San Francisco, Los Angeles, San Jose, and Chicago.  With over 880 store locations, Macy’s has the store volume to fulfill orders from, instead of primarily utilizing distribution centers.  Neiman Marcus can do the same.

The popular retailer can partner with a Same-Day Courier like AQuickDelivery in Atlanta and have its online order fulfilled throughout the Georgia area.  The Atlanta Courier also is equipped to provide same-day delivery for retailers nationwide.  There may be many adjustments that Neiman Marcus has to make and implementing same-day delivery to generate online growth can be one of them.

Reference:  12.15.16, www.internetretailer, Matt Lindern, Distribution problems cost Neiman Marcus during its first quarter