The Changing Scene at Neiman-Marcus

The sixth floor Zodiac Room no longer dyes its sugar blue, and customers are no longer greeted with cups of consomme. The linen place mats are gone. In the couture department, the fine garments are out front, on racks, no longer hidden to be shown only on request. Behind the scenes, the porters at the Haskell Avenue warehouse no longer sweep the floors four times a day. It took a good deal of persuading to convince them that “Mr. Stanley only wants it swept once.” Stock personnel, who were assigned to particular departments and often worked part-time, are now pooled and dispatched to departments when they are needed.

The famed regular delivery service can no longer be obtained daily. Now deliveries are made within the city on Monday, Wednesday, and Friday, to the far suburbs on Tuesday and Thursday. A dollar is charged for delivering items under $10. (Same day service, however, is available, for a $3 charge.)

“Change,” says Stanley Marcus, “is inevitable.” But what has caused the change?

“Once you decide not to be a virgin, it’s just a matter of deciding how far from home you want to sleep,” says Stanley Marcus, reflecting on the decision which permanently transformed the comparatively small family store, in which you could often see Stanley himself inspecting the merchandise, into a conglomerate-owned, nationwide chain.

In the Sixties, Marcus had realized expansion was inevitable, an immutable law of business. Specialty stores like Neiman’s, which had ridden the oil boom to fame, found themselves increasingly confronted with the corporate ambitions of stores like Saks Fifth Avenue. For years, a gentlemen’s agreement kept Saks from invading territory that might become Neiman’s, but that agreement was melting away in the expansive climate of the Sixties.

“I knew that we couldn’t finance expansion ourselves,” Marcus says. “I was just about resolved to selling more stock, which would have put the family in a minority position. Then some companies which wanted to buy us started calling, and that seemed like a better idea.” Neiman’s toyed with the idea of merging with Macy’s, Marshall Field, and Saks. But Saks, for example, indicated that it wanted to send Neiman’s to second-rate markets such as Memphis, and reserve the leading markets for itself. This tended to offend Neiman’s tender corporate ego.

In the midst of these negotiations, a friend suggested that Stanley talk to Ed Carter, chairman of a California-based clothing chain, Broadway-Hale Stores. “Carter’s company was a firm that dealt in moderate-priced merchandise; I didn’t see much point in talking to him,” Marcus says. The friend insisted, “Has it occurred to you that this could be to your advantage? They don’t know anything about specialty stores, and they might be willing to grant you independence that another chain wouldn’t.”

Carter flew to Dallas, and hit it off well with Stanley immediately. They had much in common: both had graduated from Harvard Business School, both recognized the need for a store to be involved in community affairs, particularly in supporting the fine arts, and both were low-key personalities. Even their differences seemed complementary. “I pointed out that he was a Republican and I was an independent, but more of a Democrat,” Marcus says. “He said that was fine, the diversity was needed, and that I should continue to express myself as I pleased.” Carter spent half a day touring the store, seeing if Neiman’s was healthy and measured up to its image. He presented a merger deal on the spot, which the Marcus family considered for a week.

Carter offered Neiman’s the capital it needed to expand; Neiman’s offered Carter the most prestigious specialty store in America. He assured Stanley that Neiman’s would remain independent, asking to be consulted on only two matters. He asked to have a say in the choosing of Stanley’s successor, and to be notified “if we were going to build any $10 million stores,” Marcus says.

Carter was accepting a store known for its image, not for its profitability. Neiman’s financial planning and expense controls were weak; the store was making from 2 to 2 ? per cent on sales, while Broadway-Hale’s profit margin had been as high as 4 per cent. Had Broadway-Hale been operated like Neiman’s, Broadway-Hale would have made ten million dollars a year instead of the 15 million it was making. Carter subtly challenged Neiman’s to bring its expenses under control, expenses Marcus describes as “a lot of sheer waste.”

On April 16, 1969, the Marcus family surrendered its majority ownership of Neiman-Marcus. The terms were generous: the equivalent of $50 a share for each share of Neiman’s common stock, which had traded at less than $20 a share six months earlier. The day of the merger announcement it was trading at $42. The total price for Neiman’s: $40 million. “Carter reminded me that, considering the price Broadway-Hale was paying, he expected us to expand rapidly,” Stanley says.

Stanley called his staff together on the first floor of the downtown store to tell them of the merger. “It is now 9:15 a.m.,” he said. “The merger will be announced on the radio at 9:30 a.m. By 9:45 there will be a customer who has been treated rudely and he will blame it on the merger.” Sure enough, there were several such complaints that day; they haven’t stopped since.



The changes that came to Neiman-Marcus were signaled one October day in 1959. That was the day Neiman-Marcus shares went public. The decision to sell off a minority interest in the store came about because the Marcus family estate, which consisted almost exclusively of Neiman’s stock, had no established value. If it were traded publicly, the Internal Revenue Service would assess the stock at market value, probably lower than they might assign if it were privately held. Family members also wanted to diversify their investments, which until then had been tied up in the store.

Stanley’s decision to expand hastened the day when the Marcuses would have to relinquish practically all of the ownership. “A dynamic store is somewhat powerless to control its own growth,” Marcus says. “If you want to grow, you are forced to reach for new business before it’s too late.” Neiman’s had been reaching for new business since 1953, with the opening of a store in Preston Center, a move Marcus describes as self-defensive. “I knew that if we didn’t open a store out in the fast-growing, affluent North Dallas area, someone else would.” The downtown store was remodeled in 1955, and the same year a store was opened in Houston. But business in Houston and Fort Worth was really just an extension of business in Dallas. For years River Oaks residents in Houston had been driving or taking the train to Dallas to shop at Neiman’s, as had’ customers from Fort Worth’s Arlington Heights. Now they merely shopped at home.

The decision to expand beyond Texas was based on the Neiman’s legend. Neiman’s special cachet came to the aid of the late Leo F. Corrigan when he opened the Emerald Beach Hotel in Nassau in 1958. Corrigan needed to dramatize his new hotel, so he called on Stanley Marcus to stage a fashion show. Marcus had Corrigan build a runway around the building that curved out to the sea, so that the elegantly clothed models had the most spectacular of settings. Two thousand of the world’s most fashionable people attended, and came away convinced that Neiman-Marcus was “the most fabulous store in the world.”

Neiman’s hoped to ride this reputation into Atlanta when they opened a store there in 1971. “We just supposed that the whole world was our oyster,” says Tom Alexander, Neiman’s executive vice president for advertising and public relations. “We got to Atlanta and found that a man named Rich had got there first.”

Rich’s Department Store had been in Atlanta for over a century. For weeks prior to the opening of Neiman’s, Rich’s ran newspaper advertisements reminding the city that it had extended credit to Georgia cotton farmers when the boll weevils struck, and that when the city had been forced during the Depression to pay its school teachers in scrip, Rich’s had redeemed the city’s IOU’s in cash. “What could we say?” Alexander sighs. “What we had been doing for Dallas?” When Alexander went to the Atlanta newspapers to get choice advertising space, he was told, “We’ll put you right after Rich’s 17 pages of ads – between the crossword puzzle and the obits.” Sherman had an easier time marching through Atlanta than Neiman-Marcus did.

Atlanta taught Neiman’s the value of careful analysis and planning. The Atlanta store’s grand opening was not typical of Neiman’s. It was casual dress, and tickets were only $10 apiece. The store did not do particularly well, though it has since improved. When Neiman’s opened the St. Louis store, the ceremony was black tie and tickets were $25. Neiman’s knew in advance that St. Louis customers were more accustomed to cash purchases, so it developed a direct mail advertising campaign to explain and encourage charge accounts. “We aren’t everything to everybody,” Alexander says. “It’s hard to get attention, so you have to anticipate. There isn’t a hell of a lot of difference in what stores can purchase to sell, so you’ve got to make it on service and exclusive imports. You’ve got to get it first and present it attractively.”

But can the Neiman-Marcus mystique survive expansion? Can a store in St. Louis provide customers the kind of service and personal attention that Dallas customers enjoyed before expansion began?

“Binkey” Downing, a buyer at Neiman’s for the last 27 years, remembers her first trip to the Marcus family store. Her mother took her by the hand and led her up the steps into Neiman-Marcus. “Now, don’t touch anything,” her mother cautioned. They were greeted at the entrance by Herbert Marcus, Sr., a sentry whose welcome told you that from here on you were under the care of the family. On her later visits, she recalls Carrie Neiman serving as a hostess in the couture. shop. “Marcuses were never far away.” she says. “Herbert, Sr., could always be seen thumbing through merchandise, testing it constantly.”

After World War II, Binkey joined Neiman’s. Within three weeks, Stanley Marcus was teaching her the business of buying. “He would accompany me to fashion showings and I would take notes while he pointed out certain aspects of workmanship in each article. Later he would ask me questions about what I liked from each collection, and why.” Binkey would go with Stanley each season to the New York fashion market and learn the Marcus “editing” process – selecting the finest garments from each collection and blending them into the Marcus collection. The tutoring not only conveyed the Marcus taste, but the ritual itself conveyed the Marcus pride of serving the best clientele with the finest merchandise.

Buyers now have to serve their departments in seven stores – two in Dallas, one each in Fort Worth, Houston, Atlanta, St. Louis and Bal Harbour, Florida – whose customers may have very different tastes. Twenty-five years ago a buyer served only her department in Neiman’s downtown Dallas store. She spent considerable time on the floor dealing with that department’s customers. When she went to New York to buy the season’s fashions, she thought individually of those customers. Now she can’t know the clientele of her departments in seven different stores, so she must depend upon Neiman’s department managers in those stores to convey precisely what the needs of customers are. Neiman’s is struggling to develop this line of communication, and if it fails, store executives readily admit, the Neiman’s mystique will be diminished.

Suburban boutiques are challenging Neiman’s in this respect, offering the kind of personal service Herbert Marcus, Sr. had in mind when he founded Neiman-Marcus. The boutique owner does her own buying with her specific customers in mind. Many of those boutique owners are former Neiman’s buyers and managers. Stanley Marcus admits that the boutiques are emulating the Neiman’s of the past, the small personal Neiman’s that could react quickly to its customers’ needs. “No question about that,” he says. “They have less red tape and can certainly do things quicker.” While Neiman’s has to take arriving merchandise through various checking-in procedures before moving it out onto the floor, a boutique owner can receive merchandise and minutes later have it up for sale. And if it isn’t selling well, she can mark it down quickly without worrying about admitting the error. One other advantage is pointed out by a Dallas boutique owner. “On Sunday I’ll go down and open the store for a good customer. Who’s going to do that for you at Neiman’s?”



The boutiques also responded more quickly to the changes which saw fashions enter a free-form stage in which a woman expresses herself through her clothes. Neiman’s felt a moral responsibility not to let its customers be led into faddish clothing. “If we had turned in that direction like some department stores, we could have endangered our whole business. We let that kind of fashion seek its own level,” Stanley Marcus says.

Neiman’s faces another, perhaps insoluble problem: the absence of Stanley Marcus. His philosophy of merchandising, his taste, and his continual presence on the floor of the downtown store created the myth of Neiman-Marcus. Marcus personally trained the managers of six of the existing seven stores, and the managers-designate of the new stores which will open next year in Washington, D.C., and Chicago. But will they be able to perpetuate his personality without his physical presence?

Customers were always awed and impressed by the presence of Marcus on the floor of the downtown store. Now Marcus has moved to the 48th floor of the Republic National Bank Tower, where he reviews policy changes at Neiman’s in his capacity as chairman of Neiman’s executive committee and as executive vice president of Carter Hawley Hale. He is no longer seen on the floor. He moved out of the store because he felt his son, Richard Marcus, the president, and Richard Hauser, the chairman of Neiman’s, should have a free hand in establishing themselves.

Richard Marcus, 37, occupies his father’s old office on the seventh floor of the downtown store, and represents the Marcus family name and family traditions. His principal area of responsibility is operations, and he shares the top decision making with Richard Hauser, who is mainly concerned with merchandising and sales promotion. Although Hauser’s title as chairman would indicate that he is the chief executive, Stanley maintains that the two men share the leadership. “Titles are insignificant. Hauser hasn’t the final say,” Stanley says.

But Richard Hauser’s presence does indicate Neiman-Marcus’ recognition of the need for a strong corporate leader with a chain store operations background. Hauser quickly established his reputation as a brusque, authoritative man with strong opinions, when, shortly after his arrival, he sat in an advertising planning meeting with Richard Marcus and the store’s merchandise managers. Items were brought into the conference room for approval for use in ads. One by one the managers entered like Persian traders bearing wares for a sultan, and one by one they left the room shaken as Hauser repeatedly rejected their proffered items. Before, the ad meetings had been sessions in which the managers catered to the Marcuses’ traditional styles, and had always come prepared with something they knew would receive quick approval. But Hauser’s advertising thrust was different. It was apparent he wanted ads that would highlight items with volume sales potential, as well as maintaining the Nei-man-Marcus image. Richard Marcus, his equal, sat silent as the Hauser machine began cranking to life.

“I have a perception of news value in advertising. Our advertising must have news value,” Hauser said, explaining the rejections. “Our next meeting was better.”

One of Hauser’s major thrusts is to sharpen Neiman’s approach to the young market, which Stanley Marcus had been reluctant to enter for fear of faddishness. Under his hand, a contemporary jewelry department has been established with its own buyer, and at NorthPark he has separated the Junior Shop from the Colony Shop.

Asked why he thought Neiman’s needed to sharpen its approach to the young market, Hauser replied that the share of sales generated by Neiman’s junior and sportswear departments had not been as large as it should be.

Does he think Neiman’s is now succeeding in reaching this young market?

“I’m not anxious to publish numbers. Why don’t we let it go at that?” he remarked.

Does he regard the burgeoning number of boutiques as serious competition for Neiman’s?

“I really don’t have any comment on that,” he said.

Hauser’s brusqueness offers a marked contrast to the style of Stanley Marcus.

Marcus’ demeanor is smooth and elegantly relaxed; Hauser comes across as stiff and somewhat nervous. While talking, Marcus sits almost motionless in his leather chair gently puffing his famous crooked pipe. Hauser fidgets in his chair and speed-smokes cigarettes.

Richard Hauser, at 40, is one of the brightest young chief executives in the retailing field. A New York native with an MBA in marketing from Columbia, Hauser began at Bloom-ingdale’s in 1958. He left in 1967 to spend a year at Saks Fifth Avenue, and then returned to Bloomingdale’s. Described as “a Saturday crowd kind of guy,” meaning that he plays to the young clientele that shops on Saturday mornings, Hauser displayed a penchant for high-volume merchandising by turning an ailing department store into New York’s finest and busiest. He had help from Katie Murphy, who devised many of Bloomingdale’s high-volume campaigns. She is canonized in New York’s merchandising circles as the saint of retailing, and at least one New York store president says Hauser “rode the late Murphy’s hem to stardom.”

The question about Hauser is how many department store sales tactics will he apply to a specialty store like Neiman’s? Department store sales depend on a large number of shoppers who make small purchases, while specialty store sales depend upon a considerably smaller number of purchasers who buy high-cost items. Department stores depend on price reduction promotions to generate a high volume of shoppers, while specialty stores use image promotions such as Neiman’s Fortnight to generate buying.

Will Hauser initiate more department store-like sales? “No, that’s the most unlikely thing I would do,” he says. “Too many sales would put in question our integrity and they aren’t dignified.” Just what Hauser will do remains unclear, although he forecasts no startling changes. “There is no question that my coming in as chairman indicated a few changes in how the standards are to be interpreted. People are learning about my interpretations by what I say and what I do. One of my fundamental beliefs is that revolutions cause casualties. Even if I saw major changes that needed to be made I certainly wouldn’t proceed at a revolutionary pace.”

Though some might wish it, Nei-man-Marcus can never go back to the days when it was a family-run specialty store with the Marcuses on the floor insuring that every detail measured up to the Neiman-Marcus tradition. But being larger will have its advantages, giving Neiman-Marcus the position enjoyed by other large chains, such as Saks, to secure preferential treatment from garment manufacturers – the special dresses cut from bolts of imported cloth, the fast delivery in time for the opera gala – given because Neiman-Marcus has an expanded market. And, like Saks, the opportunity for higher salaries and broader advancement for employees will also come to Neiman’s.

The greatest fear of several. years ago – that Carter Hawley Hale would interfere with Neiman-Marcus’ operations – has never materialized at any level. “Even the Dallas store doesn’t interfere,” says Tom Barnett, manager of the Fort Worth store for the past 17 years. “Sometimes I get a suggestion from Dallas on how to do something. I either accept it or tell them to forget it. Carter Hawley Hale? I know more about them because I own their stock than I do because I work for them.”

“You might not believe this,” says Max Brown, Neiman’s executive vice president for stores. “If I have a counterpart at corporate, I don’t know who he is. I’ve never even met Ed Carter, nor have I set foot in Carter Hawley Hale’s offices.”

Stanley maintains that Ed Carter has made good on his vow to allow Neiman-Marcus to maintain its independence. Grinning, he recalls: “The closest thing we ever had to interference, and it wasn’t interference mind you, was the day Prentis Hale called up and said his wife had a friend who was making some caftans and would we look at them to see if we were interested. We did, and found they were not up to our quality standards, so we never bought any.”

Undoubtedly the greatest influence Carter Hawley Hale has had on Neiman’s is in the area of controlling various operating expenses. For the moment, Carter Hawley Hale seems to have recognized that even an efficiently-run Neiman’s will not attain the profit margins of leading department stores.

But the paramount question that remains to be answered is whether the level of service at Neiman-Marcus will be maintained. Ultimately that decision is up to Richard Hauser.

“I chose Richard Hauser because heis a very successful and proven merchant,” Stanley says. “He once ran themost successful department store inthe country. Change is inevitable, thedifficulty is to move in a new directionwithout throwing the baby out withthe bath water. Unless we do maintainour standards of quality and customerservice in the communities we moveinto, then there’s no need for thosecommunities to support our stores. Aslong as the service aspect is recognized, Neiman’s is okay. If they shouldever decide that service and my personal touch isn’t important anylonger, then they’ll flop.”

The Marcus Touch



“I shop mostly at the downtown store. I know salespeople there who give me personal service. I don’t shop at the NorthPark store often; I might as well go to Lord and Taylor.

“But I do remember once the North-Park store was featuring a collection of pre-Columbian artifacts. I was standing there for some time trying to decide whether or not I should buy a particular piece – an eight-inch sculpture of a man – when Stanley Marcus walked up to me and said, ’Do you know that’s a whistle?’ whereupon he demonstrated by blowing it for the whole floor to hear.”

Mrs. Edward L. Wilson, housewife

Nothing Special



“I moved to Dallas from Minnesota four years ago to attend college. I shopped at the North Park store when I first arrived because it was convenient. It was just another department store to me; I was unaware that Neiman-Mar-cus was supposed to be anything special.

“When I went through sorority rush, I heard that a girl got ten bonus points if her clothes were from Neiman’s. I didn’t understand why until a friend explained that, back in the old days, the store was really something special – you went there for personalized service and clothes you couldn’t find anywhere else in town. Apparently Neiman’s is still thought of that way by most people in Dallas, but exclusivity is something I have never associated with Neiman-Marcus.”

Mary Ann Sawyer,

clerk, county courthouse

The Best of Care



“I worked for the Marcus family for many, many years in the downtown store, and I can tell you one thing that never changed, and that was the service. My customers always got the best of care, and that’s a fact.

“The only thing that has changed, to my mind, is the manufacturers. Nobody gives a damn about doing things right anymore. Today anything can sell. In my day we were always selective. Now they just buy and buy.”

Delia Rice,

retired salesperson