Minding the Store

9. Running a Store with a Split Personality

9 Running a Store with a Split Personality ALTHOUGH WE MAINTAINED a conservative dividend policy, plowing a substantial part of our earnings back into the business, the financial requirements of our growing volume and expansions taxed our resources. Unwilling to dilute our ownership by the sale of common stock, we resorted to open lines of credit at the banks, term loans, and even the sale of preferred stock. Our debt ratio always ran quite high, and finally on the recommendation of Fred Florence, by now a member of our Board of Directors, we decided to ease our problems by the sale of some debenture bonds. At his suggestion, we visited the Prudential Insurance Company in Newark, where we met with Kerby H. Fisk, head of the bond department, and explained why we wanted to sell Prudential $2,000 ,000 of debentures. After reviewing the statements and financial history of our business he said, "I question whether we want to get involved with a company selling only 'whipped cream.' I've read about your sensational sales of furs and diamonds, but if a dip in the economy occurs, you are very apt to be without customers ." This was the first time our well-planned public relations program had backfired! We assured him that we were selling much more than "whipped cream"; that in truth we were selling "milk" as well, and that actually , we sold more "milk" than "whipped cream." We suggested 163 RUNNING A STORE WITH A SPLIT PERSONALITY that he come to Dallas to go through our stocks with us, and to review our sales by price-line categories to prove the validity of this statement. He accepted our invitation, and was astonished to find that in addition to selling more mink and vicuna coats than any single store in the country, we also sold thousands of garments at $30, $75, and $100. Thus reassured that our business had a very broad base for consumer support, he agreed to the purchase of the bonds_ Curiously, he wasn't the only one to suffer from this misapprehension . Despite the fact that we may advertise a sable coat for $50,000 once in the course of six months, and dresses at $50 twenty times in the same period, a large number of potential buyers will remember only the sable advertisement, and not the ones for $50 dresses. If you were to query these women about what they want to spend for a dress, a large number would reply "$50," and if you were to follow up this question with another, "Do you buy your dresses at Neiman-Marcus?" you would probably get the answer, "No, I can't afford to shop there." They either ignore our advertisements for less expensive merchandise or don't believe them. However, since we sell large quantities of moderately priced articles in all departments of our stores, we obviously have been able to convince a substantial number of customers that we have things to sell at affordable prices. There is a reverse twist to this reputation for selling high-priced merchandise. There are women who do read both the $50,000 sable coat and the $50 dress advertisements, and who deliberately choose to buy their $50 dresses from the store that sells $50,000 sable coats. A little bit of the luster of the sable rubs off on the label of every $50 dress. What we proved very early in our history was that it was possible to sell both the finest, most expensive merchandise to those who could afford it and simultaneously well-selected, good-quality merchandise at moderate prices to those in other income strata. Obviously there is a thin market for $50,000 furs, and if we depended on the sale of them for any substantial 164 RUNNING A STORE WITH A SPLIT PERSONALITY portion of our volume, we would have a very small business. Stores of our type which failed to recognize this obvious fact went out of business; others, like Bergdorf Goodman, read the signs correctly when they popularized their clientele by adding their Miss Bergdorf and Bigi shops. It's not enough merely to have less expensive garments for sale; they must be better selected, better made, better displayed, and better styled than similar articles found in the stocks of department stores. Very frequently I am asked, "Why is Neiman-Marcus so different from other stores? What is...