Store Wars!
A short time ago, in an upscale retail world not so far away, Neiman Marcus reigned supreme—especially in Texas. Now Saks Fifth Avenue is coming to the Houston Galleria to challenge Neiman’s on its own turf. How will the empire strike back?
BACK IN MARCH, DURING THE Gianni Versace show in Milan, Italy, Rose Marie Bravo, the boisterous president of Saks Fifth Avenue, suddenly exclaimed, “Houston!” Supermodel Naomi Camp-bell was strutting down the runway in a shiny little green slip dress, and Bravo, who was sitting in the first row, could barely contain herself. “That screams Houston,” she declared. “That’s exactly what we want.”
All around her, buyers for Saks dutifully took notes. When more models paraded out in the kind of dazzlingly colored dresses that have made Versace a favorite designer of celebrities and cutting-edge fashion mavens, Bravo said the word “Houston” again, and her associates took even more notes. If the members of the international fashion press were eavesdropping, they had to have been baffled. Why was Bravo, the woman who makes the final decision on which luxury apparel goes into Saks’s 51 stores around the United States, jabbering about a city in Texas?
The truth was that Bravo had been thinking about little else since the start of the year, when her boss at Saks, CEO and chairman of the board Philip Miller, decided to open the chain’s second-most palatial store (after its famous flagship on Fifth Avenue in New York City) in the Houston Galleria—at the other end of the mall from archrival Neiman Marcus. In upscale-retailing circles, the Neiman’s at the Galleria is renowned as one of the most successful stores in the country, with sales of more than $115 million a year. More couture clothing—apparel made by the world’s most expensive designers—is bought by women at the Galleria Neiman’s, which opened in 1969, than at any of the other thirty Neiman’s stores in the U.S., including Neiman’s nine-story flagship in downtown Dallas and its glittery outpost on Wilshire Boulevard in Beverly Hills. When women step off the escalator onto the second floor of the Galleria Neiman’s, they enter what one well-known Houston socialite describes as “a girl’s version of heaven.” Directly in front of the escalator is a Chanel boutique, flanked on one side by a boutique devoted to Giorgio Armani’s Borgonuovo collection (the most expensive line Armani makes) and on the other by a boutique dedicated to German designer Jil Sander. Elsewhere on the floor are collections by Dolce and Gabbana, Valentino, Christian Lacroix, Claude Montana, Badgley Mischka, Prada, Escada, Ralph Lauren, and Donna Karan. And all of it is presided over by some of the company’s best “sales associates,” a sleek group of eleven women and one man who persuade their customers to spend $4,000 for a basic jacket-and-skirt combination and $15,000 for an evening dress—and who are rewarded, in some cases, with six-figure salaries. “They are deadly, like beautiful cobras,” one Houston woman says. “The minute they lock their eyes on you, you know they are going to find something for you to buy.”
In the past, tony stores like Sakowitz, Marshall Field, and most recently, Barneys tried and failed to break Neiman Marcus’ hold on the upper-crust Houston woman. Even Saks, the grande dame of New York retailing, once before attempted to compete with Neiman’s, opening a store in 1974 a few blocks from the Galleria. It hasn’t gone out of business, but it has never really caught on either; though it is more than half the size of the Galleria Neiman’s, its sales have reportedly amounted to only one third of those logged by its formidable foe, according to Women’s Wear Daily. Neiman’s seems to have had too loyal a following among Texans who have grown up with its Christmas catalog and its His and Her gifts. City by city, it has used its muscle to secure exclusive rights to sell the top designers’ clothes, and it has been a major sponsor of the Houston Chronicle Best-Dressed Luncheon, which has led many socialites to believe that they had better spend their money at Neiman’s if they ever want to make the prized list. Even middle-class Houstonians who can’t afford Neiman’s prices buy a tie or a jar of lotion there just so they can say they own something from Neiman’s. Driving up to the Galleria Neiman’s is like approaching a great cathedral. The 206,000-square-foot store is a sanctuary of conspicuous consumption, with cream-colored walls and perfect track lighting designed to show off the city’s most expensive clothes.
In the rarefied world of “specialty retail”—the industry term for stores that sell the highest-priced apparel and accessories—Neiman’s is only one of two large national chains left. The other is Saks. For more than twenty years the two behemoths have been squaring off across the country, opening stores in almost all the major metropolitan markets in the country—often within blocks of each other. As opposed to discounters like Wal-Mart, which sell lower-priced items, or department stores like Foley’s and Dillard’s, which sell mid-priced items, or even higher-end stores like Nordstrom, which concentrate on “bridge” merchandise (apparel that is costlier and more designer-oriented than what is found in department stores), Neiman’s and Saks focus mostly on top-of-the-line clothing, shoes, cosmetics, jewelry, handbags, belts, scarves, sunglasses, gloves, hats, and furs. (Neiman’s also specializes in home decoratives such as crystal, china, and silver.) Although Saks has more stores and sells more merchandise—its 1996 sales were $1.94 billion compared with Neiman’s $1.56 billion—Neiman’s attracts bigger spenders: Its stores average sales of $380 per square foot versus $343 per square foot for Saks.
For years Saks seemed content to play a distant second fiddle in Texas to Neiman’s, just as Neiman’s seemed happy to let Saks be the dominant player on the East Coast. But in the early nineties Saks hired Philip Miller, a handsome, charismatic man described by one colleague as the Gatsby of American retailing. Miller knows all about Texas. He was the president of Neiman Marcus from 1977 until 1983, leaving after the company’s board passed him over for the position of chairman, picking instead Richard Marcus, the son of legendary Neiman’s chairman emeritus Stanley Marcus. After his Neiman’s stint, Miller was tapped to run Marshall Field and later was lured away to Saks, where he began formulating a master plan to make Saks the leading outfitter of the nation’s wealthy—a title that most retail analysts have bestowed on Neiman’s since the mid-eighties.
Initially, Miller said, Saks was going to build more stores in California, New York, and Florida. But his ultimate target was Texas, the home of six Neiman Marcus stores: three in Dallas, two in Houston, and one in Fort Worth. Miller planned to renovate and expand the existing Saks locations in San Antonio and Dallas and told his staff to scout out space for new stores in Austin and Fort Worth and ordered a new Saks in west Houston at the Town and Country Mall (where a Neiman’s was already in place). In his most startling display of bravado, however, he ordered the construction of a new 210,000-square-foot Saks at the Houston Galleria in the space once occupied by Marshall Field. At least $50 million was budgeted for its construction, about twice what a large specialty store usually costs. “We’re going up against the five-hundred-pound gorilla at the other end of the mall,” Miller told me. “And we know we’ve got to be at our best.”
On September 10 the war for rich Texans’ hearts and credit cards begins. The new Saks at the Houston Galleria will open with a black-tie gala—a slap at Neiman’s, for September 10 happens to be the day of Neiman Marcus’ ninetieth anniversary. The next week, in fact, Neiman’s will throw two black-tie anniversary galas for itself, one in the downtown Dallas store and the other at the Houston Galleria. Saks executives insist they didn’t deliberately plan their party to upstage Neiman’s. Still, Neiman’s executives are clearly peeved that Saks has chosen this moment to try to capture the limelight. “We believe we have the finest specialty store in America, regardless of who else wants to come here,” snaps Burt Tansky, the no-nonsense CEO and chairman of the board of Neiman’s.
What makes this retail row especially interesting is that 59-year-old Tansky knows Saks as well as Miller, who’s also 59, knows Neiman’s. From 1980 to 1990 Tansky was the well-regarded president of Saks, and many retail analysts assumed he would eventually be named chairman and CEO. But when Miller was hired, a reportedly disappointed Tansky resigned and resurfaced as the vice chairman of Bergdorf Goodman, the elite Manhattan specialty store a few blocks north of Saks. Then, just as Miller began his push to expand Saks, Tansky was offered the top job at . . . Neiman Marcus. It was a delicious irony: Tansky and Miller, the two leading merchants of American luxury apparel, were finally going head to head.
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