Evan Smith: If Stanley Marcus were around to celebrate the hundredth anniversary of the founding of Neiman Marcus this month, would he recognize the 2007 version of the company?

Burton Tansky: Yes, he would, and he’d be pleased. We’re larger than he ever imagined his company could be, but the idea of quality, of serving the customer, is very much alive. It’s what we’re all about.

ES: What’s changed since the company was sold two years ago to the private equity firms Texas Pacific Group and Warburg Pincus?

BT: The sale didn’t change our strategy whatsoever—not one iota of how we operate. We went from public to private and didn’t miss a beat. We’re working off the strategy that we developed before the sale, the five-year plan that was in place. Our expansion program is exactly the same as it was. We’ve pushed to open more stores. We’re exactly on target.

ES: How many stores now?

BT: Thirty-eight, soon to be 39.

ES: The thirty-ninth will open in—

BT: September. In Natick, Massachusetts, west of Boston.

ES: What other expansion plans are in the works?

BT: We’ve announced another 5 or 6, so that will take us to 45. And we continue to look for opportunities beyond that.

ES: What factors go into that sort of decision?

BT: It’s a simple process. We study the demographics of the community to determine the wealth factor: Are there enough people with the kind of income we need to support a store? Then we study the psychographics: Do the people who fit our demographic profile have a lifestyle that includes the products we sell? They have to have an interest in fashion. They have to travel. Demographics and psychographics work together. If they come out positively, the possibilities go up. Also, we work only with top developers, which allows us to go into the best centers in the towns we deem “high potential.” And it’s important that other stores in the center are compatible with who we are in terms of quality and service. A good example would be Nordstrom. Nordstrom only serves customers up to a certain level—we go beyond that—but they have very high quality and service and are very good operators. Together we form a strong alliance.

ES: Is there a market where the demographic piece is right on but where you’ve looked at the psychographic piece and said, “Probably not for us.”

BT: Actually, there is: Seattle. But it corrected itself. The psychographic factor was far too casual until three or four years ago, when we saw a real change. People were starting to dress differently. As a result, we’re opening a store there, probably in two years.

ES: I imagine you had similar conversations about Austin before opening there in March.

BT: Austin had similarities to Seattle because of the high-tech community and the casual lifestyle, but it was important to us: It’s in our backyard, and it’s part of the great state of Texas. We needed to allow it to grow. It’s grown so well.

ES: Other than Nordstrom, who else do you see as a competitor?

BT: Our designers, who are very important to us, are also retailers. We compete with them in a number of major cities throughout the country, but they continue to sell with us, and there are certainly enough customers that our business with them has grown substantially. There are also specialty stores in every city, most owned by somebody in the community. On a national basis, I would say Saks Fifth Avenue is a competitor.

ES: What would you say are the chief strengths of Neiman’s at this point in its history?

BT: Everything is of a certain quality: the quality of our merchandise, the quality of the way we operate our stores, the quality of our management team. We have an unrelenting interest in seeing that the customer is served well. There’s nothing we won’t do for a customer that falls within reason; even if it’s unreasonable, we do it. We’re able to offer a customer an exciting experience every time she comes into one of our stores. So the environment, the assortments, the service—that’s the trifecta in terms of our interaction with our customers. Our relationships with our customers develop over time. We have an outstanding sales associate group whose responsibility is to build relationships. From those relationships comes loyalty. Our interest is in building customers for life, not for one day or one hour.

ES: How selective are you in hiring these folks?

BT: We’re very, very selective. A few years back we established a test by interviewing a number of our best sales associates from around the country to try to understand how they view their own strengths. We compare new applicants against that test to see if, in fact, they have the personality, intelligence, wherewithal, and passion to be successful.

ES: And those attributes are . . . ?

BT: Devotion to the customer, good communication skills—things that you would expect. It’s proven to be very helpful. Our turnover is low. People enjoy working here.

ES: How important is a background in retail?

BT: It’s not necessary. In some cases it’s helpful, no question, because many applicants are already well trained and skilled at working with a clientele. But the most important thing is to bring in someone who has a retail personality: outgoing, interested in people, interested in serving customers, interested in following through and developing a relationship. Someone who will develop a passion. Because this business, like any business, depends on people who see what they do as a career rather than a job. Those are the people we care about. We bring them along, and, if they wish, they have opportunities to move to assignments in other areas of the store. And we train them well. A new entry into our company initially gets about 160 hours of training; over the year, all of our sales associates get about 200 hours of training. Every week the store managers give merchandise training: new items, new products, new deliveries, what’s selling, what isn’t selling. They’re taught on a continuum how to communicate with the customer: telephone skills, writing skills, follow-up skills. We give everybody an opportunity to be successful.

ES: Earlier in the conversation you seemed to make a deliberate choice to use the feminine pronoun to describe your customer: “she,” as opposed to “he.”

BT: We have a large men’s business, but in our world the female customer is the one who generates all the excitement. She shops very differently than a man. She shops frequently. She finds fashion to be a motivator: the products, the items, the trends. We have many men who love to shop—I don’t want to throw a blanket over everyone—but they tend to be more conservative in their approach. They buy a lot, but they buy it fewer times.

ES: The other thing that caught my ear was your description of shopping at Neiman’s as “an experience.”

BT: It’s always been the case, and it can’t change. Unlike the department stores, we’re not transaction driven. We’re driven by building a clientele. That’s why it’s so important that the experience be a positive one in the broadest sense of the word. When a customer comes in to shop, she enters a store that is well designed and well decorated, that has art on the walls—we have the largest art collection of any retailer in the country. Our sales associates are available, skilled at what they do, and anxious to make her comfortable and to fulfill all of her needs. They stay in touch with her, communicate with her, keep her up-to-date on new things going on in the stores. That takes some of the pressure off her in terms of the things she has to know about fashion in a changing world.

ES: One of the ways the world is changing is technologically. An awful lot of people are shopping online, not just for cheap stuff but for high-end stuff of the sort you sell. What percentage of your business is done over the Internet?

BT: Let me give you a little bit of background here. We have three Web sites. We have neimanmarcus.com, which is approximately seven years old. We have bergdorfgoodman.com, which is approximately three years old. And we have horchow.com, which is approximately five years old. All of them have been enormously successful. On the Neiman’s site, half of our business comes from outside our store trading area, which means that half the customers are new. At the Bergdorf Goodman site, 67 percent of the business comes from outside of the New York/Connecticut/New Jersey/Pennsylvania trading area; within a month we were shipping to all fifty states. And the Horchow site has a long reach also. When we went live with each of the sites, we essentially picked up every house in the country. Wealth is everywhere; we know that now. Affluence is in virtually every village, township, and city, small or large, and in most cases, the quantity of people who live in those places and have the affluence we need is not large enough to justify opening a store. But now they can shop with us.

ES: It’s one thing for me to walk into my Neiman’s store in Austin and know my guy, my shopper, and get a particular type of experience, but it’s another thing for me to go online and have no personal interaction.

BT: You can’t replicate the experience online because you’re not looking at people eyeball to eyeball. But there’s a different level of expectation than there is when you’re in a store. Our job was to shape these sites to make them more customer-friendly, and we think we have. They’re easy to navigate. We’ve downloaded virtually every catalog. We talk about incoming fashion, about trends for next season. We try to educate while we’re selling. And if you can’t work within the site, there’s a number you can call. We’ll talk to you.

ES: This is a growing piece of your business.

BT: There’s no question that the Web is the fastest-growing piece we have. It is now our largest single store. Our three sites combined will do $500 million this year. And I think it will continue to grow. Today’s generation is more tuned in to the use of the computer than the last generation, and the next generation even more so. My grandkids have been online since they were three years old. Now, does that mean our stores are going down? It does not. Store business will continue. The experience is one that people will not give up. But the Internet is a convenience that people are getting more and more comfortable with. I think what we’re doing is taking a share of the market that we didn’t have before.

ES: Let’s step back for a moment. How’s retail doing, generally speaking?

BT: Retail is doing just fine. However, there are segments that are doing less well, and some that are doing better. We at the top are doing very well, because the customer has the affluence and the wherewithal to do what she wishes, and she’s sophisticated and has a real desire to be in step with fashion. There’s a group of retailers at the bottom who are serving their customer and are doing well. It’s the department stores in the middle that seem to be stuck. I think they haven’t yet figured out how to get around all the issues they have to deal with.

ES: An example of a department store in the middle would be . . .?

BT: I would say Macy’s. What they’ve done, I think, is build a business on the basis of transactions and little or no service. That may work for them. That doesn’t work for us.

ES: You talk about the upper end thriving, but the economy waxes and wanes. Is your business recession-proof?

BT: We haven’t been through a serious recession in a long time. We had post-9/11, and while people were concerned about the uncertainty and pulled their horns in, there was no leaving us to go to a lesser venue. What we saw was that the customer stayed with quality. We didn’t change our method. We kept our focus. They just bought less, and we adjusted our inventory.

ES: If they bought less, it means you also earned less.

BT: Well, it was only the year of 9/11 that we had a decline in sales. But we still earned a lot, and we stayed very, very profitable. As soon as things started to clarify themselves, people felt a little bit more comfortable about the future, and what we found was that our customer was appreciative that we had not changed our stance. That we did not panic. That we did not trade down. That we did not change the assortments. That we did not change our level of service.

ES: I asked you earlier about the strengths of Neiman’s. What about the weaknesses?

BT: Whenever you put anything under a microscope, you’re always going to find areas of opportunity—I don’t call them weaknesses. Our area of opportunity would be that as we continue to grow, we must ensure the quality of the team by bringing people into our organization who have the same passion as those who are here already. Retail has not been one of the most enticing first jobs for college graduates over the years. That’s a concern.

ES: After all this time, Neiman’s is still headquartered in Dallas. How has that been? How is it now? Is the city a good place to do business?

BT: I think being in Dallas is perfect. It’s our home. It’s a positive. It has allowed us to expand and grow, and it hasn’t held us back at all. We have a great relationship with the city and great respect for it. We’re very interested in its welfare and good health, and we participate in a number of good causes. We do so with a lot of enthusiasm. And we’re here to stay. We’re not going anywhere.

ES: Was there ever a possibility that you’d move?

BT: We’ve never had that discussion. My experience—and I’ve lived in a number of cities and been with a number of retailers—is that you are who you are, that you make the best of where you are. The one thing about being in Dallas is that it keeps our team on airplanes. Someone in a New York store takes the subway or a taxi to the marketplace; we fly. But it hasn’t hindered us. We’re unencumbered by the nuances of New York, and because we’re not based there, we probably have a better understanding of the country, especially the Southwest and Midwest, and an appreciation for the “out of New York” mentality.

ES: Has Dallas been as supportive of Neiman’s as you’d like?

BT: Yes, but it’s not that we ask for much.

ES: A city that was run for several years by a mayor, Laura Miller, whose father was a former Neiman Marcus executive has to understand the value of its association with the company.

BT: I think the city absolutely understands how important we are to Dallas. And we understand how important the city is to us. We have three stores here and one in Fort Worth. We’re well represented. And our second-
largest-volume store in the country is in Dallas, at NorthPark.

ES: Where’s number one?

BT: Beverly Hills. I should also mention the store we’re sitting in as we talk, the downtown store. Remarkably, I think it’s 98 years old. It’s held up very well. We’ve maintained it. People come here to see it. It’s a tourist attraction.

ES: Let me end by asking about you. Your career in retail began when?

BT: It began in 1961. I was 23 years old.

ES: Where were you?

BT: Pittsburgh. The name of the store was Kaufmann’s. I was in a training program.

ES: And you’ve worked continuously in retail ever since.

BT: Forty-six years.

ES: If a young kid came to you now for advice about succeeding in the business, knowing what you know, what would you tell him?

BT: Work hard. Be smart. Be prepared to make the changes necessary to serve an ever-changing consumer. Always be passionate about the business. Set benchmarks and goals for yourself that are realistic and attainable but that you still have to push to meet. And never be satisfied with what is. Always know that there’s more out there to get.