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How Neiman Marcus can avoid brand dilution with the Target collaboration

July 11, 2012

Neiman Marcus pairs up with Target

Maintaining brand image, quality of products and customer service are the main factors that department store chain Neiman Marcus must keep in mind to avoid brand dilution when partnering with mass merchandiser Target.

Neiman Marcus is partnering up with Target for a limited-edition, 50-product holiday collection featuring 24 designers including Marc Jacobs, Oscar de la Renta, Diane von Furstenberg and Proenza Schouler. There is a chance that Neiman Marcus could dilute itself with this partnership, but there are ways that it can still maintain its luxury status, build loyalty and attract new customers.

“If luxury brands are going to dip into the mainstream pool, they have to remember that people buy luxury because it’s luxury and they want the luxury experience, whether it’s in person or online,” said Adriana Estrada, senior strategist at Siegel+Gale, New York.

“The only way these brands will be diluted is if the quality of goods doesn’t live up to the expectations of the Neiman Marcus and designer shoppers,” she said. “But savvy luxury shoppers are discerning and may not go for the collaboration products if they do not meet their standards – they just won’t buy them.

“However, as we’ve seen over and over at Target and H&M, designer shoppers will go for the lower-priced collaboration and mix it with the originals.”

Neither Neiman Marcus nor Target responded before press deadline.

Needless mark-down?
Neiman Marcus is joining the ranks of Missoni, Jason Wu, Versace and Karl Lagerfeld, brands that have collaborated with mainstream retailers such as H&M and Target for exclusive collections.

However, there is always the possibility of brand dilution by Neiman Marcus and some of the designers.

“It’s a great idea for Target, but not so great for Neiman Marcus,” said Al Ries, chairman of marketing consultancy Ries & Ries, Roswell, GA. “For Target, it creates the impression that the chain carries products that are just as good as those found at Neiman Marcus.

“For Neiman Marcus, it creates the impression that a consumer can buy Neiman Marcus products at Target for a lot less money,” he said. “Not true as far as these limited-edition products are concerned, but there is always the perception that it might be true.”

The Target and Neiman Marcus Holiday Collection includes 50 limited-edition products first on sale Dec. 1 in Neiman Marcus stores, Target locations and on NeimanMarcus.com and Target.com.

The collection will be priced $7.99-$499.99, with most products under $60.

Designers for this collection include Alice + Olivia, Altuzarra, Band of Outsiders, Brian Atwood, Carolina Herrera, Derek Lam, Diane von Furstenberg, Eddie Borgo, Jason Wu, Judith Leiber, Lela Rosa, Marchesa, Marc Jacobs, Oscar de la Renta, Philip Crangi, Prabal Gurung, Proenza Schouler, Rag & Bone, Robert Rodriguez, Rodarte, Skaist-Taylor, Thom Browne, Tory Burch and Tracy Reese.

All designers are members of the Council of Fashion Designers of America. To celebrate the collaboration, Neiman Marcus and Target plan to donate $1 million to the CFDA.

Right on target
Other luxury designers have dabbled in mainstream retail in the past.

The most recent was Missoni for Target, which launched last year. However, there were some glitches in the system that could have harmed the loyalty towards Target and Missoni customers.

The system crashed the day the collection went live, which angered and frustrated many consumers.

The loss of crowd control and too much expectation with limited supplies could turn customers off, Ms. Estrada said.

However, the most important things to remember are that luxury products, no matter the price, must stay that way.

Designers must uphold the same quality, image and craftsmanship into these products as they do their others, or it could seriously dilute the way that consumers see both a brand and where brands are sold.

“Where a brand is on sale is just as important as the brand itself,” Mr. Ries said. “Neiman Marcus might suffer from the dilution of its brand, but because the products are relatively inexpensive, I don’t think the designers are going to suffer from having their designs on sale at Target which has a reputation for promoting good design at reasonable prices.”

Final Take
Rachel Lamb, associate reporter on Luxury Daily, New York

Rachel Lamb is an associate reporter on Luxury Daily. Her beats are apparel and accessories, arts and entertainment, education, food and beverage, fragrance and personal care, government, healthcare, home furnishings, jewelry, legal/privacy and nonprofits. Reach her at rachel@napean.com.