Target and Neiman Marcus Join Forces
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Target (NYSE: TGT) and Neiman Marcus have joined forces to unveil a collection featuring more than 50 limited-edition gifts from 24 designers on December 1 this year, just ahead of the Christmas season. The products will sell at prices from $7.99 to $499.99, with most costing less than $60. Neiman Marcus held talks with Target for several years before it approached the company again in December about a potential partnership. Target has introduced its own designer collections that have helped it increase store and online traffic. Neiman Marcus has now introduced Target to its designers. Target will oversee the sourcing and manufacturing for the collection. The collaboration allows both companies to broaden their customer base and add to its selection of holiday gift items under $100.
This collaboration is welcome news as merchants recently reported their worst June same-store sales in about three years. There has been some concern over consumers pulling back in light of the European economic crisis and an unstable U.S. recovery. Even though there are signs of slowed consumer spending from high income shoppers as well, luxury names such as Neiman Marcus, Saks (NYSE: SKS), and Nordstrom (NYSE: JWN) continue to outperform the rest of the industry. Target also reported disappointing June sales.
Saks is long-established as a retail icon, known for providing customers with a wide product selection and exceptional service. They are committed to diversity in both their corporate structure and product variety. Saks is an elite competitor in upscale retail. However, their customer base does not translate well beyond that parameter. Nordstrom is one of the nation’s leading fashion specialty retailers. However, they are faced with the same problem as Saks; their customer base does not exist beyond upscale retail. Neiman Marcus’ collaboration with Target could serve to grow and expand their customer base.
Exclusive designs can be a differentiator across retailers. For Target, its limited-edition designs that often draw crowds have given the brand some credibility with shoppers as it seeks to lure them into spending more on discretionary merchandise, which is more profitable than consumable items. Even though Target has worked with designers previously, this collaboration is on an entirely new scale. The collection will allow Target to compete more directly with upscale retailers than it has in the past. It definitely sets the discount retailer apart from the big box Wal-Mart (NYSE: WMT).
Investors have responded well to the announced collaboration so far. This is good news for the discount retailer and will continue to be positive as the largest shopping season of the year approaches. Target and Neiman Marcus are striving to distort the distinction between upscale and discount with this collaboration.
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