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11/23/2019

Premium Stores vs. Outlets: Who’s Winning Consumer Dollars?

Exploring Nordstrom, Saks, and Neiman Marcus Audiences and Retail Strategy

Recent closures are rocking the fashion retail industry. Barneys New York, a paragon of luxury retail, is one of the most recent to fall victim. What does the downfall of Barneys and the growth of e-commerce mean for other retail giants, like Nordstrom, Saks, and Neiman Marcus? Should these brands move away from luxury retail and double down on their discount outlet stores? Or should they stay focused on their existing strategies? Ubimo’s Polaris location intelligence platform reveals insights to help brands define their future strategies and understand their existing audiences.

Focusing Where it Counts

As department stores think about opportunities for expansion, investment, advertising, and customer engagement, understanding the audiences visiting their physical stores is critical. Two key metrics for measuring these audiences are share of visits, the percent of total store visitors that a brand is capturing and efficiency, a relative measure of foot traffic per store. Of the brands in this analysis, Nordstrom and Saks both operate more outlets than premium stores, while Neiman runs more premium stores. Is this the optimal strategy for each brand?

All three brands have room to improve and explore new strategies based on their share of visits and efficiency metrics. Neiman Marcus currently focuses mainly on premium stores and operates a limited number of Last Call outlets. While their premium stores attract the most foot traffic (68.6% of total in-store brand visitors), the Last Call outlet stores are 12% more efficient, e.g. drive more foot traffic per store on average. This indicates that shoppers have an appetite for Last Call and flock to the outlets when they are available, since there is higher foot traffic per store than Neiman Marcus premium stores. Thus, if Neiman Marcus should look to their outlet stores to understand ways they can improve efficiency of their premium stores.

Two key metrics for measuring these audiences are share of visits, the percent of total store visitors that a brand is capturing and efficiency, a relative measure of foot traffic per store.

The story is reversed for both Nordstrom and Saks. For these brands, the outlets have the highest share of visitors (63.7% and 80.7%, respectively), but their premium stores are actually the most efficient. So the outlets are driving the highest percentage of overall foot traffic, but the premium locations see the most foot traffic per store, making them the most efficient. This signals that there is room for Nordstrom and Saks to increase the efficiency of their outlets or close outlets that are performing poorly in terms of efficiency. But there is also room for them to capitalize on their existing efficient premium stores. In the premium stores, Nordstrom and Saks can test new ideas, like pop-ups or new product lines, since these stores are more efficient and the ideas will reach a larger audience per store. Also, if brands roll out new ideas in their premium stores, they will only have to test on a smaller number of stores to reach the same total number of customers.

Share of Store Visits: Premium Store vs Outlet

Efficiency: Premium Store vs Outlet

Connecting with Your Audience

Once stores understand the foot traffic to their retail locations, they can utilize audience insights to inform their growth strategies and cater to their shoppers. If Neiman Marcus wants to expand their Last Call outlet brand, they should understand the characteristics of existing shoppers frequenting Last Call stores. The most efficient Last Calls, which drive the highest amount of foot traffic, are in the San Francisco Bay Area. So, we examined the audience visiting these stores to identify areas for growth. These Last Call locations are popular among younger shoppers, aged 18-34. The proportion of visits from Gen Z, ages 18-24, was 25.4% higher than their share of the population, and the proportion of visits from Young Millenials, ages 25-34, was 11.5% higher than their share of population.

Once stores understand the foot traffic to their retail locations, they can utilize audience insights to inform their growth strategies and cater to their shoppers.

These results indicate that if Last Call expands on their outlet strategy, it’s crucial to engage the younger audience. One way to do this is to carry brands that are popular with them. Ubimo’s audience affinities insights reveal that Last Call shoppers particularly enjoy brands like Nike, Adidas, and Levi’s. Knowing this, Last Call can secure a core demographic, ensuring the success of their stores.

Beyond Brick and Mortar Stores

Another way to engage in-store shoppers is through their mobile phones. Smartphones go with people everywhere. The younger generations are especially glued to their phones, constantly checking social media, messaging, and surfing the web. Using Ubimo’s Polaris Realtime DSP, brands can engage with their customers by serving relevant mobile advertisements based on digital and offline attributes.For example, if Saks wants to focus on their outlet strategy, they can provide special offers or coupons to loyal customers, those who visit Saks stores frequently, by sharing the offers through mobile ads. Reengaging real-world shoppers digitally can increase the reach and engagement of qualified customers. If Nordstrom wanted to tap into and win over outlet shoppers who frequent their competitor’s Off Saks stores, they could do so by serving their own advertisements to this same audience of Off Saks customers. In this way, brands can digitally engage their customers who visit their physical stores and sell products even after audiences leave the retail locations, creating a seamless customer journey and unified brand experience.

A Brave New Retail World

As retail brands brace for an uncertain future coming off of the closure of Barneys, they can ensure their current and future success by understanding visit trends and acting on audience demographics using location intelligence. Brands can no longer operate in the status quo and, instead, should reconsider their premium vs. outlet strategies. These brands, Nordstrom, Saks, and Neiman Marcus, who began as brick-and-mortar retailers, face competitive pressures not only from other physical retailers, but also from digital ones. They’ll need to use all data available to them to make sure their stores are operating as efficiently as possible and they are reaching the right audiences with their messaging and promotions. In the face of intense brand competition, retail brands have a choice: eat or be eaten.

Disclaimer: This independent analysis is based on Ubimo’s location intelligence platform. As such, Ubimo does not have any relationship with the brands featured in this report, nor should the independent analysis be construed in any way to suggest otherwise. Ubimo data is always anonymized and aggregated.

Greer Bingham

Marketing Insights Manager

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