Neiman Marcus Has Quarter Loses Due to Distribution Challenges

When a luxury retail department store leader like Neiman Marcus makes tech adjustments in its' distribution system, it is clear that traditional warehousing is not what will succeed any longer. Distribution has moved to a more sophisticated approach to managing inventory and shipping, especially when faced with robust Amazon. The e-retail giant has mastered distribution and used Same-Day Delivery to revolutionize how we ship.

Yet, Neiman Marcus recent announcement shows that the retailer has some improvements to be made. Internet Retailer discussed in an article how thre retailers has had first fiscal quarter losses for 2017 due to the distribution problems that it is facing. Neiman Marcus had challenges implementing a new cross-channel merchandising system, which costs Neiman Marcus up to $35 million during its fiscal first quarter. This impacts sales revenue from the holiday season. Neiman Marcus reported online sales accounted for 29.2% of overall sales in the first quarter, which ended October 29th, at $315.1 million. This number is slightly down from $315.7 million from the previous year.

Neiman Marcus stated, “These issues primarily related to the processing of inventory receipts at our distribution centers, the transfers of inventories to our stores and the presentation of inventories on our websites. These issues prevented us from fulfilling certain customer demand in both our stores and websites that we estimate resulted in approximately $30 to $35 million of unrealized revenue.” Efficient distribution matters not only for physical stores, but also with online business. Without having the product in stores, it can effect sales, and without correct inventory to fulfill online orders, it effects on-time shipping. This then creates the inability to keep up with demand on both fronts.

In a filing with the U.S. Securities and Exchange Commission, Neiman Marcus revealed problems that related to the implementation of NMG One, its new cross-channel merchandising and distribution system. It resulted in a negative impact on online and offline sales. More specific numbers mentioned in the report were Neiman Marcus' earnings, which included:

• A year-over-year total comparable sales decline of 8.0%, compared to a 5.6% decline last year.
• Net revenue of $1.079 billion, down 7.4% from $1.165 billion.
• A net loss of $23.5 million, compared to a net loss of $10.5 million.

One way to improve omnichannels to facilitate online and offline sales is same-day delivery, which is what companies like Best Buy, PetSmart, Toys-R-Us, and others are doing. One prime example is Macy's, which uses its' physical store locations as close proximity warehousing and get product to shoppers fast. Macy's offers same-day delivery in San Francisco, Los Angeles, Seattle, Houston, Chicago, New Jersey, Washington DC, and more. With over 880 store locations, Macy's can fulfill online orders on a national scale, alleviating some of the pressure on its' distribution centers.

Neiman Marcus can do likewise, partnering with a Same-Day Courier like A-1 Express to develop a same-day solution to move inventory between stores, as well as fulfill online orders to customers. The Orlando Courier also has a nationwide footprint and can handle the volume Neiman Marcus needs. Like Macy's and Amazon, Neiman Marcus can generate sales growth with same-day delivery, turning more inventory and order fulfillment to their stores.

Reference: 12.15.16, www.internetretailer, Matt Lindern, Distribution problems cost Neiman Marcus during its first quarter