CASE STUDY: NEIMAN MARCUS Neiman Marcus is an established US luxury department store. It belongs to the Neiman Marcus Group and operates stores in about 40 locations, five of which are in South Florida. Founded in 1907, the stores sell women's and men's clothing, accessories, jewellery and dinnerware. Neiman Marcus stocks high-profile brands, such as Chanel, Gucci and Prada, alongside up-and-coming designers. Its target market is people who can afford and value high-fashion. According to a recently published prospectus, Neiman Marcus said ‘Our customers are educated, affluent and digitally connected.’ Seventy per cent are women and about 38 per cent have a median household income of US$200000. The average customer is 51 years old; 48 per cent are aged 50 or younger. In common with many other retailers, Neiman Marcus has an online selling operation. Indeed, orline sales are becoming more important to the business. Neiman Marcus’s chief operating officer Don Grimes said that the company sold US$1300 million online in 2015, an increase of 13 per cent. Web sales made up 25.5 per cent of the company’s 2015 sales of US$5095 million, up from 23.9 per cent a year earlier. The success of its online operation was explained by investment in technology and the provision of a personalised shopping facility. 4 What is meant by the term distribution channel? 2 Describe one factor that might affect the choice of distribution channel for a business. 3 Describe two features of a department store. 4 Discuss the possible reasons for the growth in online sales for retailers such as Neiman Marcus. Give at least two reasons in your analysis. 5 Assess the benefits of e-tailing to Neiman Marcus.CASE STUDY: NASSAR Nassar’s is a high street retailer of fashionable menswear. The business has 23 stores in the UAE and a few in neighbouring middle-eastern countries. For 56 years, the business has used cost-plus pricing in its shops. It is a simple pricing method, all staff understand it and it ensures that profits are made. For most lines bought in by the chain, a mark-up of 40 per cent is applied to the cost to get the selling price. In 2014/15, the business started to fee! the impact of online competition. Although the business was keen to hold on to its traditional methods, the owners understood that if they failed to meet customer needs sales would decline. As a result, an online operation was set up. However, the online operation had problems with distribution and was taking time to get established. The business was also running short of cash. It was suggested by one of the managers that perhaps promotional pricing could be used to generate sales quickly. This was discussed at a meeting and the managing director suggested that a trial should be undertaken at one of the stores. The plan was to use psychological pricing for a selection of four items on a one-month trial basis. Table 37.1 shows the sales of the four items in the month before the trial and Table 37.2 shows the sales of the same four items in the month of the trial. ¥ Table 37.1 Sales in month before trial COST (AED) || COST + PRICE (AED) ES REVENUE (AEI 1 200 280 100 2 800 1120 50 a 400 560 80 4 120 168 200 W Table 37.2 Sales during one-month promotional pricing trial 1 200 239 150 800 899 65 400 S19 140 120 159 300 awn1 What is meant by cost-plus pricing? 2 Work out the price Nassar’s would charge for an item costing AED 240. 3 Discuss one advantage and one disadvantage of cost-plus pricing. 4 What is meant by psychological pricing? 5 (a) Complete the tables by calculating the revenue before and after the price change and (b) then assess whether the sale using psychological pricing was effective for Nassar’s.