Thursday, November 17, 2016

Partnering to Get Younger

Many firms struggle at times with an aging customer base.  We have seen firms such as Harley Davidson and Talbot's face this challenge in recent years.   Neiman Marcus provides another example of a firm that has had difficulty attracting younger shoppers.  According to Fortune, the average age of a Neiman Marcus shopper is 51 years old.  What is Neiman Marcus doing to attract younger shoppers?  They have come up with an interesting and creative strategy.  They are partnering with Rent the Runway, a firm whose focus is millennials.  Their average age is 29 years old.   Rent the Runway will open small boutiques in select Neiman Marcus stores.   Rent the Renway appears to seek access to shoppers who want the touch and feel available in a physical location - something that their online business model does not provide.   

Mutually beneficial partnerships, such as this one, might be an effective strategy for firms who face an aging customer demographic.  What's the risk?  Certainly, one worry is cannibalization.  Will they take sales away from one another?  A more interesting question, though, is whether those young consumers, the millennials, will convert to purchasers at Neiman Marcus.  Can these folks afford the premium-priced goods at Neiman Marcus?  A key strategic risk emerges if Neiman Marcus begins to offer lower-priced goods to cater to these young shoppers. That move might compromise their premium, differentiated competitive positioning and their reputation for high quality.   Moreover, what if they cause a decline in satisfaction among their core customers by carrying more of the types of clothes that attract millennial shoppers?  Older women may not like the fashions that millennials seek.  Getting younger is a challenging proposition for any firm; it's not as simple as it may seem.  

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