Merchant Prince Stanley Marcus

 

INC.: While, at the same time, the buyer is bringing more price pressure on the manufacturer?

MARCUS: That's correct. The buyer is saying, "I want more money for my showcase. I want markdown money. I want advertising money. And I want some money under the table."

INC.: Is that more true today?

MARCUS: I really couldn't say. Buyers have always been susceptible to corruption. It used to be nightclubs and racetracks. Today, for all I know, it's sex.

INC.: But whether the concession is under the table or over it, you're saying that these concessions have become too important in buying decisions.

MARCUS: I can tell you almost exactly when it began, because I was one of the ones who started it. It was back in 1931. David Crystal came to me with a line of casual dresses made from a new fabric, Linisette, I think it was called, and asked me to give it a try. I liked the program, but it was new, risky, so I made a proposal to Crystal that if he and his fabric supplier could put together some money for us to buy local advertising and help defray the cost of a mailer, that we would put on a huge promotion of his dresses. He did, and it was a success that became copied very quickly throughout the whole industry. But like lots of good ideas, it has been carried to an extreme, and become self-defeating. Now, everybody is looking for advertising money, and it has helped to drive the best goods from the marketplace.

INC.: How's that?

MARCUS: Because if a buyer, sitting in front of her computer screen, is faced with the choice of buying something that is definitely superior or something that is of lesser quality but comes with 50-50 advertising money, you know which one the computer is going to tell her to buy.

INC.: And by the same logic, the incentive is to buy goods that come with markdown money rather than those that don't.

MARCUS: To me, insisting on markdown money makes an unfair claim on the manufacturer. If you're a retailer and you buy a product of your own free will, assuming that the product is delivered in good condition, you should take your own lumps if it doesn't sell. But that's not the trend today. Retailers want to minimize risk. And they show very little respect for price. Somehow the goal of retailing has become to get rid of your goods as quickly as possible, and this has led to a theory of merchandizing that requires you to reduce prices just as soon as sales of an item begin to drop. That's why the markdown money has become so important. But with all this marking down, customers no longer have any confidence that the price they are paying today is not going to be undercut tomorrow. The price system's foundation is as strong as Jell-O.

INC.: And as a result, margins get thinner, leading to even greater pressure on prices, greater standardization, and further decline in product quality.

MARCUS: It's a vicious circle.

INC.: Don't both sides have an argument here? The manufacturers say they would obviously prefer not to have to get into markdown money and advertising money, but they're at the mercy of the big stores, the volume buyers. And from the other side, the retailers complain that they really do want to offer better goods -- and a better selection of goods -- but the manufacturers aren't offering them. Which group has the better argument?

MARCUS: Probably the manufacturers. It's not black and white, to be sure. But I think the reason retailers see less choice and less creativity is that they're putting greater pressure on the manufacturer to cut costs. You can't do that and then turn around and complain that creativity is gone. Creativity is a commodity that must be paid for. And fewer and fewer of today's retail managers understand that.

INC.: Is that because fewer and fewer retail managers have much creativity themselves?

MARCUS: To a degree. I think the good, creative people -- the people with flair -- have gotten out of the retail business and gone into things like advertising, where they have found more money, more applause, more of an opportunity to spread their wings.

INC.: You were able to spread your wings without leaving retailing. And perhaps nothing symbolized that better than your Christmas catalog.

MARCUS: We used it to help build a sense of excitement, a sense of the unexpected. And it is still effective in that regard today, although less so. Production and distribution costs have escalated enormously, and I have a feeling electronic marketing will eventually replace the catalog as we know it now. That is something that retailers, on the whole, are not very enthusiastic about.

INC.: Why not?

MARCUS: Retailers tend to be extremely reactionary. Over the years, they've fought about every new or progressive idea that they've come up against. In the '20s they fought chain grocery stores. In the '50s it was various laws to protect the worker. They resisted truth-in-labeling laws. On the whole, retailers are like the Bourbons: they've learned nothing and forgotten nothing.

CORRECTION-DATE: July, 1987

CORRECTION:

On the cover of our June issue, we incorrectly identified Stanley Marcus as the founder of The Neiman-Marcus Co. In fact, the Dallas-based department store was founded by his father, his uncle, and his aunt.

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