Neiman Marcus 2009 Annual Report Download - page 8

Table of Contents
and participation in charitable functions in each of our markets. Past trunk shows and in-store promotions at our Neiman Marcus and
Bergdorf Goodman stores have featured vendors such as Chanel, Giorgio Armani, Oscar de la Renta and Manolo Blahnik.
Through our print media programs, we mail various publications to our customers communicating upcoming in-store events,
new merchandise offerings and fashion trends. In connection with these programs, Neiman Marcus produces The Book®
approximately seven to nine times each year. The Book is a high-quality publication featuring the latest fashion trends that is mailed
on a targeted basis to our customers and has a yearly printing in excess of 2.0 million. Our other print publications include the
Bergdorf Goodman Magazine and specific designer mailers. We also believe that the online and print catalog operations of Direct
Marketing promote brand awareness, which benefits the operations of our retail stores.
Loyalty Programs. We maintain a loyalty program under the InCircle® brand name designed to cultivate long-term
relationships with our customers. Our loyalty program focuses on our most active customers. This program includes marketing
features, including private in-store events, special magazine issues, as well as the ability to accumulate points for qualifying purchases.
Increased points are periodically offered in connection with in-store promotional and other events. Upon attaining specified point
levels, customers may redeem their points for a wide variety of gifts ranging from gift cards to designer merchandise and trips to
exotic locations. Beginning in calendar 2006, we transitioned customers in our previous Bergdorf Goodman loyalty program to our
InCircle loyalty program. Approximately 40% of our total revenues during each of the last two calendar years was generated by our
InCircle loyalty program members.
Proprietary Credit Card Program. We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC
Private Label Corporation (collectively referred to as HSBC). Pursuant to the agreement with HSBC, HSBC offers proprietary credit
card accounts to our customers under both the "Neiman Marcus" and "Bergdorf Goodman" brand names. Our original program
agreement with HSBC was scheduled to expire in July 2010. We have subsequently entered into an agreement with HSBC to extend
the program to July 2015 (renewable thereafter for three-year terms). We refer to the agreement with HSBC, including as extended, as
the Program Agreement.
Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all
credit risk with respect to sales transacted on the cards bearing our brands. We receive payments from HSBC based on sales
transacted on our proprietary credit cards. Such payments are subject to revisions, both increases and decreases, based upon the
overall profitability and performance of the proprietary credit card portfolio. Based upon current market conditions and the terms of
the current Program Agreement, we believe the future income earned by the Company will be lower than the income earned pursuant
to the original Program Agreement and that a higher portion of such future income will be based upon the future profitability and
performance of the credit card portfolio. In addition, we receive payments from HSBC for marketing and servicing activities as we
continue to handle key customer service functions, primarily customer inquiries and collections, for HSBC.
In connection with our Program Agreement, we have changed and may continue to change the terms of credit offered to our
customers. In addition, HSBC has discretion over certain policies and arrangements with credit card customers and may change these
policies and arrangements in ways that affect our relationships with these customers. Any such changes in our credit card
arrangements may adversely affect our credit card program and ultimately, our business.
Historically, our customers holding a proprietary credit card have tended to shop more frequently and have a higher level of
spending than customers paying with cash or third-party credit cards. In fiscal years 2010 and 2009, approximately 50% of our
revenues were transacted through our proprietary credit cards.
We utilize data captured through our proprietary credit card program in connection with promotional events and customer
relationship programs targeting specific customers based upon their past spending patterns for certain brands, merchandise categories
and store locations.
Integrated Multi-Channel Model. We offer products through our complementary Direct Marketing and Specialty Retail
businesses, which enable us to maximize our brand recognition and strengthen our customer relationships across all channels. Our
well-established online and catalog operation expands our reach beyond the trading area of our retail stores, as approximately 40% of
our Direct Marketing customers in fiscal years 2010 and 2009 were located outside of the trade areas of our existing retail locations.
We also use our e-commerce websites and catalogs as selling and marketing tools to increase the visibility and exposure of our brand
and generate customer traffic within our retail stores. We believe the combination of our retail stores and direct selling efforts is the
main reason that our multi-channel customers spend more on average than our single-channel customers (approximately four times
more in fiscal years 2010 and 2009).
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