Bergdorf Goodman Inc.

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Bergdorf Goodman Inc.

754 5th Avenue
New York, New York 10019
U.S.A.
Telephone: (212) 753-7300
Fax: (212) 872-8677

Wholly Owned Subsidiary of N eiman Marcus GroupFounded: 1901
Employees: 2,000
Sales: $392 million (2000 est.)
NAIC: 448120 Women’s Clothing Stores; 448110 Men’s Clothing Stores

Owned by Dallas-based Neiman Marcus Group, Bergdorf Goodman Inc. is the only premier luxury store situated solely in New York. The legendary establishment is actually two Manhattan stores situated across the street from each other at Fifth Avenue between 57th and 58th Streets. A separate men’s operation, established in 1990, is located on the east side of Fifth Avenue. On the west side, Bergdorf Goodman’s main store, which opened in 1928, is undergoing long-term remodeling as the store attempts to modernize and regain some lost luster. A trendsetter in the 1970s and 1980s, and responsible for introducing many important designers, Bergdorf Goodman has come under fire from critics who say the store has lost touch with contemporary tastes.

1899: Herman Bergdorf Mentoring Edwin Goodman

The driving personality behind the rise of Bergdorf Goodman as a luxury retailer was without doubt Edwin Goodman. As a six-year-old, Goodman’s father, Henry, immigrated to the United States from Germany and settled in Macon, Georgia, where his family ran a dry-goods store. After the Civil War, the Goodmans moved to the North, opening a dry-goods establishment in Lockport, New York. Henry Goodman married Celia Cohn, whose family owned the Superba Cravat Company of Rochester, and was able to give up the drudgery of shopkeeping and go to work for Superba. As a result their son, Edwin, grew up in a middle-class home in Rochester. Early on he decided to become a tailor and dropped out of high school in order to learn the trade at the Stein-Bloch factory located in Rochester. His talents were quickly noticed and he was encouraged to move to New York City and become involved in making tailored suits for ladies, a rapidly growing and lucrative field. Not all men’s tailors were able to make the transition; one who did was a French immigrant named Herman Bergdorf, who owned a Fifth Avenue shop near 19th Street. He was as much interested in living the good life, however, as he was in growing the business, and it was mostly through chance that his work was “discovered.” His sister, the social secretary for a prominent woman, Mrs. William Goadby Loew, wore one of his tailored suits to work one day. Mrs. Loew was impressed enough to order one for herself. Once she was seen wearing a Bergdorf suit, his reputation was made and everyone in her fashionable circle besieged Bergdorf with orders. It was in 1899 that Goodman at the age of 23 came to work at Bergdorfs shop to learn ladies’ tailoring from the now-acclaimed master. It did not take long before Goodman was not only an accomplished tailor but essentially acting as Bergdorfs partner. With Bergdorf happy to spend more time at his favorite haunt, Brubacker’s wine saloon, Goodman ran the shop, displaying an aptitude for business as well as tailoring.

In 1901 Goodman raised money from his family to buy into the business, which was now renamed Bergdorf Goodman. As the retail and theater districts continued their decades-old march up Fifth Avenue, Goodman was eager to join the parade and after some effort convinced Bergdorf to relocate their shop. After they sold their current building, Goodwin used his share of the proceeds to get married and travel to Europe on his honeymoon. While he was away Bergdorf hunted for a new uptown location on the stretch of Manhattan that was known as the “Ladies Miles” because of the abundance of fashionable shops located there. Rather than acquiring a building on Fifth Avenue itself, however, Bergdorf opted for a less expensive side street address, 32 West 32nd Street, a decision that infuriated Goodman. The two men did not remain partners much longer: Goodman bought out Bergdorf, who then retired and enjoyed his remaining years in Paris.

Although he retained the Bergdorf Goodman name, Goodman was now very much on his own, able to trust his own taste and follow his own vision without interference from a less committed partner. He wanted to break away from the prevailing notion that shops simply offered their customers a single-breasted or double-breasted version of the same suit, either made out of blue serge or tan covert. He longed to make women beautiful and to this end studied the windows of the more successful shops. Popular at the time were hobble skirts, so named because they severely constricted the ability of the wearer to walk. Goodman designed the ultimate hobble skirt, ultimate in both style and discomfort, which gained him instant success. But despite the demand, he opted to discontinue the item. He decided that discomfort was not style, nor was fad to be confused with fashion. Believing that women should be comfortable in their clothes, he found a way to maintain the elegant lines of the hobble skirt while using a box pleat in the back to provide greater freedom of movement. It was just the first step Goodwin would take in liberating women from the restrictive clothing of the day. He led the way in exposing the neck, abandoning the jabot, a boned article that practically choked the wearer. In an even more daring move, Goodman exposed the ankle.

Moving Bergdorf Goodman in 1914

Goodman began to build an exclusive clientele but by 1914 he was still a ladies’ tailor operating out of a cramped salon on a side street. In order to take the next step he decided to move further north on Fifth Avenue to larger accommodations. He found a brownstone at 616 Fifth Avenue, located where Rockefeller Center stands today. After acquiring the property, he razed the brownstone and commissioned a five-story building to replace it. Unsure that his business would be able to support that large a structure, he hedged his bets by renting out much of it.

Goodman’s fears turned out to be unwarranted. He outgrew his salon in little more than a decade, the result of a major contribution to the fashion industry—championing high-quality, ready-to-wear garments. He recognized that women’s lives were changing and that they simply did not have the necessary time to devote to fittings. He also believed that ready-to-wear clothing did not have to be second-rate merchandise, a point he made repeatedly to manufacturers he visited, browbeating them into producing garments worthy of his fashionable clientele. After taking the initial steps into quality ready-to-wear garments in the early 1920s, Goodman was greatly assisted in expanding the business by his children, Andrew and Ann, and their friend Bernard Newman. All under the age of 25, these enfants terribles would have a major impact on the garment industry and the growth of Bergdorf Goodman. In large part their success was the result of Goodman’s habit of personally waiting on his customers, despite the growing prestige of his business. His children followed his example and by interacting with customers learned what they wanted. They also participated in Bergdorf Goodman’s semiannual sales, visiting the stock rooms to mark down items and in the process taking note of which items sold well and which ones failed to live up to expectations.

When rumors about the building of Rockefeller Center began to circulate, Goodman’s friend and real estate broker Leo Fishel and entrepreneur Fred Brown found a new home for Bergdorf Goodman at its current Fifth Avenue location. It was uncertain whether customers would follow the store uptown, and once again Goodman played it safe by having the new store designed so that it could be broken up into sections that could be sublet if needed. The precaution, as it turned out, was not necessary. With the advent of the Depression Goodman was able to forego his lease and buy the building outright, as well as pick up the mortgages of the surrounding businesses that did not fare as well during the 1930s. The real estate arm of Bergdorf Goodman eventually purchased the entire block. His business was prosperous enough that Goodman could have opened other stores under the Bergdorf Goodman banner, but he firmly believed that by operating in a single location he could better maintain the quality of merchandise and level of service that was instrumental in his success.

Upon Edwin Goodman’s death, his son Andrew took charge of Bergdorf Goodman in 1953. The store was already well established with New York society, as well as the merely wealthy, but Andrew was instrumental in enhancing its reputation and expanding its range of merchandise and personalized services. According to Crain ‘s New York Business, he “took the business to new heights as a fashion destination in the 1950s and 1960s.” In 1972 he sold Bergdorf Goodman to what would become Carter Hawley Hale Stores, and then in 1975 retired.

Bergdorf Goodman in the Vanguard of Fashion in the 1980s

Carter Hawley invested $15 million to renovate Bergdorf Goodman, installing the first escalators and adding about 50 percent more selling space. It also opened a Bergdorf Goodman satellite store in White Plains, New York, but by 1980 the company decided to convert it to a Neiman Marcus store, which management felt was more “adaptable” to a suburban location. In the late 1970s there was talk of opening Bergdorf Goodman stores in other cities, such as Boston and Washington, D.C., but these plans never came to fruition. The Fifth Avenue store, in the meantime, continued to thrive. In the 1980s Bergdorf Goodman was in the vanguard of fashion, among the first to recognize new European and American designers and especially important in bringing attention to Milan designers, such as Giorgio Armani, Gianfranco Ferre, and Krizia. Bergdorf Goodman’s parent company became the object of takeover bids in the 1980s, and as a way to fend off these advances, Carter Hawley restructured its business. In 1987 Bergdorf Goodman, Neiman Marcus, and Con-tempo Casuals were spun off as the Neiman Marcus Group, its headquarters located in Dallas, Texas, where the Neiman Marcus department store chain was launched in 1907.

Company Perspectives:

As the leading fashion specialty store, Bergdorf Goodman is known throughout the world for its elegance, quality and superior service.

Bergdorf Goodman continued to operate as a single location business with little interference from Dallas. Just before the Carter Hawley restructuring, Bergdorf Goodman introduced “The Decorative Home on Seven.” The seventh floor business offered antiques, home furnishings, porcelains, crystals, silver, linens, stationery, and first edition and rare books, as well as delicacies. A more important change was the 1990 addition of Bergdorf Goodman Men, “the ultimate store for gentlemen,” located across the street at 745 Fifth Avenue. It offered collections from all the top U.S. and European designers of mens wear and sportswear. Services included made-to-measure tailoring, custom shirtmaking, personal shopping, emergency pressing, and spot cleaning. Unfortunately Bergdorf Goodman Men opened during a downturn in the economy and the business did not become profitable until 1995. Bergdorf Goodman redesigned its fifth floor, formerly the Miss Bergdorf department, in 1992. Dubbed “On 5ive,” the department added a wide assortment of accessories to complement its eclectic fashions. The floor also offered a shoe department and café.

Guiding Bergdorf Goodman through the recession of the early 1990s was Burton Tansky, a seasoned executive who joined the company in 1990 as vice-chairman and in February 1992 became chairman and chief executive officer. Serving as president was Stanley Elkin, who came to Bergdorf Goodman in 1978 to become chief financial officer, then was named chief operating officer in 1985 and president in 1990. The parent corporation underwent a number of managerial changes in 1994, resulting in Tansky being appointed chairman and CEO of Neiman Marcus Stores. In turn, Elkin became chairman and CEO of Bergdorf Goodman. As the economy improved Neiman Marcus began to formulate big plans for Bergdorf Goodman. The company’s CEO, Robert Tarr, told Women’s Wear Daily in 1996 that the initiative included franchising women’s stores in the Far East, establishing men’s stores around the United States, and pursuing a private-label business with the Bergdorf Goodman name that also could be sold at Neiman Marcus stores.

With the economy starting to enjoy a long expansion, leading to a bull market for luxury goods, Bergdorf Goodman did not prosper as well as might be expected. Critics charged that the store had become staid and failed to keep up with changing tastes. To reinvigorate and modernize its operation, Bergdorf Goodman initiated a number of changes in the late 1990s. Both the main store and the men’s store underwent a sweeping $50 million renovation program. In 1999 the first phase was completed when the cosmetics store was doubled in size, resulting in “A New Level of Beauty” operation that included eight spa rooms for facials, skincare consultations, and special treatments. Bergdorf Goodman also found additional retail space by commandeering office space, with some administrative functions transferred elsewhere in midtown Manhattan.

To help turn around the men’s store, veteran retailer Peter Rizzo was brought in as vice-chairman in April 1999 and several months later was named president. In January 2000 Elkin suddenly resigned and Rizzo began openly campaigning for Elkin’s position, despite only being on board for eight months and having little experience in the women’s market; of the stores’ $275 million in annual sales, only $40 million were from the men’s side of the business. According to Women’s Wear Daily, there was speculation that “pressures from the inside and organizational changes may have hastened Elkin’s decision to leave. … Over the past few years, Bergdorfs operations, with the exception of buying, sales promotion, advertising, and a few other areas visible to the customer, have been centralized into the parent Neiman Marcus Group in Dallas, limiting Elkin’s direct control.” Moreover, the publication noted reports of friction between Elkin and Rizzo, with sources also suggesting that because of Bergdorf Goodman’s relatively small size there was no need for both a CEO and president.

Rizzo’s self-promotion, however, did not result in winning the top job at Bergdorf Goodman. Rather, Ronald L. Frasch was named chairman and CEO in April 2000. His appointment was seen as a return to the old guard, and to some a repudiation of Rizzo’s aggressiveness. Frasch worked for Bergdorf Goodman in the 1980s and was a colleague of Tansky at Saks. Despite speculation that Rizzo would resign, he stayed on as Bergdorf Goodman pursued the next stages in its turnaround initiatives. According to Daily News Record, “Rizzo played a pivotal role in broadening the appeal and modernizing Bergdorf Goodman with younger, more contemporary designer lines and reorganizing the selling floors for a sharper focus to a different audience, in both the men’s and women’s stores. He also was instrumental in launching new marketing campaigns.” Part of those promotional efforts was the creation of a magazine. Rizzo resigned from his position in September 2002, denying rumors that he had been asked to leave and maintaining that he actually had a good relationship with Frasch.

Amid all the changes in the upper ranks of management, as well as extensive remodeling of its store, Bergdorf Goodman found that its attempts to revitalize its business were hampered by a poor economy and the lingering effects of the terrorist attacks of September 11, 2001, which caused a drop in New York tourism. Nonetheless, Bergdorf Goodman retained its reputation and position as one of the world’s top specialty retailers.