The Reengineered Saks Fifth Avenue Is ‘Winning’

Marco B Divaio

It’s so far, so good, for the recently reengineered Saks Fifth Avenue. At least that’s what Marc Metrick, chief executive officer of the luxury e-commerce company known as Saks, contends in his latest quarterly letter to vendors. More from WWD Six months ago, Saks Fifth Avenue was split into two […]

It’s so far, so good, for the recently reengineered Saks Fifth Avenue.

At least that’s what Marc Metrick, chief executive officer of the luxury e-commerce company known as Saks, contends in his latest quarterly letter to vendors.

More from WWD

Six months ago, Saks Fifth Avenue was split into two separate companies, one for saksfifthavenue.com which is now called Saks, and another for the Saks store fleet, now called SFA.

“The accelerated growth in both channels coupled with our continued frictionless omnichannel experience shows early signals that our new model is winning with the consumer,” Metrick wrote in the letter, dated Sept. 7, a copy of which was obtained by WWD.

“Despite the recent increase of COVID-19 cases, business has remained strong. That being said, like all of you, we are closely monitoring the situation with cautious optimism,” he wrote.

Saks Fifth Avenue’s division into separate e-commerce and stores companies has drawn criticism from certain retail experts, who see the split as overly complicated, involving a great deal of administrative detail, and undermining efforts to create more seamless experiences for omnichannel shoppers. Some also view it as a sign that Hudson’s Bay Co., owner of Saks Fifth Avenue, Hudson’s Bay and Saks Off 5th, sees a big future in dot-com while having diminished expectations for the stores. Hudson’s Bay and Off 5th have also split their dot-com and store operations into separate companies.

However, Metrick and other HBC executives have argued that HBC’s new business model for its brands doesn’t impair the customer experience and that scores of service agreements ensure smooth cooperation and integrations between the dot-com and store operations. They also say the strategy puts a spotlight on the value of Saks’ e-commerce business. As reported, Insight Partners made a $500 million minority equity investment in the Saks e-comm site, valuing it at $2 billion. Saks.com is being positioned for a possible initial public offering. The 40-store Saks Fifth Avenue fleet, known as SFA, remains wholly-owned by HBC.

Metrick wrote in the letter that the Saks team “works closely with our partners at SFA…to deliver a frictionless customer experience.” Saks oversees all marketing and merchandising strategies for both channels.

“This model works as proven by some key stats from the quarter: nearly 50 percent of e-commerce returns were made in stores and approximately 30 percent of online orders were fulfilled by stores,” Metrick indicated.

Marc Metrick – Credit: courtesy shot.

courtesy shot.

HBC no longer reports its sales and earnings publicly, so Metrick’s quarterly letters are intended to give vendors some idea of how Saks and SFA are performing. The latest letter indicates that during the second quarter:

• Online sales on a gross merchandising value basis increased by 82 percent over 2019.

• Site traffic was up 80 percent to 2019.

• New customer counts online were up 85 percent to 2019.

“It’s important to note that we’ve seen improvement across all categories of business, with the strongest growth in men’s, women’s accessories and fragrance. Women’s apparel experienced significant growth as the category continues to rebound from the previous year,” Metrick wrote.

With the SFA store fleet during the second quarter:

• Comp sales on a gross merchandising value basis were up by 29 percent from the 2019 period, driven by “a marked increase” in productivity among style advisers.

• Top-performing locations were Atlanta; Beachwood, Ohio; Philadelphia, and Chicago.

• Men’s, women’s shoes and handbags performed particularly well.

The Fifth Avenue flagship in Manhattan is “rebounding” and improving its performance and traffic each month, Metrick wrote.

He also indicated that the Saks e-commerce fulfillment network is expanding with a third fulfillment center, in Middletown, Pa., which will be operated in partnership with GXO Logistics, beginning this month. “This facility will enable us to better meet the higher demand of our business and to quickly deliver orders to our customers throughout the holiday season,” he said.

He noted that Saks Fifth Avenue opens a store at the American Dream retail and entertainment complex in East Rutherford, N.J., on Sept. 17 and will “deliver our experience to a new group of customers, further our brand awareness and be a part of an innovative destination.” The Saks store fleet is headed up by Larry Bruce.

Metrick said Saks is advancing personalized service and investing more in top-of-funnel marketing tactics, including scaling investments in social media, podcast advertising and connected TV.

“We’ve also continued to focus on enabling one-to-one interactions with a number of key initiatives — launching additional trigger email programs informing customers of new products, enhancing product recommendations, optimizing frequency of email communications and furthering our advanced measurement capabilities,” Metrick wrote.

He said Saks has started hosting in-person events again, ensuring website and app stability, optimizing search, product and cart pages, and that the recent introduction of Klarna, a buy now, pay later service, has been exceeding expectations by driving conversion and bringing in new customers.

In June, Saks Fifth Avenue unveiled its diversity, equity and inclusion roadmap and established “The New Wave at Saks,” a designer accelerator program supported by Mastercard. The program seeks to develop “high-potential independent brands,” which Metrick said will be showcased in the Saks Fifth Avenue channels this month.

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