Sears Holdings announced at the end of May 2018 its plans to close at least 63 stores as another quarter of losses hit the company. JC Penney is anticipating closing 8 of their stores this year after closing 140 in 2017. Macy’s has closed 11 stores already in 2018 as part of its 2016 plan to close approximately 100 stores. Hudson’s Bay Company, the owner of Saks Fifth Avenue, reports 65 million in net income, a 2.1% increase in sales entering 2018 and a new store opening in Canada just months after it announced its Transformation Process. What is this department store doing that the others aren’t?
How is Saks Fifth Avenue able to avoid the “extinction of department stores?”
As part of my internship at Enhanced Retail Solutions, I get to discover how buyers and suppliers are using data to make decisions and to create a personality for their retail stores. While the majority of Enhanced Retail Solutions’ clients supply to mid-tier stores like Macy’s that represent the average consumer, I wanted to do some research on how a time-tested luxury retailer sets itself apart.
Saks Fifth Avenue was started in the early 1900s by Horace Saks and Bernard Gimbel, who operated autonomous retail stores at Herald Square. In 1924, they opened the flagship store between 49th and 50th streets & 5th Avenue– Saks Fifth Avenue was born. Saks Fifth Avenue is present in 22 states, 6 countries, and is distinguished as a fashion hub for superior service and distinct luxury retail.
Since Saks was acquired in 2013 by Hudson’s Bay Company (HBC), revenue of the parent company increased 363%. This increase was led by Saks’ expansion in Canada and HBC prioritization of e-commerce. Saks’ Quarter Four of 2017 was the highest fourth-quarter sales growth of the last three years. In a report from Saks this March, sales from Saks Fifth Avenue grew for the third consecutive quarter, boasting the company’s highest margins.
After 2016, however, some shareholders were suggesting HBC sell its flagship store and lease the location to boutique stores, pressuring HBC to squeeze more out of its real estate. Because Hudson’s Bay and Saks Fifth Avenue branches of the company are supporting the struggling DSG and OFF 5th brands, some investors wanted to sell the flagship store’s location and use the capital to help the slipping companies. A plan that could be justified with numbers but must be looked at holistically; without the Saks Fifth Avenue store at 611 Fifth Avenue, the essence and credibility of the brand would fall. No more Saks Fifth Avenue, simply Saks *insert location here*.
While HBC leased part of the Lord & Taylor flagship, it held onto the flagship Saks, and then some. The store recently unveiled its Beauty Floor 2.0, a $250 million remodel project to boost beauty sales and attract younger clientele. Saks Beauty 2.0 on level two is proud of its sleek modern design, natural light from windows with broad views of Fifth Avenue, reflecting Italian floors tiles, digital creativity, and millennial appeal. This 32,000 sqft space houses over 122 beauty and wellness brands including La Mer, Givenchy, Tom Ford, and Chanel, among others. The space also features wellness services like FaceGym, massaging underutilized facial muscles for a noninvasive lift, and Remodelage Martine De Richeville, a cellulite, and weight loss massage treatment. There is an event space for classes and seminars. There are virtual “try-on” makeup mirrors. Givenchy is promoting custom leather lipstick cases. Gucci is holding its first beauty space in the world in this Saks. Dior is sponsoring its own spa. You can create custom bouquets at EB Florals flower shop.
Even if you are not interested in cosmetic products, you have to see this store for the tech-incorporated design and architecture. Especially when the glass elevator and wrap around staircase is completed in February of 2019. Sadly I will be back in Florida by then, so someone send me pictures!
HBC expects its luxury sector and Saks Fifth Avenue to grow in Fiscal 2018. The retail strategies outlined in the Hudson’s Bay 2017 Annual Report include driving sales across all channels by improving digital platforms and online capabilities to create the same superlative service guests experience in stores, online. Another prominent focus of Saks’ is to create exciting in-store experiences and unique offerings, as demonstrated by Beauty 2.0.
“Our strategy for all stores in North America is to create one-of-a-kind experiences for our clients―this is what we call ‘The New Luxury,” explained Marc Metrick, president, Saks Fifth Avenue, in a statement. “This is an experience clients cannot get anywhere else…”
Saks Fifth Avenue’s focus on creating a truly distinct shopping experience for clients is setting the standard for other retailers and then surpassing it. It’s the forward-thinking beauty and design combined with superior customer service that keeps people interested in Saks. To some, including myself, Saks is a reach. But that’s a niche that Saks has. When I’m in the store, it feels like I’m walking through a museum; it motivates me to strive for the best. I’m thankful for this internship for the giving me valuable opportunities, leading me to a career in corporate retail, and maybe even working for Saks one day.
Besides the obvious difference in merchandise offered by Saks and mid-tier department stores, customers feel welcomed in Saks. Saks alleviates all of the issues of department stores: crowded spaces, fluorescent lights, and bad customer service. If other department stores followed Saks to provide a better shopping experience by employing contemporary design and technology and offering superior customer service, they too could become more than a department store, but a destination.