BIRMINGHAM, Ala. — With an arsenal of merchandising and marketing ideas that itself deviates from the usual weapons, Saks Inc. is declaring war on department store sameness.

Defining department stores’ biggest challenges as “sameness of product,” “pricing confusion” and “ineffective marketing,” among others, R. Brad Martin, chief executive officer, outlined strategies to rejuvenate business despite a difficult economy at the annual shareholders meeting at Saks Inc.’s corporate offices in Birmingham Wednesday. Martin said new initiatives should help the company meet its long-term goal of 5 to 7 percent revenue growth, and 3 to 5 percent comparable-store sales growth for the next few years.

Saks Inc. will try almost anything to get consumers excited about department store shopping, from nail spas to “personalization shops” to Club Libby Lu stores for “tweens.” While making shopping more experiential and less promotional, the retailer wants to wow consumers with more unique merchandise, from private labels and proprietary brands to unique vendors and environments.

Despite its efforts, business has been difficult for the company. While special items led it to a first-quarter profit of $14.4 million versus a year-ago loss, both its Saks Fifth Avenue and department store divisions had lower operating income as well as lower net and same-store sales during the period, as reported. In May, its comps slid 1.6 percent as department stores were off 0.2 percent and SFA was down 3.8 percent. Its fiscal 2002 sales totaled $5.91 billion.

For the Saks Department Store Group, which includes Parisian, Proffitt’s, McRae’s, Younkers and Carson Pirie Scott, Martin said differentiating product from other department stores is key. Unique merchandise, including private label, has grown to 23 percent of sales from 17 percent in 2002, and is on track to grow to 30 to 35 percent by the end of 2003. The trend is most pronounced at Parisian, where the percentage is 40 percent.

In women’s apparel, the private brand, Relativity, launched in 1998, is now at $100 million in annual sales with strong margins, said Martin. Relativity and Laura Ashley, introduced last fall, will expand to other families of business by year’s end, including special sizes.The department store group is going after the tweens market, with the recent acquisition of Club Libby Lu, a Chicago-based specialty store chain that offers parties and events for preteens. Saks will open 11 mall-based freestanding shops, and will install Club Libby Lu shops in selected stores, with 75 to 100 locations planned over the next few years. Saks also is targeting kids with FAO Schwarz, Zany Brainy and Right Start in-store shops rolling out this year, all with child-friendly environments that include games and interactive experiences.

To enhance the shopping experience for women, nail salons will open initially in six department stores over the next few months — three Parisians and three Proffitt’s/McRaes. Ambience and staff will be hip and European-inspired, and salons will offer consumer-friendly pricing.

“Personalization Shops” — Saks’ attempt to customize product, especially accessories such as handbags, with monograms, photos and other personal touches — will open during the fourth quarter with dedicated space and a centrally trained staff in selected stores.

Martin plans to combat “pricing confusion” among consumers by expanding the “incredible value” program, which presents certain categories, especially private label, as fairly priced and not subject to markdowns. For certain categories and items that also are sold by competitors, Saks has initiated a “we will not be undersold” policy in advertising and signage.

In marketing, Saks Inc. is making a number of bold moves, such as a successful program in Parisian’s Atlanta stores that ran for three weeks in May. As Federated Department Stores’ consolidation of Rich’s and Macy’s brought about four Atlanta Macy’s store closings, Parisian offered customers who owned a Rich’s or Macy’s credit card a $50 Parisian gift certificate just to open a credit account.

“We saw an opportunity to get business from Macy’s customers who were disengaged,” said George Jones, ceo of the Saks Department Store Group, in a postmeeting interview. “We took extreme measures, but it paid off. That’s the kind of creative marketing we want to continue, along with events and gwp [gifts with purchase].”

Jones said Saks will continue to extend existing brand partnerships, such as the Jane Seymour home collection, launching in department stores this summer, and to search for new partners. Jane Seymour home is presented in lifestyle settings with a wide range of product, from bedding to photo frames, and it will be the dominant brand in all of the department stores’ home areas.For the Saks Fifth Avenue division, Martin said that successful in-store leather goods and jewelry salon shops, now in the New York store, will roll out to other locations. At SFA, designer business is improving, he said. Contemporary areas continue to be strong, while bridge remains soft.

Saks Fifth Avenue will open new stores in Richmond, Va., this fall, and Raleigh, N.C., in Sept. 2004.

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