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NEW YORK — A remodeled flagship, more powerful brand presentations, fewer price promotions and splashier events.
These are just a handful of the ideas outlined by Fred Wilson, president and chief executive officer of Saks Fifth Avenue Enterprises, in his first major interview since joining the company in December. Wilson and his team are out to modernize the chain, restore its historic luster and develop a stronger personality that resonates with customers. Saks has for years struggled with its image due to management and ownership changes, wobbly strategies and increased competition. While the team is hesitant about providing details about the future, it’s already emitting signals that big changes are on the horizon.
“We will make a powerful statement by brand and classification,” said Wilson. “We are getting input from a lot of resources.”
The master plan for renovating and remerchandising the Fifth Avenue flagship is in the works, and is expected to be finalized by September, with construction seen commencing in January. “The new plan will be very grand and dramatic,” said Robert Wallstrom, senior vice president and general manager of the flagship.
Ahead of the hammering, alterations are evident on the selling floors — from earlier deliveries to fewer markdowns, less merchandise and a greater population of mannequins to show outfits and wardrobing alternatives. “Even before making major changes, you can take what you have and energize it,” Wilson said. “This guy Wilson has been walking the floor every day.”
Aside from making the daily rounds, he also has been holding what’s become known in the store as “town hall meetings.” They’re geared to lift the morale of the entire staff of Saks Fifth Avenue, and improve communications. The team has been further motivated by the streak of strong monthly comp-store sales gains since last fall, peaking at 25.2 percent in February and 20.6 percent in March, as Saks rides the wave of consumer spending helping many retailers, particularly luxury chains. For 2003, SFA’s comps rose 3.4 percent, putting the chain at $2.44 billion. Operating income was $108.5 million, up 6.9 percent from $101.5 million.
The vision for Saks Fifth Avenue, which turns 80 next year, will be largely set by Wilson. He’s been given a great deal of independence in reshaping Saks by parent Saks Inc. — and he reportedly insisted on it when he joined the retailer. The Saks Inc. corporation is headed by R. Brad Martin, chairman and ceo, and Steve Sadove, vice chairman. Wilson reports to Sadove.
In part, the team’s vision calls for Saks to develop far greater drama and ease of shopping in its stores (not just the flagship), without a return to its carriage trade roots or an adoption of the cool edge of Barneys New York. How Saks will sharpen its identity is still being determined, Wilson said.
The flagship renovation is critical in establishing the brand positioning. It’s possible that certain past renovations over the last two years, such as the array of luxury accessories shops that line the main floor’s perimeter, could be undone. Over the past couple of years, men’s wear, special sizes and jewelry departments also were re-created, but a cosmetics overhaul for longer sight lines and a design to enhance the main floor grandeur was put on hold.
There’s speculation that the upcoming renovation will be more costly than the $100 million to $120 million estimated by the previous regime a few years ago. Not all of that was spent, and a good portion went for infrastructure improvements, such as air conditioning and converting back rooms into selling space.
Though Wilson wouldn’t provide very much detail on the renovation strategy, he stressed that Saks is seeking “much more innovation” on the selling floors, both in terms of how brands are presented and how categories are merchandised, and that the corporation sees an opportunity to garner greater business from the flagship, which accounts for about 25 percent of total volume. Having a major Fifth Avenue presence, at just under 600,000 square feet (gross), which is more than twice the size of Bergdorf Goodman, has been the prime advantage Saks has over its rival, the Neiman Marcus Group, parent of Bergdorf’s.
Before Saks, Wilson ran Donna Karan International, and before that, he was ceo of the LVMH Specialty Store Retail division and ceo of the LVMH Fashion Group for the Americas, where he dealt with Saks and other luxury retailers as a supplier. As part of his last assignment at LVMH specialty retailing, Wilson oversaw the development of the huge Louis Vuitton flagship on Fifth Avenue and 57th Street, which opened in February. It’s just that kind of statement that’s likely to inspire new presentations at the Saks flagship and its branches. “He’s all about big brand presentations. It’s very much in his background,” said one source. Another source said Wilson will dispatch a group of Saks executives to Japan to see how brands are presented in that nation’s department stores. There, collections are often situated in leased departments occupying good chunks of space, 2,000 square feet or so, with a breadth of merchandise.
“Fred Wilson is bringing a clear vision of what he sees the future will be for Saks,” said Gil Harrison, chairman of Financo Inc. “Since he took the job, he has visited every store and met with all of the major vendors to personally understand their product and commitment to rebuild Saks Fifth Avenue Enterprises. He understands brands and the strength of brands, and from his experience at LVMH, he has seen how department stores and other retailers have built brands throughout the world. It is fair to assume that, as time goes by, he will utilize these skills in his analysis of the Saks Fifth Avenue franchise.”
Ron Frasch, the former Bergdorf Goodman ceo who is currently a Saks Inc. executive responsible for private label and international development, is also a believer in big brand presentations. At Bergdorf’s, he created “worlds” of Chanel and Giorgio Armani housing all or most of a brand’s products in a single shop environment. Saks, with its much greater space, could very well create a “universe” of Chanel or Vuitton, even duplicating assortments in certain categories, such as handbags, in different sections of the store. Frasch has not been given an official title but that’s expected to be cleared up in the future, although not imminently. Given his prior Bergdorf’s experience and competitive restrictions imposed by his contract there, the role he plays at Saks Fifth Avenue is currently limited, but over time, those restrictions expire.
Two other key members of the new Saks team that will influence the store’s direction and presentation are Andrew Jennings, president and chief merchandising officer who formerly ran Holt Renfrew in Canada, and Terron Schaefer, senior vice president of marketing who was worldwide creative director at the Simon Property Group. Both are predisposed to create splashy, comprehensive merchandise and marketing promotions, so changes at Saks, both physically with the flagship and strategically, could entail a level of flamboyance not seen at the retailer in years.
“Saks is already well on its way to strengthening the talent on its organization, and next will be to give the [chain] a universal point of view, so every Saks has the same panache and glitter as the flagship in New York,” said Harry Bernard, executive vice president of San Francisco-based Colton Bernard Inc. “That’s been one of their most serious difficulties in the past. They’ve got to go in the direction of luxury, to reposition on an equal footing as Neiman Marcus. Fred Wilson’s ability to motivate is one of his strongest assets.”
Among the other changes Wilson and his team have initiated:
- An advertising and branding firm, Fallon Worldwide, has been commissioned to help identify a branding strategy. Hiring the agency was one of the first steps taken by Wilson, who also worked with the agency at Donna Karan. Fallon’s research on the Donna Karan consumer and brand image became a tool for developing new strategies.
- Increased editing of assortments and far less price promoting on the selling floors. “Part of the vision of Saks Fifth Avenue as a quality enterprise means much fewer sales events,” Wilson said.
- Accelerated deliveries. Executives say for spring, in some cases, designer brands hit the selling floor 30 to 60 days ahead of last year, though they acknowledged the seeds of earlier deliveries were sown last year under the previous regime headed by Christina Johnson.
- Mannequins and other visual displays to provide what Wilson refers to as a “look book” approach to showing a wider range of styles to suit different shoppers. “We are showing you how you can personalize your style,” Wilson explained. “When you step off the escalators, immediately you come upon something. We’ve more than doubled the mannequins in the last 90 days.”
On the fourth floor, for designer collections, there is 30 to 50 percent less merchandise compared with a year ago. “The floor has been messed with big time,” Wilson said.
The fifth floor, for contemporary collections, also has been edited down. “The most dramatic changes have been on four and five,” Wilson said. “There were too many brands and too many products.”
“There’s energy here,” he added. “People are excited. Business is up. Products are being delivered earlier, and we have been trying to accelerate deliveries as early as possible. Much of this was being put in place before I got here. I have to credit the merchants for getting this started. We have a lot of good people.
“The whole design of spring has lifted the business, absolutely,” Wilson added, referring to the season’s colorful offerings and how they are displayed in Saks stores.
Asked what areas are performing the best, Wilson replied, “We’re doing well everywhere, especially in bridge, contemporary, shoes, accessories and designers. “The men’s business is smaller than we would like it to be as a percent of the total, but it’s going very nicely. It’s on its way.” Smaller businesses at the store, such as intimate apparel, are said to be less robust, as well.
As an example, Wilson pointed out that three weeks ago, a 2,200-square-foot Armani Collezioni men’s shop on six was opened. It has upgraded lighting, a marble floor and tall, monotone, gray walls. Wilson noted.
“In a big way, Armani represents the Saks point of view. We’re putting merchandise out to see in an easy, simple way so it’s not overwhelming,” said Wallstrom. The old Armani shop was more walled in and had 24 suits in a style on the floor. Now there’s three, and a lot more in the storage room,” Wallstrom noted. “There’s about one-third of the merchandise on the floor and about two-thirds in the back. It was just the opposite before.”
He also said the shop has better service, with four or five sales associates on the floor at any given time.
The Dolce & Gabbana shop on three was also redesigned recently, shedding a heavy, deep burgundy look for a more modern, clean and open appearance, and on the main floor, a luxury handbag shop mixing Lambertson Truex, Jimmy Choo, Marc Jacobs, Miu Miu, Dolce & Gabbana, Celine and Fendi was created in one area behind cosmetics. “It’s a modern presentation that makes it easier for the consumer to shop,” Wallstrom said.
Saks also is trying to make sharper fashion statements by mixing items and outfits from a brand in a floor presentation. On five, for example, there’s an array of mannequins featuring DKNY, Joie, Diesel and Juicy Couture to spotlight the current golf-active trend in casual sportswear.
Saks sees expansion in the broadest terms, and last year announced a strategy for building stores overseas via a network of licensing arrangements. At the time, Saks said it plans to open a total of four stores in the United Arab Emirates, Qatar, Kuwait and Bahrain, beginning this year, and between five and 10 Saks stores in major cities in Japan, beginning in 2005. Saks also said it was considering Beirut in 2005 or 2006. South America also could be fertile ground, considering Saks has so many Latin customers, but there are no definite sites.
However, that strategy may take a different route. Asked if the plan is still to open licensed stores abroad, Wilson replied, “We are not sure, ultimately, what form [the strategy] will take.”
Private label represents just 4 to 5 percent of the retailer’s total volume of about $3 billion, including direct businesses and outlets. “We believe in private label. It will be an important part of the business,” Wilson said. Asked if he wants to increase private label, Wilson replied, “Probably, but we are reviewing it carefully now.”
The outlet strategy is also under scrutiny. While, since its inception, Saks has generally been pleased with the productivity of the outlets, in the past, some Saks executives have expressed reservations about the value the units bring to the Saks image and whether the company opened too many outlets, which made it challenging to get enough good designer merchandise to present alluring assortments off-price at each location. Currently, there are 54 units around the country. Asked about its current performance and if the concept had room for growth, Wilson said, “We are trying to maximize the business in its current format. Right now, it is doing fine.”
Among the regular-priced Saks Fifth Avenue stores, the presentation has been erratic, with about 12 to 15 locations said to be weak. Saks would close some doors, but it’s not that simple, due to lease obligations.
However, Wilson implied that quality standards will be raised wherever Saks is situated. Asked about flagship enhancements translating to branches, Wilson said, “We see opportunities right through the chain,” though for years, Saks has been hampered by agreements vendors have with Neiman’s and other competitors.
“We will be putting in the SFA brand filter in as many places as we can, as quickly as we can. Part of the vision is that we believe in consistency,” Wilson stated. “We think all great brands have consistency.”