Layoffs are often red flags about a firm’s financial health, yet in the case of Saks.com, chief executive officer Marc Metrick says recent cutbacks are no reflection on the state of the business.
“Right now, Saks is the largest luxury e-commerce business in the United States. We weren’t before the pandemic,” Metrick said. “You really got to go back to 2019, pre-pandemic, to look at it. Online, in 2022 we were up 120 percent versus 2019. The stores are up 20 percent versus 2019, and the combined business is up 42 percent.”
Earlier this month, Saks.com laid off about 100 corporate workers, or 3.5 percent of its entire workforce. Metrick told WWD that the layoffs stemmed from a reorganization involving creating separate technology and operations teams for efficiencies and to accelerate growth, and were to eliminate redundancies. Whether the layoffs are finished, or more could occur, is something Metrick wouldn’t address.
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In the reorganization, RJ Cilley was named chief operating officer, a new role in the company in which he oversees fulfillment centers, logistics, photo studios, item life cycle involving the processes to get items on the website and ready to sell, customer experience and service, business operations and marketplace, and the Bangalore, India, teams that support different areas.
Also in the reorganization, Mike Hite was named interim chief technology officer at Saks, another new role, where he is responsible for building and innovating the online experience.
Cilley was senior vice president, marketplace and operations at Saks, overseeing digital operations. Prior to that, he was the chief digital officer for HBC and earlier held roles across digital, business operations and corporate development at Saks Fifth Avenue and HBC. Before that, he was an investment banking analyst at BMO Capital Markets focusing on consumer and retail. HBC is the parent company of Saks, Hudson’s Bay and Saks Off 5th brands, all of which recently experienced some corporate layoffs.
Hite was Saks’ chief information officer, overseeing internal information technology systems. Before that he held tech roles at Jane Street, WeWork and Airbnb, and finance technology roles at Bain Capital and TripAdvisor.
In the following Q&A with WWD, Metrick discussed the Saks.com reorganization, the ensuing layoffs, how the luxury website and its assortment is changing with the introduction or expansion in such categories as wellness, home, kids, golf and ski, and how it’s not. Saks.com is approaching $2 billion in annual sales, according to sources, and has been fueled by Insight Partners’ $500 million minority equity investment in Saks.com in 2021 in conjunction with the reengineering of Saks Fifth Avenue into two separate companies — the e-commerce business, which is simply known as Saks, and the physical stores, known as SFA.
It’s important to Metrick and his team that Saks reinforces its messaging, and that brands and consumers better understand the changes in particular, its approach to a marketplace business model, its performance and opportunities and the layoffs that represented a small percent of the workforce. Apparently, there are a few impressions in the market that Saks.com executives feel need fixing.
WWD: Why was it necessary to lay off some corporate workers?
Marc Metrick: Reorganization is what you saw. I always felt like omnichannel department stores were at a severe disadvantage to the pure-plays, hampered by old systems that couldn’t integrate well with implementing new systems. These pure play e-commerce companies started five years ago with everything new. So when we first separated Saks from SFA, I said “Let’s build this thing up so we can move with rapid, rapid pace,” and get more competitive. We took a similar approach to a start-up to allow us to move as quickly as possible. We combined technology and operations and had technology people distributed across multiple areas. We had engineers on multiple teams, among other technology people, so now as we are consolidating technology functions into one team it led to the small reduction in workforce because of the redundancies. Now the goal is to get to that next horizon of growth and really burst through. I said that to really scale up and run fast and efficiently, let’s separate our technology and our operating functions. And when we did that, when we reorganized over the last 90 days, we had a few redundant functions and roles. That’s what you saw being displaced. It’s unfortunate. It’s not something we ever want to do.
WWD: How is the split of Saks.com and the Saks Fifth Avenue stores working out?
M.M.: The separation has enabled the stores to focus the right way and online business to focus the right away: on the customer. And it’s a win-win. We grew our customer count 60 percent since pre-pandemic. Just online we picked up 2.7 million customers. Our total number of omnichannel customers, those who shop online and in our stores, is up 43 percent since 2019. Those are big numbers. This is a strategy that is working. In 2016, 2017, we weren’t seeing that kind of lift in all channels.
WWD: What do you attribute the gains to?
M.M.: We were able to market much more efficiently and specifically. We were able to invest into technology to personalize more effectively. People don’t care that it’s two different companies. The customer looks at Saks.com and Saks Fifth Avenue as one.
Through data, through looking at the customer through a different lens, we were able to significantly expand our assortment. We’re not taking it down, in quality. This is where I feel a lot smarter than I did four, five years ago. The luxury consumer doesn’t just want to buy expensive designer product. They want to buy luxury lifestyle product. There is a lot to offer them inside that definition of luxury, and that’s what we have been able to do. We added lots of brands, expanded the assortment but always stayed true to luxury. We’ve also improved our packaging, there’s more luxury to it, speed, pre-printed return labels for returns, taking friction out of the process. You and our partners need to understand all of that and that we are wholly committed to the luxury strategy.
WWD: Saks.com does carry drones and Sharper Image toys. How do they fit in?
M.M.: Guess who buys drones — luxury consumers. These are all toys for the luxury lifestyle.
WWD: What about that $60 toaster?
M.M.: We’re not putting a price point on anything.…The top three customer service issues always were about the assortment. That you didn’t have anything I wanted. One of the most important things in shopping for luxury product is having product availability, and having more of what people want. And more important, actually having something that people didn’t know they wanted, but ended up wanting, and discovering. That’s part of the experience. So that’s what that’s all about.
WWD: Some of these new items we haven’t seen on Saks.com before are procured through a marketplace model. How deeply is Saks getting into that model?
M.M.: We’re being very opportunistic about it. There’s not a target. It’s not like we’re going to turn into a marketplace. You can’t do it in luxury. You’ve got to be edited. You’ve got to have a point of view. You got to stand for something. And that’s another myth I need to bust. We’re not just going to be an array of stuff. There’s always going to be a Saks point of view on everything we do. But you can take an opportunistic approach to your business and give consumers the right level of assortment, which is afforded by marketplace or leased concession, while at the same time managing to have a Saks point of view on the assortment. With our overall business model, there will always be a higher penetration of wholesale, rather than marketplace which is very small.
WWD: In what categories, wholesale or marketplace, do you see opportunities for growth?
M.M.: It’s across the board. You want to make sure you’re able to offer the consumer choice when they come to see you. And it’s just too expensive [for Saks] to buy everything that they may want.
WWD: Industry-wide, the rate of growth of online sales is slowing. What is your outlook on that?
M.M.: It’s moderating for sure, but still pretty strong. It’s still an exciting time. We are coming off an incredible moment of aberration for the industry, but there is still business to be done. We are positioning ourselves for growth in 2023. You just got to win the customer. It’s not going to be as easy.
WWD: What about investing in the stores?
M.M.: It’s critical to the success of the e-commerce business. I would say that HBC plans on investing a fair amount of money in the stores over the next couple of years. I feel really good about the condition of the store fleet over the last five or six years and of what’s been invested, versus what you’d see out there.
WWD: There’s still the idea of taking Saks.com public, following Mytheresa.com, which went public. The investment and build up of the Saks.com business, its organization and the volume, would suggest that. Can you talk about that at all?
M.M.: The goal is to get this thing to be as big as possible. If that’s it, make it the best possible customer experience as much as we can.