With all the fallout and disruption in the retail and apparel industries this year, Saks Off 5th sees some golden opportunities.
“Our merchants have liquidity — that translates to money to spend in the market to drive newness in our assortment,” said Paige Thomas, president and chief executive officer of Saks Off 5th. She’s making the point that in the fast-paced off-price sector, keeping the open-to-buy liquid is critical to seize merchandise opportunities as soon as they arise.
“We do not see any challenges to deliver expansion with our best brands or deliver newness by bringing in brands we didn’t have before,” said Thomas.
In an exclusive interview with WWD, her first since joining Off 5th last February, Thomas said 14 brands were added or on tap for the assortment this fall, among them Adidas, Kenzo, Hanky Panky, Molton Brown and Lacoste.
She also said six other brands were bought in a bigger way to add relevance to customers’ changing, casual lifestyle needs due to the pandemic, among them Burberry, Ugg, Tory Burch, Tumi and Kate Spade.
“In 30 to 60 days, we will be talking about even more brands,” Thomas said. “Our team has done an unbelievable job getting into the market building relationships and talking about new opportunities within our product offering.
“I see a huge opportunity in our Saks Off 5th offerings to shift to customer needs. Our previous offer was a bit formal, a bit traditional. Our vision, from a merchandise procurement perspective, is to fill out his or her closet in a more complete way.”
Off 5th has a unique place in the off-price sector, and is in a position to capitalize on the ill fate of others, specifically two primary competitors, Century 21 which went out of business this year and Neiman Marcus Last Call, which closed most of its stores and says it currently has no plans to close the remaining. Off 5th is the last player with a comprehensive designer and luxury offering, though Bloomingdale’s The Outlet was adding locations before the outbreak of the coronavirus.
Additionally, there’s excess merchandise available stemming from other store closings, either permanently, such as in the case of Barneys New York, or from retailers temporarily closing stores, canceling orders and ordering conservatively for seasons ahead. Six years ago, Loehmann’s, which sold designer labels off-price, shut down.
Off 5th’s stores have suffered through the pandemic, traffic is way down. But the off-pricer’s digital business is relatively robust, offsetting some of the brick-and-mortar decline. Digital sales represent 30 percent of the chain’s total annual volume, which was $1 billion, pre-pandemic.
For years Saks Off 5th couldn’t quite get it together, flip flopping on expansion, pricing, merchandising and market strategies. A few years ago, the chain grew to more than 130 stores. Subsequently, about 20 weaker locations were closed, leaving the off-price chain with 110 units currently.
Everyday low pricing was attempted but reversed back to the high-low strategy. Off 5th advertises discounts of 30 to 70 percent.
For a long time Off 5th was buying with a department store mentality, thinking about two big seasons — spring and fall — and planning that way. It was more about depth and less about breadth. Consequently, customers felt Off 5th lacked freshness.
According to the company, buyers now shop opportunistically, looking at the open-to-buy every week, resulting in better turns and greater freshness. The majority of the merchandise is purchased in the market; the rest is manufactured for Off 5th or coming direct from Saks Fifth Avenue, though Thomas said only a small amount of merchandise comes from Saks’ leftovers.
Sources speculated for a brief time Richard Baker, executive chairman and ceo of the Hudson’s Bay Co., the parent company of Off 5th, Saks Fifth Avenue and Hudson’s Bay in Canada, considered selling Off 5th, but it would be hard for it to survive separate from Saks Fifth Avenue. “There is an established connectivity and halo of the brand awareness, that’s why we are Saks off-price,” said Thomas.
How much connectivity there should be between Saks and Off 5th has been debated internally. There is some degree of collaboration between Saks and Off 5th, but not much.
For two years up until Thomas joined Off 5th, Marc Metrick, the president and ceo of Saks Fifth Avenue, was running Off 5th. He led efforts to stabilize Off 5th by paring down its store base and reshaping its business model. Off 5th seemed to turn a corner, generating comp gains from 3.4 to 4.9 percent in quarters one, two and three of 2019. But this year it’s difficult to get a precise read on Off 5th’s performance, or any of the other divisions at HBC, since the corporation went private in February and no longer publicly discloses its financials.
“I talk to Marc on a regular basis, but only a very small amount of inventory flows into our stores and digital business from Saks,” said Thomas. “Still, it’s important that our team really understands that Saks Off 5th offers Saks Fifth Avenue style for less. There is a collaboration, but we are not in the market together procuring goods. Saks Off 5th shoppers do expect to see their favorite Saks brands at our stores at a value, and it’s also critical our team stays aware of what is trending.” Designer styles arrive on Off 5th’s selling floors six months after first appearing at full-price retailers.
At Nordstrom Inc., divisions operate more collaboratively, particularly in the merchandising. Forty-five of the top 50 vendors at Nordstrom’s full-line stores are also sold at the Nordstrom Rack off-price stores. At Saks Off 5th, the crossover of brands is far less, though Thomas declined to specify how much there is.
The Nordstroms say many shoppers at Rack graduate to Nordstrom full-line department stores. Asked if the same is true for Off 5th and Saks Fifth Avenue, Thomas replied: “We have data that [shows] our core customer cross shops into full price — Saks full price, Bloomingdale’s, Neiman’s and Nordstrom — and that we have a greater luxury customer than any other off-pricer. It’s the white space where we can win.” Reportedly, there is minimal overlap of customers shopping both Off 5th and Saks Fifth Avenue, though executives declined to specify.
Responding to industry speculation that Off 5th, like many other retailers selling nonessentials, was experiencing a very difficult 2020, Thomas said, “Saks Off 5th has been performing in line with expectations. Our store performance has been more challenging; our digital business is exceeding all expectations and driving strong growth.
“We are powering ahead,” Thomas added. “I’m really proud of the team. As challenging as the business environment is, we have [made] some pretty bold, aggressive moves. We have been building upon the foundational work that was established prior to me joining,” said Thomas, referring to streamlining the store fleet, and pushing digital growth, among other changes. She came to Off 5th from Nordstrom Inc., where she served as executive vice president and general merchandise manager of men’s and kids’, and earlier, executive vice president and gmm of Nordstrom’s Rack and HauteLook off-price businesses.
“The performance was there — three quarters of comp growth,” last year. “But 30 days after I arrived, we were faced with closing all of our stores,” due to the pandemic. “Needless to say, it’s been a really interesting journey. I’m proud of our quick pivoting, closing stores and immediately building a plan to reopen them,” Thomas said.
She underscored how Off 5th differentiates in the off-price sector. “It’s significant in two ways. We cater to a highly valuable, affluent, true luxury off-price customer. She’s fashion savvy, educated, affluent and she loves fashion,” and has different demographics from those shopping T.J. Maxx, Burlington or Nordstrom Rack, Thomas added.
Off 5th’s high penetration of digital sales is also a differentiator, she said. “We have made strategic investments in our digital channel. This summer, we brought in a new platform, Salesforce Commerce Cloud. It offers a better customer experience, including easier checkout and navigation, speed, and greater ability to support scale of growth from a digital perspective.”
A buy now, pay later service will be in place sometime in November, and one of three providers being considered will be chosen.
Off 5th added store fulfillment capabilities a few years ago, and will add curbside pickup, and buy online, pick up in stores, possibly in 2021.
For holiday, Off 5th for first time has been offering “sneak peek” deals in October ahead of the store’s usual Black Friday promotions. Retailers of all sorts have been advancing holiday campaigns this year due to the pandemic and a desire to spread the shopping out over a longer period to reduce crowd sizes and delivery pressures, and compete with Amazon Prime Day, which was postponed to Oct. 13 and 14, and became a de facto start of Christmas gift shopping.
For holiday, Off 5th has stepped up its presentations of beauty and wellness, comfy and cozy fashion, home products, tech, luxury goods and winter staples. Gift sets and prepackaged gifts are being emphasized to make shopping easier.
“We are putting fuel on the fire — to take us forward,” said Thomas. “We are absolutely holding our own, and we’re excited about what we can layer on, on top of the foundational work that was done, to take Saks Off 5th into the future.”