At the heart of Saks Fifth Avenue’s split into separate e-commerce and brick-and-mortar stores companies, Marc Metrick sees a clear objective.
“We believe it is our right to own the U.S. luxury consumer,” said Metrick, chief executive officer of Saks, the e-commerce operation of the Saks Fifth Avenue brand. “We want to be the destination where the consumer is coming for everything from a luxury standpoint. That’s our goal.
“We have to deliver the best possible experience we can, the best possible assortment and selection we can, and this transaction enables us to do that in a way we would not have been able to before as a combined company.”
In a conversation with James Fallon, WWD’s editorial director, Metrick, a 25-year veteran of Saks, explained some of the nuts and bolts of forming two separate Saks companies, how it’s advanced the Saks brand and performance, and responded to some questions being raised about the strategy.
Last March, Saks’ parent corporation, the Hudson’s Bay Co., split its Saks Fifth Avenue store fleet and saksfifthavenue.com into separate companies. Insight Partners, a private equity firm, entered into a partnership with HBC, establishing Saks’ e-commerce business as a stand-alone entity, now known as Saks, and made a $500 million minority equity investment in Saks. The 41-unit Saks Fifth Avenue store fleet operates separately as an entity referred to as SFA, which remains wholly owned by HBC.
Richard Baker, HBC’s governor, chairman and CEO, and Metrick were the architects of the re-engineering.
In years past, “We couldn’t invest the right way. We always had to decide between bricks and clicks and what we were going to do,” Metrick said. “This split has enabled us to properly invest and properly focus, and candidly, take what’s ours.
“Forever, we were an ‘or’ organization. We had to choose — where to invest our inventory, where to focus our energy, where to focus our capital, where to put our investment. This gives us the ability to refocus the organization, to become an ‘and’ organization. We can build for the consumer the right digital experience and keep that store experience special and important….So it allowed the team to focus differently and really introduced a whole new investment criteria of how we were spending and how we are investing specifically around our marketing and customer acquisition tactics.”
Metrick said Tracy Margolies, Saks’ chief merchandising officer, and Emile Essner, Saks’ chief marketing officer, “have responsibilities for both channels, but they’re different from before because they have separate budgets, separate tactics and specific people on their teams in some places where they can direct focus. It’s certainly gives us the ability to control that brand experience for merchandising and our communications all at the same time, benefiting both by channel-specific strategy.”
Metrick said more than 300 operating service agreements are in place “to make sure the consumer is having an omnichannel experience. We split for purposes of our investment and our focus and our strategy, but we are holding the omnichannel experience together for the consumer through these operating service agreements to make sure the ecosystem of Saks Fifth Avenue remains omnichannel.”
He underscored the omnichannel character of the business, indicating that last quarter, 50 percent of the returns from the website came through the stores and 30 percent of the website’s sales were filled by the stores. “From a consumer perspective, it’s absolutely business as usual.…You can buy something on saks.com and have it altered in one of our stores. You can buy something online and return it to a store.…Our stylists in our stores make a full commission on saks.com. We have 3,500 stylists inside our stores.”
He said Saks launched its website in 1998. “It’s not like we are new to this. We changed the focus, the rules of engagement. We changed our investment thesis. Think about our marketing team, how they get to go to market, to get to consumers on an everyday basis is radically different overall from the last 10 years. But we don’t have to train anybody. They know how to do it.” As previously reported, Saks.com generates about $1 billlion in annual revenue.
The re-engineering has supported efforts to broaden the Saks Fifth Avenue offering, Metrick said. “Just over the last seven months, since the transaction, we increased total items on saks.com by 30 percent. We’ve added about 600 new brands across existing categories we do business in and new categories we weren’t doing business in before. It gives Tracy and the team the ability to free themselves to really invest into everything for the customer. You can buy gym equipment on saks.com now. We are getting into the home business in a much more pronounced way, food in a much more pronounced way. We are amplifying categories that we really didn’t stand for, like children’s.”
He said saks.com gets 1 million visits a day. “That is almost double what were were getting in 2019. That’s not an accident. That is through strategic investment.” He emphasized that the Saks stores are up 30 percent versus 2019, “enjoying a very healthy business right now and so is everybody.”
Through the pandemic, “the consumer had different choices to make and found luxury.…Once you taste it, that’s what you want to eat going forward. People weren’t going out to eat. They weren’t traveling. They had the same disposable income or even less. So they found luxury and haven’t walked away from it yet and I don’t think they will.”
He said men’s continues to be one of Saks’ fastest-growing businesses and accelerated through the pandemic, and that recently, there have been some spikes in the evening business. “People are getting ready to go out again. Saks has been a go out and travel company, as people begin traveling again and going out again, we are seeing those commensurate businesses really fire.”
Regarding Saks’ holiday positioning, Metrick said, “We believed we would see the consumer come back. We didn’t know where we would be with the pandemic, but we knew they would be back. We also had to decide whether there would be a supply chain issue. So we really leaned into our inventory purchases. We got behind them. We make a big bet on the consumer and I am very confident it’s going to pay off.”
He also said the company has contingency plans, whether with FedEx or UPS, for delivering purchases to customers. “I think the consumer is going to be tuned in to what some of these macro challenges are. They might shop earlier. We have the benefit of micro fulfillment in stores, as well as recently starting up an additional fulfillment center in Middletown, Pa., while also operating the fulfillment center in La Vergne, Tenn.”
While Saks does ship abroad through a few different partners, the focus is “on getting our proposition here in the U.S. very solid. It doesn’t mean we don’t have midterm expectations to go out internationally. Right now we are testing something in Japan with a partner, with saks.com. It’s early days for that.”
It’s believed that the re-engineering is the prelude to taking saks.com public, that an IPO is the end game. When asked about that, Metrick said, “I’m not focused on that. The endgame here is I want Saks to be the number-one e-commerce platform in the U.S. That is the endgame for me.”
Asked what technologies are most important going forward, Metrick answered, “the strategy needs to be around fulfillment and how to get goods to customers as fast as we can, through the whole pipeline. Speed is everything.” He also said bringing the “theater of livestreaming to the customer is very important.”
Regarding the lingering industry skepticism on the breakup strategy — as well as the pressure other retailers such as Macy’s and Kohl’s are now under to adopt a similar plan — Metrick replied, “It’s good to see the certain level of skepticism and naysaying that started at pretty loud levels quiet a bit. But honestly, it’s about really winning with the consumer and making sure we deliver that great experience and that’s what making me really feel good about this.
“This isn’t about putting in a bunch of money in and splitting up the companies. You have to have the team that’s behind it, and you have to have the right brand and the right partners.”