Saks CEO on e-commerce split-up and luxury spending

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Eight months after the Hudson’s Bay Company, the owner of Saks Fifth Avenue, split the luxury retailer’s e-commerce business into a separate entity, changes are underway.

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NEW YORK — Eight months after the Hudson’s Bay Company, Canada-based owner of Saks Fifth Avenue, split the luxury retailer’s e-commerce business into a separate entity, changes are already underway at its site.

The number of styles sold by Saks.com has increased by 40%, and the number of brands available has increased by 30%. Saks.com is offering in children’s clothing and home goods as well as activewear. Buyers can now enjoy free delivery and returns. And finally, shoppers will see faster delivery of their goods and more upscale packaging – with an eco-friendly twist.

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Behind all the changes is Mark Metric, former president and CEO of Saks Fifth Avenue, and now CEO of the new Saks.com company called Saks. Metric says the stand-alone company with the new funding means the business can grow much faster. So far, there are signs that the spinoff announced in early March is in the works. Saks.com now has 1 million visits per day, up from 500,000 two years ago. And sales on the total value of merchandise on Saks.com grew 80%, while store sales increased 30% in the second quarter ended July 31 compared to the same period in 2019.

Venture capital firm Insight Partners invested $500 million for the new Saks.com company and valued the standalone business at $2 billion. Hudson’s Bay, which also owns Saks of Fifth and the Canadian Hudson’s Bay department store chain, went private about two years ago.

Changes are taking place as online shopping exploded during the pandemic, even for high-priced luxury items, as shoppers avoided brick and mortar stores. According to Mastercard Spending Pulse, online sales grew 21.1% in the first nine months of this year and nearly doubled overall luxury sales. In comparison, total retail sales excluding auto and gas increased by 10.8% during that time frame.

Meanwhile, news is pouring in that Saks is preparing for an initial public offering for its e-commerce business. This is happening as active investor Jana Partners is pushing for a spinoff of Macy’s e-commerce business.

The recently interviewed Metric at Sachs’ New York headquarters to explain a wide range of issues, from the reasons behind the split to how luxury spending is on the rise again. His responses have been edited for clarity and length.

Q. Why did Sachs spread its e-commerce?

A. 20 years ago or so, the first example of e-commerce…. none of us – we traditional department store folks – were able to really join the space race in the right way. We had a lot of bricks and mortar to deal with. We had customers who liked to shop one way, and we had to be consistent and it was very complicated. And then as we’ve been watching the channel shift through pre-pandemic, seeing this digital-native consumer come to life, we realized….we can’t miss it, like the industry did in the first one. Remembered that. So we really decided to structure our business in a way where we can win right with both channels.

> What’s the biggest difference?

A. Since we launched Saks.com in the late 90s, we were an “OR” company. We can invest online or in store. We can buy inventory online or in store. We can focus on online or online marketing. Store. We have now become an “and” company. We can invest in our online and in our store. We can spend marketing dollars for our online and our stores. We can buy merchandise online and for our stores

> How’s the luxury business doing?

A. I am very happy with how the business has come to a halt and how the pandemic has propelled the business forward. There are people who really want to get dressed up again, whether they’re returning to the office or they’re going out to dinner again and they’re going to see friends. It’s the go out and travel businesses that are really working.

Q. How is the consumer benefiting?

A. They have more choices and choices than ever before. There are new categories that we weren’t really into in a meaningful way or they were there, but they weren’t really powerful. We are growing and really going after them.

> How are you improving the delivery speed?

A. When we could, we focused on getting it to you. Now we are focused on getting it to you as soon as possible. Maybe a day or two of faster delivery, and it’s not really where we want it to be yet. But this work is going on now.

> Why are you speeding up now?

A. It starts with having inventory at our fulfillment centres. When you’re the fully invested omnichannel retailer that we were, some of your inventory is sitting in your fulfillment center and some is sitting in one of 40 stores. And it just takes a long time when you end up at the fulfillment center and have to go to the stores to get it filled. It’s going to take longer for the customer to receive it. It’s less efficient for the consumer, and it helps to speed up that process in a big way.

Q. Are there any plans for Saks.com to go public?

a. My job and my team’s job is to focus on the customer experience saying what we’re going to do and building this business. What happens from the perspective of capital markets, who knows?

Q. What about acquiring new customers?

A. We’ve gotten about half a million new customers in the last seven months all while maintaining the right economics, and I’m thinking about economics in a very different way. So I’m not only thinking about my customer-acquisition costs being moderate to low. I am thinking about the lifetime value of these customers, what they are bringing to us.

Q. How are you navigating the disruptions in the supply chain?

A. It is not a matter of diversifying where we are going. It was a matter of making sure we had enough so that if there was a drop or if you got less you were still getting it. He was coming there early so that even if he came late, he would come on time. So it was really about being strategic about the quantities you were placing. And we weren’t crazy.

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