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July 10, 2024
Is the Saks Acquisition of Neiman Marcus a Good Move?
Saks Fifth Avenue’s parent company, HBC, has announced the acquisition of Neiman Marcus for $2.65 billion, which, once the transaction is finalized, will establish a new luxury retail powerhouse named Saks Global.
Once direct competitors and heated rivals, the two brands are now planning to structure a single retail fashion entity while keeping all of the included brands intact and operating under the same names. The mainstay brands will be:
- Bergdorf Goodman
- Neiman Marcus
- Saks Fifth Avenue
- Saks OFF 5TH
Marc Metrick, currently CEO of Saks.com, will become CEO of Saks Global, where he will lead its retail and consumer businesses and drive strategies to enhance the luxury shopping experience. In the announcement’s press release, Metrick said, “We have respect and admiration for NMG and the contributions its teams have made in the company’s evolution. Together, with our ongoing focus on innovation, we are primed to drive growth for our brand partners and create career development opportunities for the incredible talent across Saks Global.”
Geoffroy van Raemdonck, CEO of Neiman Marcus Group (NMG), highlighted the strategic alignment and complementary capabilities between Saks and NMG. He expressed confidence that this collaboration, along with a new long-term capital structure, will enhance customer value and ensure the success of iconic brands like Neiman Marcus and Bergdorf Goodman.
The main goals of this acquisition are to:
- Provide greater merchandise selection and accessibility through online and fulfillment
- Increase personalization with technology, including first-party data combined with AI
- Support sales associates to maintain customer service along with career development
- Bolster fashion brands, both new and established, so they can better reach luxury consumers
“We’re thrilled to take this step in bringing together these iconic luxury names, Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman. For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners and employees. This is an exciting time in luxury retail, with technological advancements creating new opportunities to redefine the customer experience, and we look forward to unlocking significant value for our customers, brand partners and employees.”
Richard Baker, HBC Executive Chairman and CEO, via Business Wire
CNN reported that the two companies have been planning this merger for multiple years now. One of the most important factors in completing this acquisition is for the retailers to be able to better price products from the luxury brands they carry and sell.
The deal also includes Amazon’s involvement. It plans to work with Saks Global to innovate in customer experience and logistics, reflecting its interest in expanding into luxury retail. The e-commerce retailer has invested in the deal and positions itself to become more involved in both the space of physical stores and the luxury retail market. Amazon is also expected to be responsible for handling the logistics of the e-commerce side of sales for the newly announced Saks Global.
This acquisition will likely face challenges along the way. Neiman Marcus filed for Chapter 11 bankruptcy in 2020 and has only recently begun to recover. And with any acquisition, there are concerns about job losses due to restructuring and layoffs. Additionally, there is no guarantee of how the completed merger will fare and whether it will positively or negatively affect all the brands involved.
The finalization of the deal is still pending and requires approval by the Federal Trade Commission. It is possible the acquisition will face regulatory scrutiny if the FTC believes the combined entity would harm competition, similar to how it challenged the merger of Tapestry and Capri in April.
Discussion Questions
How might Saks and Neiman Marcus avoid losing their identity and positioning in the competitive luxury retail market, especially given their history as direct competitors?
How will this merger affect store consolidation, and what strategies could Saks Global employ to ensure the integration process maintains the unique shopping experiences associated with each brand?
With Amazon’s involvement in innovating customer experience and logistics for Saks Global, how might the brands balance leveraging advanced technology with maintaining the personalized service that is a hallmark of luxury retail?
Poll
Loading …BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Shannon Flanagan
VP|GM Retail & Consumer Goods at Talkdesk
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
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The merger of the two companies will create some benefits such as better buying power and the potential promise of stronger e-commerce and logistical support from Amazon. However, it still leaves lots of questions around the future place of both brands in a luxury retail sector that is moving more to direct to consumer and away from traditional department stores – a merger does not resolve this.
In my view, corporate dealmaking is always exciting and generates a lot of promises around synergistic savings. However, the real challenge is actually delivering on those promises – and very few deals live up to expectations. My other fear is that as per the playbook of Hudson’s Bay, this deal might end up being more about real estate than retail.
I would think the obvious fear would be one of the two would become the next Lord and Taylor: once HBC moves on to a new and shinier toy the old one gets tossed.
Its also interesting how there is no mention of Hudson Bay’s own stores in Canada and the condition they are in?
The article doesn’t mention that HBC is not an independent company. It is owned by PE NRDC Equity Partners, a private equity investment company. We know what often happens when retail is controlled by PE NRDC Equity Partners.
My short response is “meh”.
My longer response is that I don’t see how putting these underperforming retailers together creates differentiated, accretive but profitable experiences. If they can maintain the differentiation between chains and just realize benefits from logistical and back office consolidation it’ll be “okay.” But if they play it the way these types of mergers have been done in the past, it’ll be another case of putting sows’ ears together in hopes of coming out with a fine silk purse.
Finally, the luxury market is getting crazy oversaturated. There’s no share to take from anyone else
This. I wonder how much of hand Amazon will have in this merger(use of technology, yes, but what else?). Time will tell.
“Meh” too… There is something here that this retail consultant doesn’t get/see. From a distance, it appears that the two brands should continue to compete healthfully, not merge.
It will be interesting to see how a brand that has reportedly struggled to pay its suppliers, can purchase another luxury retailer. It will also be interesting to see how brands that have not wanted their products sold on Amazon respond to the company’s involvement and what it means for their brand. Amazon seems poised to benefit from the deal at they just exited their own stores in this space. Back-end consolidation will certainly help with efficiency savings but doesn’t solve the customer pain point issues so it can’t be a silver bullet.
The fact that the deal has been years in the making implies that it has been well thought out. Gosh, I hope so. The challenges are many, including clearing the FTC approval hurdle. On the bright side, Saks and Neiman Marcus have been laggards in the digital space and should benefit mightily from Amazon’s involvement on that front. On the not-so-bright side, differentiating the Saks portfolio from Neiman’s will present a major challenge. Giving into the temptation to position Saks a rung (or two) down from Neiman’s will pop Saks into a sea of middling sameness with Nordstrom and even Macy’s. Perhaps the biggest challenge is one of perception. Neimans was one of the first luxury retailers to successfully position as a brand (not just a place that has brands). Growing up in Dallas, walking around with a Neiman Marcus shopping bag in hand was a status symbol on its own. Fast forward to nowadays and many of the brands that both retailers carry can be grabbed on enumerable online marketplaces, not to mention through brands’ direct-to-consumer outlets (across bricks and clicks) and the burgeoning resale market. How much brand weight do Neiman’s and Saks still carry? We’re about to find out.
Who knows?! It saddens me to see another iconic brand be folded into a like brand. The big question I’m most curious about is the positioning of Neiman Marcus in their portfolio: stores, product, teams, culture, etc. The big opportunity I’m most intrigued by is the impact of Amazon and Salesforce investments. Retailers continue to be too slow to adopt technologies that can drive not only superior customer experiences, but also real bottom line savings. It will require a material paradigm shift in how c-level execs approach the business to incorporate (and listen to) tech leaders, like these players.
I agree. I feel like the big winner here could be Amazon, they’ve been trying to get luxury for years. But at what price for the industry and the customer?
It gives amazon a way to stretch is ecommerce delivery into luxury goods segment (pretty sure they aren’t shipping Chanel in Amazon boxes) and gain valuable insight into luxury segment. The learning from it is worth the price Amazon is investing in
The obvious answer as to how they can maintain their individual identities is by doing just that: keep the separate name plates, and really every other department beyond the purely backroom (like internal audit or building services) But of course the more you do of the latter, the fewer are the alleged advantages of merger. There’s little – if anything – I like about this idea: I don’t like consolidations in general, and HBC in particular fails to impress me. Remember “Don’t mess with Texas?”…can’t the same be said for its native retailer?
I worry about loss of identity for both of these retailers. I can’t help comparing this to Macy’s gobbling up its competitors, keeping the individual store names, but making the sales floors a sea of sameness. I would hate to see that happen to either Saks or Newman Marcus.
When you go into the Neiman Marcus-branded store, will you say, “This feels just like Saks”? However, you are not likely to say the reverse.
That’s the very reason I hate when department stores are purchased by other department stores. Instead of allowing each personality to stand on its own the purchaser turns the purchased into their brand, with the original name. It’s really sad. And kind of lazy.
By rationalizing and repositioning the store and brand portfolio to counter the increasing power of vendors, the newly formed company may be able to improve its overall cost position, increase its competitiveness, and increase gross margins.
By boosting profitability and providing the necessary resources for future growth and investment, increasing gross margins can significantly contribute to the success of the business.
While Amazon brings its extensive e-commerce platform and logistics expertise, Salesforce brings its powerful customer relationship management (CRM) software and cloud computing capabilities. These combined financial and technological resources can greatly enhance the new entity’s ability to compete in the market and drive future growth.
Consolidating positions in Saks’ New York office can lead to improved operational efficiency and cost savings. By streamlining roles and responsibilities, the company can eliminate redundancies and optimize resources, allowing for better coordination and collaboration among team members. This consolidation can also create a more cohesive and focused work environment, enabling the company to respond more effectively to market demands and customer needs.
One potential challenge in differentiating the two brands is the risk of alienating shared customers. If the company makes drastic changes to the value propositions of Saks and Neiman Marcus, it may cause confusion and dissatisfaction among customers who patronize both stores. Striking the right balance between differentiation and maintaining a consistent customer experience will be crucial in order to retain and attract customers.
One potential strategy for balancing differentiation and maintaining a consistent customer experience is to carefully analyze the customer base of both Saks and Neiman Marcus and identify common preferences and expectations. By understanding the shared values and needs of these customers, the company can develop a unified brand message and experience that resonates with both sets of customers. Additionally, implementing personalized marketing strategies and loyalty programs that cater to the unique preferences of each customer segment can help retain and attract customers without alienating either group.
Finally, investing in innovative technologies, such as virtual reality or augmented reality shopping experiences, can create a cutting-edge and modern image for the brand.
A better growth path may emerge as a result of this transaction, but it is far from certain. -Db
This is a far from obvious solution to what ails these two retailers and this tier of the market. Sure, they will save a couple of nickels in some back office efficiencies and a couple more nickels in “negotiating power” (maybe). Neither of those press release favorites will move the needle significantly. And before you know it there will be rumblings about the 9 markets that have both Sak’s and NM stores, sometimes within walking distance. The temptation to explore possible consolidations of some kind will be overwhelming. They sure as heck won’t be closing any NM stores in Texas and they sure as heck won’t be closing any Sak’s stores in New York, but beyond that it gets to be a coin toss. Buckle in. A quick reflection on the number of regional department stores lost to retail consolidation makes me very sad, and I am instantly reminded that there is nothing sacred about any retail brand when the hammers of debt and/or $$$ extraction come into play. AAATM. Acquisition As an ATM.
And then there is Amazon. Amazon’s participation gives this deal a whole new horizon of possibilities and opportunities. The lens I am looking through is definitely old fashioned. Amazon is providing a whole new lens through which to view this deal. I hope. I wish. Please.
Two former powerhouse brands, former competitors, have decided to get hitched. This says more about the sad state of the luxury segment than it does about creating a bold new channel for well-heeled customers.
The question I have not heard asked by anyone covering this story is, “How big is the luxury retail segment, and how many stores are required to capture that opportunity now and into the foreseeable future?”
All the data I have seen suggests that this is a shrinking market, but still a viable one. In other words, the name brands and store coverage needed to address this market could and should be captured by just a few viable players. Based on consumer surveys and insights data, it could be determined if a single name(s) would resonate with the target consumer base, or if multiple banners should be employed. (As a native Chicagoan, Macy’s really missed an opportunity to maintain the Marshall Fields banner in that market…just saying.)
As a lifelong student of retailing, I’m hopeful that Saks Global will assess the addressable market, align their store base, and thoughtfully employ the banners that their customers want to engage with. Luxury department stores should not perish from the market, but their market is not as large as it once was. Please…think this one through.
Also, don’t spin off the ecommerce businesses for these brands. Omnichannel is a “thing” for the next generation of luxury retail shoppers. A unified shopping experience and loyalty program would be a powerful asset. Please…no “short-term thinking” on this topic.
Or…Filene’s in Boston. Or…Burdines in Miami. Or, Bullock’s in Los Angeles. Or……
Luxury retail spending in the US was $134.6 billion last year. This is for all products, but not vehicles, meals, etc. The challenge for department stores is that their share of the market is falling as more shoppers go directly to the brands and other channels.
If you want to forecast the future of this deal, know that HBC is owned by a private equity company, NRDC Equity Partners.
There are so many ways HBC can mess this up, Richard Baker’s track record in successfully running the things he buys is dismal. Witness Lord & Taylor, Fortunoff, Kaufhof, Home Outfitters… And since it went private there’s no telling how HBC itself is doing. Reports of slow/no payments to vendors are troubling as was the split-off of the Saks e-commerce business into a separate entity that created a big financial windfall for Baker and company, but pulled apart online and in-store when virtually every other retailer in the business was putting them back together. Confidence is low, at least in my opinion, that this Saks-Neiman deal is going to have a happy ending.
In an era of one-click buying all of these luxury box retailers cannot survive by way of independence. The plateauing of basic macroeconomics means that a given brand’s trajectory starts to flatline and growth must come from acquisition. It also signals the need to streamline critical functions such as supply chain operations, consumer intelligence, buying power, and the like. No different than the moves by LVMH or Tapestry.
When 80% of those in today’s poll never or rarely shop at either brand, we have a telling indicator, albeit anecdotal, as to the future state of traditional department store luxury retail.
If this merger were only bringing together Saks and NMG, and knowing it is private equity backed and managed, I’d predict a failed realization of the stated synergies within three years.
Given the presence of Amazon as an investor, and its formidable digital commerce capabilities, there may be a spark of possibility that this could turn into something successful in the long term, though the brands may be much more positioned as online, DTC entities.
There may be some economies of scale on the expense side, and more leverage with suppliers on the product side. But two nameplates that have lost some luster do not make one stronger company, especially if the goal is to keep the brand identities separate and distinct. A merger into “Saks-Neiman” may be the eventual endgame here.
All this alliance/acquisition does is delay the inevitable and Amazon will be part of the problem, based on what has happened at Whole Foods. Whole Foods used to offer a unique, fun shopping experience, however now you go in there and compete with all of the people shopping for delivery customers–it is like shopping at a warehouse while workers bundle up shipments. IF they can mask the technology “improvements” from the shopping experience, (unlike @ WF) then maybe they can make this work. Whole Foods is still a going concern because, well, you need to eat. Whether you need to go to Neiman’s or Saks to buy a designer dress or suit is another proposition altogether.
I truly wish I could enthusiastically suggest that this merger is amazing. However, I’m taking a wait-and-see stance given the current state of the market. If it is strictly a real estate deal, I’d perhaps be more optimistic. From a retail presence and sales transaction standpoint, I’m a bit wary.
The market has viewed both brands as direct competitors with similar (quality) merchandise. Merging them allows for some benefits that streamline duplicate functions, such as buying and many administrative/operational functions. Saving costs can go to the bottom line, but there still needs to be income. The big question will be if a merger creates the revenue necessary to sustain the business.
Well, this has been expected for such a while, and here we are. If those involved are SMART they will WORK and invest the time and effort to MAINTAIN these entities with separate identities and feel. This CAN BE DONE and has been done in the past ( Rich’s was Not Lazarus Or Burdines). The problem is the question, is there a WANT, and a need, among the customer base for 2 separate luxury specialty stores? (Bergdorf’s aside, this entity should go forward with no change, i.e. don’t fix what’s not broken ) If you look at other countries, in most there is really only ONE true luxury specialty store left. Also, there may be an interest in real estate? If real estate is the underlying truth, all is lost, however I do not beleive that this is so. I Do beleive that Mr. Baker would like to be seen as THE supplier of truly High End Goods, and the ONLY one. (Of Course discounting Nordstrom is a serious mistake.) Unfortunately, from past experience and observation, I see a time where there will be an interchangeable Sak’s store OR a Neiman’s store, not in the same locations/cities. Perhaps that WILL work? If there can be an excellent service and assortment proposition at all of their locations, that may be the win.
In my opinion, Saks and Neiman Marcus should stay distinct by keeping their brand identities strong. They must not dilute their unique styles or customer experiences in the merger. Store consolidation is inevitable and will likely lead to some store closures, but Saks Global should be careful not to lose the exclusive feel of each brand.
It is definitely a positive sign that Amazon is involved, so brands should use its technology to improve logistics but keep in mind not to sacrifice the personalized service that defines luxury retail. If they focus too much on technology and efficiency, they risk losing the exclusive feel that their loyal customers expect.