I think this strategy could work well for Saks. The brick-and-mortar stores were a drag on results. Saks still enjoys positive brand recognition and a place in the luxury retail landscape. While I’m not sure that this is the best strategy for all/most retailers, I think it fits Saks well.

This move smacks of desperation and opportunism. It goes against everything remarkable retailers have learned and deployed over more than decade, which is that customer journeys are deeply intertwined and that digital drives physical, and vice versa. The customer is the channel, silos belong on farms and it is the brand’s job to create a harmonized experience anytime, anywhere, any way the customer shops. This move effectively puts the dot-com presence in competition with stores, complicates customer services, screws up marketing attribution and raises the cost of doing business, some of which I touch on here.

Questionable at best, this move befuddles me and it should befuddle you too. At a time when traditionally brick-and-mortar retailers have discovered the importance of expanding aggressively into e-commerce, HBC decides not to leverage the synergies of the two operations as one, but to split them from one another. This may have much to do with HBC’s entry into the internet marketplace arena, but I don’t see it working.

From a financial point of view it makes perfect sense. However from a customer point of view it makes far less sense. Most retailers are looking to integrate store and online operations, not separate them out. The reason for this is that customers shop seamlessly across channels and want the minimum of friction. As sister companies, I am sure that there are good intentions about Saks’ online and offline presences working together. However in practice this can be more challenging to achieve, especially where the goals and needs of the two businesses diverge.

My view is that splitting can have issues. Given that even Amazon is moving to utilize a store network, it is clear the store is not yet dead. There are other digitally born organizations who are establishing physical presences. Winning retailers in my view will be the ones who align and optimize across all channels online and physical in order to create a harmonious experience for the customer.

Aside from the financial benefit of a spinoff (in order to maximize the value of the e-commerce business), will this matter to the customer? Will the shopper continue to think of Saks as one business, whether brick-and-mortar or online? (That’s how most successful omnichannel retailers have gained share over the past decade.) If the new e-commerce spinoff is to be wholly successful, it needs to replicate the high-touch element of shopping at Saks that put it on the map in the first place.

This is short-term thinking, but that may have been the intent — separate now to benefit from investor gymnastics today. But physical stores are essential to achieving profitable margins on e-commerce sales. This move ultimately just adds a whole other layer of red tape and management at a time when online and offline must work together as one mind. This feels like the beginning of dismantling Saks to sell it for parts.

This decision defies the omnichannel best practice of smashing the silos between online and offline. It will be interesting to see if it pays off.

Benefits include a focus on digital evolution to invite investment in online growth. This move distinguishes the company as the department store segment faces decline.

Potential drawbacks include inefficiencies and complexity if suppliers need to use different systems per channel. Consumers expect seamless omnichannel service and this move could affect responsiveness by adding barriers while rivals remove them.

I get the idea of zigging when the others zag, but isn’t retail all about coming together right now for a variety of reasons – rather than pulling apart? I’m sure someone gets a bonus for thinking of this while customer complaints are bound to happen – especially on the sales floor where it hurts the most.

Behind the scenes, it doesn’t matter how they split the operations. If it’s because investors want to see the difference in the sales channels, then show them on a line item. To the customer/consumer, they see the brand as the same, be it online or in-store. Saks’ presence in certain high-end locations is part of what gives the company its reputation. They need to be careful should they decide to mess with that part of the formula.

Frankly, the drawbacks win on this one. Sure, it’s a great financial move and lots of investors will make lots of money, but in terms of brand control and growth it seems like a wrong move.

The majority owner of HBC (Richard Baker) isn’t a retailer — he’s more interested in the real estate value of the stores. Little has been done to remake HBC since he took over, other than sell off properties for big profits. This unfortunately reeks of Eddie Lampert’s time at Sears, during which he stripped the company of any value. Mr. Baker is no doubt a very smart guy, but don’t confuse that with being a retailer. Hence the move to sell off Saks.com

In an era of a unified customer experience and unified commerce, this move seems to be a step in the wrong direction. Whatever the cooperation intended between the two groups is — when there’s a fast seller or a markdown to be had, who takes it?

The news about HBC’s spin-off of Saks.com drips with irony for me. I am old enough to remember back to 2000, when numerous brand and retail companies instantly boosted market cap by announcing vaporware “dot-com strategies.”

While I understand why a company today would make a strategic business decision motivated by investor trends, I am skeptical of a decision to “unlock” value rather than build value. The timing is suspect too — as store shopping seems poised for a rebound in the second half of 2021.

A key question left unanswered for me is, “What about the brand?” Corollaries are about how SFA best shoppers will interact between physical and digital stores.

For me, this is not the right move to maximize potential of the Saks Fifth Avenue brand, but the shareholders have certainly made a killing.

Some financial considerations motivated this move. But no. From a store and long-term health perspective, this doesn’t make sense. Store sales and online sales are tightly connected and should be controlled from one point.

Toys “R” Us tried similar in the beginning of their web work. It didn’t go well for them.

This puts the valuation of their brick/mortar business in rather harsh light. On one hand, splitting the operations does open up cash flow to the online business. On the other hand, it’s potentially adding more burden to the offline business without a clear path for resources/investments to support .com growth. This decision is a short term gain. No doubt they will be revisiting this model again in a few years.