Does Saks.com make sense as a separate business?
Source: saks.com

Hudson’s Bay Co. (HBC) is spinning off Saks Fifth Avenue’s online operations as a separate business in large part to take advantage of lofty valuations being fetched by fashion luxury platforms.

In connection with the move, Insight Partners has invested $500 million for a minority stake in Saks.com, valuing the online business at $2 billion. Saks.com has about $1 billion in annual sales.

The valuation is higher than the $1.6 billion fetched last February by HBC, which owns Hudson’s Bay, Saks Off Fifth as well as Saks Fifth Avenue’s online and offline operations, in its move to go private.

“By separating the dot-com business, we can show investors its value,” HBC CEO Richard Baker told The Wall Street Journal. “Investors don’t want to put their money in bricks-and-mortar retailers right now.”

The move also enables both Saks’ online and offline operations to “appropriately plan for and invest in their respective service models.” That sentiment appears to run counter to retail’s mantra in recent years of merging operations to optimize omnichannel approaches.

Saks.com becomes Saks and will be led by Marc Metrick, previously president and CEO of Saks Fifth Avenue. Saks will lead marketing and merchandising across businesses and retain ownership of the Saks Fifth Avenue intellectual property. Sebastian Gunningham, a former Amazon executive, will join Saks.com’s board.

SFA, the entity representing Saks’ 40 stores, will fulfill the physical functions of Saks.com such as buy-online-pick -up-in-store, exchanges, returns and alterations. The split won’t be apparent to consumers.

Luxury has been slow to embrace online selling with many fashion aficionados skeptical that high-end selling can be replicated online. But explosive online growth during the pandemic is being seen as a breakthrough that has driven up stock prices for Farfetch and Zalando. Fashion platform Mytheresa, with about half of the sales of Saks.com, went public in January of this year at a $2.2 billion valuation.

HBC has acknowledged that an IPO for Saks.com is a possibility. The new funding will be used to speed shipping, enhance customer service and introduce a marketplace.

“Luxury ecommerce is poised for exponential growth,” said Mr. Baker in a statement. “Saks is primed to win significant market share.”

BrainTrust

“This move effectively puts the dot-com presence in competition with stores, complicates customer service, screws up marketing attribution and raises the cost of doing business”

Steve Dennis

President, Sageberry Consulting/Senior Forbes Contributor


“Ultimately, I see a blended or hybrid future — with a seamless mix of online and physical interaction points. This is the omnichannel vision of many retailers …”

Kim DeCarlis

Chief Marketing Officer, PerimeterX


“The problem is they are NOT two separate businesses. Customers have clearly demonstrated that they want seamless omnichannel experiences.”

Jason Goldberg

Chief Commerce Strategy Officer, Publicis

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DISCUSSION QUESTIONS: Do you see more benefits than drawbacks in splitting Saks Fifth Avenue’s online and offline operations? Should other retailers separate their online operations?

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26 responses to “Does Saks.com make sense as a separate business?”

  1. Mark Ryski Avatar
    Mark Ryski

    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.

    1. Joe Skorupa Avatar
      Joe Skorupa

      I agree with you, Mark, because Saks is a traditional luxury department store. This means they are in the most financially battered segment in retail. There is a culling of the herd in the department store segment and few, if any, analysts expect a turnaround in that category. Saks is a powerful brand but the stores are not. So, while this strategy does not make sense for other retailers and other segments, it fits Saks well, as you said.

  2. Steve Dennis Avatar
    Steve Dennis

    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.

  3. Bob Amster Avatar
    Bob Amster

    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.

  4. Neil Saunders Avatar
    Neil Saunders

    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.

  5. Oliver Guy Avatar
    Oliver Guy

    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.

  6. Dick Seesel Avatar
    Dick Seesel

    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.

  7. DeAnn Campbell Avatar
    DeAnn Campbell

    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.

  8. Lisa Goller Avatar
    Lisa Goller

    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.

  9. Bob Phibbs Avatar
    Bob Phibbs

    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.

  10. Jason Goldberg Avatar
    Jason Goldberg

    It’s very short sighted. They are taking advantage of a short-term opportunity to maximize the market value of their digital business by decoupling it from their slower (negative) growth legacy business.

    The problem is they are NOT two separate businesses. Customers have clearly demonstrated that they want seamless omnichannel experiences (i.e., use my mobile phone to see if my local Saks has those new shoes in my size). Most retailers, and certainly Saks, stink at delivering seamless omnichannel experiences because of major silos between the digital and store teams. Those silos are only going to get worse when the businesses are separate legal P&Ls that have conflicting obligations to their respective shareholders. Saks.com when never have an incentive to forgo a pure digital sale to better serve an omnichannel customer with a higher customer lifetime value.

    Imagine you were a factory in 1890 that has just successfully transitioned your first factory from steam power to electricity. Would you keep electrifying the rest of your factories and focus on producing goods at the best price and the least power consumption possible? Or would you spin off the “electricity department” lead by your newly minted Chief Electricity Officer as a new business that you buy your power from? The new electricity department may well become successful and/or valuable, but your legacy steam powered factories are doomed. You’re guaranteeing that your steam factories will never have electrical expertise and will forever be dependent on third parties looking to monetize your dependency, while your competitors’ factories will rapidly be acquiring organic expertise in electricity.

    1. Rick Watson Avatar
      Rick Watson

      Worst idea I’ve heard this year. Why not split Saks.com into desktop and mobile divisions because mobile is the future!

  11. Shep Hyken Avatar
    Shep Hyken

    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.

  12. Ryan Mathews Avatar
    Ryan Mathews

    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.

  13. Suresh Chaganti Avatar
    Suresh Chaganti

    “‘By separating the dot-com business, we can show investors its value,’ HBC CEO Richard Baker told The Wall Street Journal. ‘Investors don’t want to put their money in bricks-and-mortar retailers right now.’”

    This is telling. By prioritizing investors over customers and the customer experience, Saks is setting itself up for failure. This level of disconnect is scarcely believable.

  14. Kevin Graff Avatar
    Kevin Graff

    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

  15. Peter Charness Avatar
    Peter Charness

    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?

  16. James Tenser Avatar
    James Tenser

    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.

  17. Doug Garnett Avatar
    Doug Garnett

    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.

  18. RandyDandy Avatar
    RandyDandy

    I have always liked Saks. I believe, way back, it was even my very first (store-centric) credit card! Much of that fondness was based on my impression that it was a little special (but not as foreboding as its competitors). That wee edge of exclusivity also made my buying from them feel a little special—about the item (and about myself). All luxury brands/retailers use that “touch” to attract customers. But uniqueness comports much better with fewer rather than greater, in terms of numbers.

    So, at some point, the proliferation of luxury goods or stores has the negative effect of devaluation — and that is the last thing makers and sellers of expensive goods need. Further, once you reach that nadir, it’s hard to regain “status.”

    The only way to try: increase exclusivity and decrease reach. So, while Saks needs strong e-commerce capabilities (to stay with the times), it imperils their core business if they make online shopping about overtly offering goods (and services?!) that should be interpreted as more one-of-a-kind rather than plentiful, and about in-person vs out-of-body transactions.

    Amazon (Target, and others) can take on a kind of world-sellers, once-removed methodology. But of proprietors of rare things, maybe a select few, perhaps Saks.com, can go more broad-based. Yet only so far. Because to offer too much goes against the “of the very few” foundations of their businesses, and the main reason(s) for their existence. In-store or online.

  19. Kim DeCarlis Avatar
    Kim DeCarlis

    Saks deciding to split their online and offline operations needs to be viewed from multiple perspectives.

    The primary driver is shareholder value and it is clear that the economics of the online business are different and much more positive than that of Saks’ brick-and-mortar storefront. This has been particularly true in light of the pandemic where websites and web apps have become the primary way for consumers to discover, shop and interact with a brand. As a result online traffic and revenue have reached new heights, even as physical store revenue has slumped. So from a purely business perspective it makes sense.

    Looking at this from the eyes of the consumer, however, brings other thoughts to the fore. Consumers don’t want to differentiate between an online brand and a physical store brand. There needs to be a handshake between the digital business and the physical store in order to keep things simple for the consumer — for new interactions like buy online pickup in store (BOPIS) and for classic interactions like merchandise returns. Otherwise a retailer risks losing consumer dollars to a brand that does. I hope Saks keeps this top of mind.

    Ultimately, I see a blended or hybrid future — with a seamless mix of online and physical interaction points. This is the omnichannel vision of many retailers and it will be interesting to see how this all plays out with Saks and others that may follow.

  20. Patricia Vekich Waldron Avatar
    Patricia Vekich Waldron

    At a time when brands aspire to make engagement and shopping seamless, this move seems to put finances before customers.

  21. Craig Sundstrom Avatar
    Craig Sundstrom

    I don’t see much logic in the idea on my own, and the explanation hasn’t added any. The folks running Saks haven’t impressed me much of late; it will be recalled that the background of Mr. Baker et al is in real estate, and while their initial impression was positive — or maybe “surprising” is the better word — by not killing off Lord & Taylor, unfortunately that seems to have been the high point: there’ve since been a large number of acquisitions which were supposed to generate synergies, both in real estate and retail, but seem to have produced neither. At some point out-of-the-box thinking isn’t enough: a person running a retailer needs to be able to actually sell stuff.

    I’m not going to say this is the first step to turning Saks into the next Lord & Taylor, but….

  22. Rachelle King Avatar
    Rachelle King

    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.

  23. AB3 Avatar
    AB3

    Baker and his colleagues have been coming up with bizarre ideas to “reinvigorate” retail since their initial acquisition of Lord & Taylor over fifteen years ago. They have consistently overpromised and underdelivered. They seem to repeatedly choose to find avenues for short-term profits (an IPO, acquisition, new locations in questionable locations, selling off divisions, etc.), rather than invest in the company to achieve long-term, sustainable growth. Perhaps their view is that there is no long game to play here.

    My view is that this is yet another scheme that will generate short term profits, and maximize major long-term headaches. These companies will not ultimately share operational goals.

    People say the value for Baker is in all the real estate. That is true for some locations, but even in many A class malls, I don’t see a major opportunity or value for the real estate.

  24. William Passodelis Avatar
    William Passodelis

    This move is very disappointing to me. I could not believe it when I saw the news! This is not the move of a merchant, but it is a very smart and very near-term financial move! I hope that both businesses will be strong enough to survive and thrive. I personally really LIKE Saks Fifth Avenue.

Share Your Opinion

DISCUSSION QUESTIONS: Do you see more benefits than drawbacks in splitting Saks Fifth Avenue’s online and offline operations? Should other retailers separate their online operations?

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Do you see more benefits than drawbacks in splitting off Saks Fifth Avenue’s online and offline operations?

View Results

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26 Comments
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Mark Ryski
Mark Ryski
Trusted Member
2 years ago

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.

-3
Joe Skorupa
Joe Skorupa
Reply to  Mark Ryski
2 years ago

I agree with you, Mark, because Saks is a traditional luxury department store. This means they are in the most financially battered segment in retail. There is a culling of the herd in the department store segment and few, if any, analysts expect a turnaround in that category. Saks is a powerful brand but the stores are not. So, while this strategy does not make sense for other retailers and other segments, it fits Saks well, as you said.

-4
Steve Dennis
Steve Dennis
Member
2 years ago

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.

12
Bob Amster
Bob Amster
Active Member
2 years ago

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.

9
Neil Saunders
Neil Saunders
Noble Member
2 years ago

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.

9
Oliver Guy
Oliver Guy
Member
2 years ago

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.

3
Dick Seesel
Dick Seesel
Active Member
2 years ago

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.

3
DeAnn Campbell
DeAnn Campbell
Active Member
2 years ago

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.

2
Lisa Goller
Lisa Goller
Active Member
2 years ago

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.

2
Bob Phibbs
Bob Phibbs
Active Member
2 years ago

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.

4
Jason Goldberg
Jason Goldberg
2 years ago

It’s very short sighted. They are taking advantage of a short-term opportunity to maximize the market value of their digital business by decoupling it from their slower (negative) growth legacy business.

The problem is they are NOT two separate businesses. Customers have clearly demonstrated that they want seamless omnichannel experiences (i.e., use my mobile phone to see if my local Saks has those new shoes in my size). Most retailers, and certainly Saks, stink at delivering seamless omnichannel experiences because of major silos between the digital and store teams. Those silos are only going to get worse when the businesses are separate legal P&Ls that have conflicting obligations to their respective shareholders. Saks.com when never have an incentive to forgo a pure digital sale to better serve an omnichannel customer with a higher customer lifetime value.

Imagine you were a factory in 1890 that has just successfully transitioned your first factory from steam power to electricity. Would you keep electrifying the rest of your factories and focus on producing goods at the best price and the least power consumption possible? Or would you spin off the “electricity department” lead by your newly minted Chief Electricity Officer as a new business that you buy your power from? The new electricity department may well become successful and/or valuable, but your legacy steam powered factories are doomed. You’re guaranteeing that your steam factories will never have electrical expertise and will forever be dependent on third parties looking to monetize your dependency, while your competitors’ factories will rapidly be acquiring organic expertise in electricity.

7
Rick Watson
Rick Watson
Reply to  Jason Goldberg
2 years ago

Worst idea I’ve heard this year. Why not split Saks.com into desktop and mobile divisions because mobile is the future!

2
Shep Hyken
Shep Hyken
Active Member
2 years ago

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.

1
Ryan Mathews
Ryan Mathews
Active Member
2 years ago

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.

2
Suresh Chaganti
Suresh Chaganti
Member
2 years ago

“‘By separating the dot-com business, we can show investors its value,’ HBC CEO Richard Baker told The Wall Street Journal. ‘Investors don’t want to put their money in bricks-and-mortar retailers right now.’”

This is telling. By prioritizing investors over customers and the customer experience, Saks is setting itself up for failure. This level of disconnect is scarcely believable.

3
Kevin Graff
Kevin Graff
Member
2 years ago

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

6
Peter Charness
Peter Charness
Active Member
2 years ago

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?

0
James Tenser
James Tenser
Member
2 years ago

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.

2
Doug Garnett
Doug Garnett
Member
2 years ago

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.

3
RandyDandy
RandyDandy
2 years ago

I have always liked Saks. I believe, way back, it was even my very first (store-centric) credit card! Much of that fondness was based on my impression that it was a little special (but not as foreboding as its competitors). That wee edge of exclusivity also made my buying from them feel a little special—about the item (and about myself). All luxury brands/retailers use that “touch” to attract customers. But uniqueness comports much better with fewer rather than greater, in terms of numbers.

So, at some point, the proliferation of luxury goods or stores has the negative effect of devaluation — and that is the last thing makers and sellers of expensive goods need. Further, once you reach that nadir, it’s hard to regain “status.”

The only way to try: increase exclusivity and decrease reach. So, while Saks needs strong e-commerce capabilities (to stay with the times), it imperils their core business if they make online shopping about overtly offering goods (and services?!) that should be interpreted as more one-of-a-kind rather than plentiful, and about in-person vs out-of-body transactions.

Amazon (Target, and others) can take on a kind of world-sellers, once-removed methodology. But of proprietors of rare things, maybe a select few, perhaps Saks.com, can go more broad-based. Yet only so far. Because to offer too much goes against the “of the very few” foundations of their businesses, and the main reason(s) for their existence. In-store or online.

0
Kim DeCarlis
Kim DeCarlis
2 years ago

Saks deciding to split their online and offline operations needs to be viewed from multiple perspectives.

The primary driver is shareholder value and it is clear that the economics of the online business are different and much more positive than that of Saks’ brick-and-mortar storefront. This has been particularly true in light of the pandemic where websites and web apps have become the primary way for consumers to discover, shop and interact with a brand. As a result online traffic and revenue have reached new heights, even as physical store revenue has slumped. So from a purely business perspective it makes sense.

Looking at this from the eyes of the consumer, however, brings other thoughts to the fore. Consumers don’t want to differentiate between an online brand and a physical store brand. There needs to be a handshake between the digital business and the physical store in order to keep things simple for the consumer — for new interactions like buy online pickup in store (BOPIS) and for classic interactions like merchandise returns. Otherwise a retailer risks losing consumer dollars to a brand that does. I hope Saks keeps this top of mind.

Ultimately, I see a blended or hybrid future — with a seamless mix of online and physical interaction points. This is the omnichannel vision of many retailers and it will be interesting to see how this all plays out with Saks and others that may follow.

4
Patricia Vekich Waldron
Patricia Vekich Waldron
Active Member
2 years ago

At a time when brands aspire to make engagement and shopping seamless, this move seems to put finances before customers.

1
Craig Sundstrom
Craig Sundstrom
Active Member
2 years ago

I don’t see much logic in the idea on my own, and the explanation hasn’t added any. The folks running Saks haven’t impressed me much of late; it will be recalled that the background of Mr. Baker et al is in real estate, and while their initial impression was positive — or maybe “surprising” is the better word — by not killing off Lord & Taylor, unfortunately that seems to have been the high point: there’ve since been a large number of acquisitions which were supposed to generate synergies, both in real estate and retail, but seem to have produced neither. At some point out-of-the-box thinking isn’t enough: a person running a retailer needs to be able to actually sell stuff.

I’m not going to say this is the first step to turning Saks into the next Lord & Taylor, but….

1
Rachelle King
Rachelle King
Member
2 years ago

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.

0
AB3
AB3
2 years ago

Baker and his colleagues have been coming up with bizarre ideas to “reinvigorate” retail since their initial acquisition of Lord & Taylor over fifteen years ago. They have consistently overpromised and underdelivered. They seem to repeatedly choose to find avenues for short-term profits (an IPO, acquisition, new locations in questionable locations, selling off divisions, etc.), rather than invest in the company to achieve long-term, sustainable growth. Perhaps their view is that there is no long game to play here.

My view is that this is yet another scheme that will generate short term profits, and maximize major long-term headaches. These companies will not ultimately share operational goals.

People say the value for Baker is in all the real estate. That is true for some locations, but even in many A class malls, I don’t see a major opportunity or value for the real estate.

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William Passodelis
William Passodelis
2 years ago

This move is very disappointing to me. I could not believe it when I saw the news! This is not the move of a merchant, but it is a very smart and very near-term financial move! I hope that both businesses will be strong enough to survive and thrive. I personally really LIKE Saks Fifth Avenue.

1