Sources: Saks Off Fifth; Photo: Wikimedia Commons/JJBers
Is Saks Off Fifth better off online?
E-commerce has proven to be a huge area of growth for off-price luxury retailer Saks Off Fifth. In a keynote presentation at the NRF 2023 Big Show, Paige Thomas, president and CEO of Saks Off Fifth, spoke with CNBC.com retail and consumer reporter Melissa Repko and explained about the retailer’s recent realization of its online potential and its moves to capitalize on it, if not focus on it.
“We absolutely have line-of-sight and a road map that our e-commerce business will become larger than our brick-and-mortar business,” said Ms. Thomas.
Ms. Thomas pointed to double-digit growth in Saks Off Fifth’s online business over almost a decade, along with a “step change” that has occurred during the pandemic that she does not see turning around.
Despite growth with its dot-com business over nearly 10 years through 2022, the company had no mobile app in 2020 at the time that Ms. Thomas stepped into the CEO role from her previous tenure as EVP/GMM Men’s and Kids at Nordstrom. At that point, Ms. Thomas saw the chain as succeeding in digital “in spite of itself.” Saks Off Fifth launched a mobile app in 2021, and later rolled out a loyalty program to drive engagement. Ms. Thomas sees both as part and parcel to knowing the customer.
Saks Off Fifth has defined a “bullseye customer” who is a high-earner that is fashion-savvy and also skews Millennial. The retailer’s increased focus on digital has followed that, and has facilitated “incredible growth” among that customer base.
Saks Off Fifth has had over 1.5 million enrollments to its loyalty program in less than a year.
“That gives us the opportunity to really think of our personalization, our email trigger, all those components,” said Ms. Thomas of the loyalty program’s success.
Ms. Thomas did not give specifics about the volume of sales she expected Saks Off Fifth to do in e-commerce in 2023.
In addition to increasing its digital offerings in 2022, Saks Off Fifth launched a number of partnerships to facilitate the sale of secondhand goods, including one with Rent The Runway. The chain anticipates adding more, similar partnerships in 2023.
Discussion Questions
DISCUSSION QUESTIONS: What do you make of Saks Off Fifth’s belief that its online business will one day generate more revenue than its stores? Does the Saks Off Fifth experience provide any insight into rival off-price models?
Poll
Loading …BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Casey Golden
CEO, Luxlock
It’s a grave mistake for any retailer to think of themselves as “only online” or even “only stores.” In today’s retail it takes both sides to make a whole. Saks is doing their customers a disservice in failing to offer physical touch points, especially considering they are positioning to serve a higher end customer. This strategy, combined with their newer focus on second-hand goods, will do more to push their target shoppers toward Nordstrom and Neiman Marcus, as well as significantly undermine their profit margins for any online business they manage to retain.
It sounds like Saks has been paying attention to the behaviors and shopping experience desires of their audience. With all of the changes in the both demographics and shopping preferences, it’s good to see retailers implementing experience-centric changes. I don’t foresee a time when Saks will be online-only, but if they can coordinate an online, in-store, and technology-enhanced curated hybrid, they may have the winning combination.
I think in this day and time retailers need an online presence to grow the business but I don’t know if it will replace brick and mortar stores. Customers like to feel and touch, like the treasure hunt aspect and while there is some of those aspects online, you can’t fully replace that experience you can do in-store.
I read the article twice looking for the word “profit.” It’s not there. Lots of talk about growth, personalization, loyalty and engagement. It’s difficult to get excited about profitless growth these days. A bullseye customer should give line-of-sight to profitability.
This direction makes ultimate sense. Not only do the demographics support the focus of Saks Off Fifth to be strongly online, but it also ties shopper behavior to define the two entities as connected but not the same. The risk for off-price retailing to be operated as something separate from the main brand is that consumers separate them in their minds.
Demographics aside, which certainly favor an increased emphasis on online, the move to further emphasize online for the off-price cousin connects the brands in a way that carries more value perception. “Didn’t find what I wanted at Saks? Go online to Off Fifth.”
Sale shoppers have different motivations than traditional full-price brick and mortar shoppers. When price is the number one driver, being able to sort “low to high” is an advantage brick and mortar can’t provide. Many off-price companies have terrible e-commerce experiences with limited inventory compared to their physical inventory; the bar is low, so investing in off-price digital initiatives could rival and likely exceed stores.
There are “futurists” out there that claim online will kill off traditional retail. Well, not yet! Certain retail models are better suited for online. Consumers who shop in discount/off-price stores are looking for value in the form of dollars. They will go online and use apps to find the best prices. Saks Off Fifth aligns with this model. Paige Thomas is probably correct in that online can generate more revenue.
Judging from some comments, not everyone here knows this is an off-price channel. It is a store designed to move off excess, post-seasonal merchandise received from the company’s regular, full-line stores or purchased to be disguised as such. An emphasis on digital makes sense, as controlling costs is essential to be profitable in the OP world. Better still — completely eliminate the overhead of brick-and-mortar. The customer whose primary focus is (1) price and (2) recognized status brand will love it.
I think it says they have very little faith in their stores. OK, my glass may be half-empty this morning, but at heart I’m a hopeless romantic who believes the main draw in off-price is the “treasure hunt” aspect, something which just doesn’t seem to translate as well to online.
Since digital businesses are not constrained by time or geography, if done correctly they definitely have the potential to outgrow brick-and-mortar businesses. In my opinion, it is less important to think about which retail channel will bring in more revenue instead, retailers must focus on how they can leverage both digital and physical retail to their advantage. With the right strategies and investments, both physical and digital businesses can help retailers achieve their desired outcomes.