Operating on the assumption that there will never be a return to a pre-pandemic normal, Saks Fifth Avenue chief executive Marc Metrick has guided the luxury retailer forward with a sense of urgency.
In March, when he led the first executive Zoom meeting from his family’s home in the Hamptons, the chief executive says he pressed to compress Saks’s four-year strategic plan into a few months, getting ahead of the coming changes by jettisoning many corporate tests and protocols.
“It’s something I learned after 9/11 and after ‘08,” says Metrick, who worked as a retail executive during the World Trade Center attacks and the 2008 financial crisis. “You never return to normal. [Soon] you’re going through TSA lines and you’re not bringing liquids onto the plane and it’s normal.”
Saks crammed years of work into months in order to implement much of the plan by May, perfect or not. As a result, Saks sales associates now Zoom-shop its 40 stores with clients on their phones and laptops. To offset inventory pileups, Saks is working with luxury brands to postpone product deliveries by weeks or months indefinitely, arguing consumers prefer to shop for shorts in summer and coats in winter.
The company also moved to launch a new website and mobile site two weeks ago, and will launch a new app soon, says Metrick. That could be key this autumn and winter. Research from Prosper Insights & Analytics predicts that the majority of holiday shopping will take place online, with 70 per cent of US consumers planning to avoid in-store shopping on Thanksgiving Day and Black Friday.
Marc Metrick, CEO of Saks.
With much of the plan in place, and eight months to prepare, Saks is now gearing up for retail’s most significant shopping period, when people are most likely to buy luxury goods. The holiday season will be an early indicator of whether Metrick has pursued the right direction, and whether Saks can make up for business lost during multiple store closures this past spring and summer. Saks is betting customers will buy fewer but better items this season, and will host toned down or virtual versions of its famed holiday events to comply with Covid-19 restrictions. At Cowen & Co., retail analyst Oliver Chen says he has taken note of Saks’s speedy implementation of its strategic plan. “It’s an acceleration of what they were trying to do with digitisation,” he says.
Still, the shaky state of the US retail environment looms large, and Chen is only marginally optimistic about what’s to come at the end of the year. He points to the bifurcating “K” economy, in which low-income shoppers are suffering and cutting back while the wealthy save and spend more on luxury housewares and accessories such as shoes and handbags. Covid-19 trends are already impacting the types of bags that are selling, Chen notes, with totes that can carry masks and hand sanitiser replacing the tiny micro bags that were trending in 2019.
Department stores, Chen’s research also suggests, are seeing improved and “healthy” profit margins in large part because they have dramatically cut costs. Metrick is seeing that play out at Saks. Over a Zoom call, he said he is “cautiously optimistic”. He declined to share financial results (Saks is owned by Hudson Bay Corp., which went private in February) but said business had been up in the low-single digits for the past four months and a modest decrease in 2020 revenues is expected. Notably, Saks is seeing improved gross margins, he said, due in part to cost cutting and a structural reorganisation of store management.
Reacting to crisis in real time
As the pandemic spread last February, Saks brought its buying teams back from Milan, skipping Paris Fashion Week. Metrick had planned to fly to Paris for meetings but turned around before boarding his United flight at the Newark airport after learning that a case of Covid-19 had appeared in Paris.
With travel locked down, Saks buyers shifted their purchasing to NuOrder, one of a number of online wholesale purchasing platforms that function a lot like a retail website, providing reams of data and oversight into the complex web of purchasing details for a national department store chain. They had been investigating NuOrder since late 2019, and it was up and running at Saks in April, he says. Virtual shopping appointments via Zoom took off equally fast, with Metrick adding that in a normal scenario, he would have pursued a three-year pilot for the feature.
He also attributes the improvements in profitability to the delays in shipping due to Covid-19, which had an unanticipated benefit. Spring’s hot-weather collections remained in stores over the summer months, and sold more at full price when clients returned to shopping. Pre-autumn collections arrived in August, in time for consumers to be ready for some fresh autumn dressing. It will be difficult to repeat those delayed collections going forward, but Metrick says Saks is pressing luxury brands to reconsider their production calendars.
Adapting to a new retail environment
With consumers flocking to online shopping this year, Metrick has been keeping one eye on Amazon, whose launch this autumn of its Luxury Stores adds a new and savvy competitor for high-end retailers. “The road to hell is paved with people who didn’t take them seriously,” Metrick says of Amazon.
His road will focus on what Amazon can’t do. “Taking on Amazon is just a fool’s errand,” he says. “We don’t want to out-Amazon Amazon. We want to out-Saks Saks. We have 3,000 stylists. Not bots.”
Shopping by appointment is turning out to be particularly lucrative despite largely empty stores. Store hours have been cut around the country, leaving more hours for private shopping appointments when they’re closed. An inveterate optimist, Metrick argues that the emptiness of Saks stores is perfect for socially distanced shopping.
Stylists, or sales associates, have been reorganised, giving them incentives to work all over the store and to sell to clients on Saks’s website as well. Saks reorganised its store management to focus on how much sales associates sell throughout the retailer’s product lines. “I used to have a manager for shoes. I don’t care about the shoe volume anymore. I care about the sales volume for (an individual sales associate),” Metrick says.
The pandemic has also allowed Saks to try things that would have seemed ludicrous before. “Kerbside pickup. If I’d proposed that four years ago, I’d have been laughed at,” Metrick says, painting a scene that sounds like a drug run. “Pull your car up to the kerb and open your trunk and someone puts in a $4,000 coat?”
Saks’s New York flagship main floor.
Kerbside pickup already feels normal, and retail analysts have called it out as contributing to improved sales industry-wide. So does the less populated, sprawling two-floor L’Avenue restaurant at Saks in New York, which is open at 25 per cent capacity and doing business with 85 customers at a time.
But with coronavirus cases spiking sharply across the US amid the failure to pass a federal stimulus package, Covid-19 is far from over. The prospect of further lockdowns and shifts in consumer confidence loom over retailers. As he spoke, Metrick was once again holed up with his family in the Hamptons. One of his son’s classmates had tested positive for coronavirus, so the entire class’s families were quarantining. He’s optimistic, but with hesitation.
“We have elections that might or might not be resolved. And even if they are resolved, they may not be resolved favourably for a certain portion of the country,” Metrick says. “We also have Covid, and it’s hard for anyone to really know what things could be like next year.”
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