Saks Looks to Bring Exclusivity Back to Luxury Retailing
Faced with 20 percent to 25 percent declines in sales volume over the downturn, Saks Fifth Avenue is reinventing itself by not only working to make its product selections more value-oriented, but bringing back exclusivity to the high-end channel.
Speaking recently at a seminar entitled, "Doing Business in the New Normal," sponsored by Emanuel Weintraub Associates and held at the Harvard Club in Manhattan, Stephen Sadove, chairman at Saks, said that while the "exuberance we were seeing in 2007" is unlikely to come back any time soon, offering "value" in the luxury channel is more than just lowering prices, particularly in luxury.
"Value isn't just about price," said Sadove. "Value is about quality. It's about design and is about understanding what is special and unique about luxury products."
Sadove further noted that extensive interviews revealed that core customers weren't willing to trade down to lower-priced brands to find that value, but wanted a better value message from their cherished luxury brands.
"What the customer told us is that they still love their brands and they still love to shop," said Sadove. "If it was a very special item, they would pay the higher price. But they wanted to also get the entry price points within the brand."
Saks faced "an enormous amount of resistance" from its core European suppliers when it first started discussing the need for multi-tier pricing back in Fall 2008. In recent weeks, however, Sadove has noticed a "180 degree difference" in conversations around such collaboration from vendors.
"What was first perceived as a U.S. problem and everything else has gone," said Sadove. "What you're finding is a willingness to think about the good, better, best model."
He singled out Louis Vuitton for being able to deliver "very special, high-end price points products but also more accessible price-point items," and said other vendors are following suit. Beyond multi-tier pricing, vendors are also moiré interested in pursuing developing exclusive items for Saks. This includes coming up with a sub-brand collections in categories not currently available in the market.
"It's not just the colors that nobody wants," said Sadove. "It's a different classification of a brand we have and doing it as an exclusive for us."
He also said luxury vendors are more open to creating completely new brands as an exclusive for Saks.
"They got the excess capacity and they're thinking, 'How do I grow?'," said Sadove.
Finally, Saks plans to increase its exclusive offerings through its own private label arrangements, although Sadove cautioned that private labels at Saks won't reach near the levels seen at J.C. Penney and Macy's. Through new brands from designers, sub-brands in different classifications and private labels, about 25 ;ercent to 30 percent of Saks' mix across many of its categories will eventually become very-limited edition distributed product.
Sadove remarked that the three-pronged exclusive push will "transform what was a business model of buying other people's goods and selling it, to our version of exclusivity with obviously better mark-ups and the ability to drive gross margin."
After a robust period growth for luxury, the channel still has some room to shrink but overall remains a viable opportunity for the survivors, according to Sadove.
"You're now going more in line with what luxury used to be about - limited distribution and exclusivity," said Sadove. "If you don't buy it now, it's not going to be available in the future. That really is the product model that you're gong to be seeing on a go-forward basis."
Speaking recently at a seminar entitled, "Doing Business in the New Normal," sponsored by Emanuel Weintraub Associates and held at the Harvard Club in Manhattan, Stephen Sadove, chairman at Saks, said that while the "exuberance we were seeing in 2007" is unlikely to come back any time soon, offering "value" in the luxury channel is more than just lowering prices, particularly in luxury.
"Value isn't just about price," said Sadove. "Value is about quality. It's about design and is about understanding what is special and unique about luxury products."
Sadove further noted that extensive interviews revealed that core customers weren't willing to trade down to lower-priced brands to find that value, but wanted a better value message from their cherished luxury brands.
"What the customer told us is that they still love their brands and they still love to shop," said Sadove. "If it was a very special item, they would pay the higher price. But they wanted to also get the entry price points within the brand."
Saks faced "an enormous amount of resistance" from its core European suppliers when it first started discussing the need for multi-tier pricing back in Fall 2008. In recent weeks, however, Sadove has noticed a "180 degree difference" in conversations around such collaboration from vendors.
"What was first perceived as a U.S. problem and everything else has gone," said Sadove. "What you're finding is a willingness to think about the good, better, best model."
He singled out Louis Vuitton for being able to deliver "very special, high-end price points products but also more accessible price-point items," and said other vendors are following suit. Beyond multi-tier pricing, vendors are also moiré interested in pursuing developing exclusive items for Saks. This includes coming up with a sub-brand collections in categories not currently available in the market.
"It's not just the colors that nobody wants," said Sadove. "It's a different classification of a brand we have and doing it as an exclusive for us."
He also said luxury vendors are more open to creating completely new brands as an exclusive for Saks.
"They got the excess capacity and they're thinking, 'How do I grow?'," said Sadove.
Finally, Saks plans to increase its exclusive offerings through its own private label arrangements, although Sadove cautioned that private labels at Saks won't reach near the levels seen at J.C. Penney and Macy's. Through new brands from designers, sub-brands in different classifications and private labels, about 25 ;ercent to 30 percent of Saks' mix across many of its categories will eventually become very-limited edition distributed product.
Sadove remarked that the three-pronged exclusive push will "transform what was a business model of buying other people's goods and selling it, to our version of exclusivity with obviously better mark-ups and the ability to drive gross margin."
After a robust period growth for luxury, the channel still has some room to shrink but overall remains a viable opportunity for the survivors, according to Sadove.
"You're now going more in line with what luxury used to be about - limited distribution and exclusivity," said Sadove. "If you don't buy it now, it's not going to be available in the future. That really is the product model that you're gong to be seeing on a go-forward basis."