Saks CEO on e-commerce split-up and luxury spending

NEW YORK (AP) — Eight months after Hudson’s Bay Co., the Canada-based owner of Saks Fifth Avenue, split off the luxury retailer’s e-commerce business into a separate entity, changes are already underway on its site.

The number of styles Saks.com sells is up 40%, and the number of brands available has increased by 30%. Saks.com is also ramping up offerings in kids clothing and home furnishings as well as activewear. Shoppers can now enjoy free deliveries and returns. And eventually, shoppers will see speedier deliveries and more upscale packaging of their items — with an eco-friendly twist.

Behind all the changes is Marc Metrick, previously president and CEO of Saks Fifth Avenue, and now CEO of the new Saks.com company called Saks. Metrick says the stand-alone company with new financing means the business can grow bigger much faster. So far, there are signs the spinoff, announced in early March, seems to be working. Saks.com now has 1 million visits a day, up from 500,000 two years ago. And the sales on a total value of merchandise basis rose 80% on Saks.com, while store sales increased 30% in the second quarter ended July 31 compared with the same period in 2019.

Venture capital firm Insight Partners plowed $500 million investment for the new Saks.com company and values the standalone business at $2 billion. Hudson’s Bay, which also owns Saks Off Fifth and the Canadian Hudson’s Bay department store chain, went private nearly two years ago.

The changes are happening as online shopping exploded during the pandemic, even for high-priced luxury items, as shoppers avoided brick and mortar stores. Online sales rose 21.1%, and overall luxury sales nearly doubled for the first nine months of this year, according to Mastercard SpendingPulse. In comparison, total retail sales excluding auto and gas increased 10.8% during that timeframe.

Meanwhile, reports are swirling that an initial public offering is in the offing for Saks e-commerce business. That’s occurring as activist investor Jana Partners is reportedly pushing for a spinoff of Macy’s e-commerce business.

AP recently interviewed Metrick at Saks’ New York headquarters about a wide range of issues from the reasons behind the split to how luxury spending is rebounding. His responses have been edited for clarity and length.

Q. Why did Saks spin out its e-commerce?

A. Back 20 years ago or so, the first instance of e-commerce….none of us — us being the traditional department store folks — were really able to get into the space race the right way. We had lots of bricks and mortar to deal with. We had customers who like to shop one way, and we had to be consistent and it was very complicated. And then as we’re sitting through even pre-pandemic watching the channel shift, watching this digitally-native consumer come to life, we realized….we can’t miss this one, like the industry missed the first one. So we decided to really structure our business in a way where we can win with both channels the right way.

Q. What is the biggest difference?

A. Since we launched Saks.com in the late 90s, we were an “or” company. We can invest in online or in the stores. We can buy inventory for online or the stores. We could focus on marketing for online or the stores. Now we’ve become an “and” company. We can invest in our online and our stores. We can spend marketing dollars for our online and our stores. We can buy merchandise for online and our stores

Q. How’s the luxury business faring?

A. I am very pleased with how the business held up and how the business pushed through the pandemic. There are people that really want to get dressed up again, even if they’re returning to the office or if they’re going out to dinner again and they’re going out to see friends. It’s the go out and travel businesses that are really working.

Q. How is the consumer benefiting?

A. They have more choice and selection than they’ve ever had before. There’s new categories that we weren’t really in in a meaningful way or they were there, but they weren’t really powerful. We are amplifying and really going after them.

Q. How are you improving the speed of delivery?

A. We used to focus on getting it to you when we could. Now we’re focusing on getting it to you as fast as we can. There’s probably a day or two faster delivery, and that’s not really where we want it to be yet. But that’s a work in progress right now.

Q. Why are you able to be speedier now?

A. It starts with having the inventory in our fulfillment centers. When you’re a fully-invested omnichannel retailer, which is what we were, some of your inventory is sitting in your fulfillment center and some of it is sitting in one of 40 stores. And that just takes a longer period of time when you run out in the fulfillment center and it’s got to go out to the stores to get filled. It’s going to take longer for the customer to get it. It’s less efficient for the consumer, and this helps move that process along in a big way.

Q. Are there plans for Saks.com to go public?

A. My job and my team’s job is to focus on the customer experience doing everything we’re saying we’re going to do and building this business. What happens from a capital market standpoint, who knows?

Q. What about acquiring new customers?

A. We’ve acquired about half a million new customers just in the last seven months while maintaining all the right economics, and I’m thinking about the economics much differently. So I’m thinking about not only my customer-acquisition costs being moderate to low. I’m thinking about the lifetime value of these customers, what they’re bringing to us.

Q. How are you navigating the clogs in the supply chain?

A. It wasn’t a matter of diversifying where we were going. It was a matter of making sure that we had enough so that if there was a fallout or if you got less than you were still getting it. It was getting in there early so that if it came late, it still came on time. So it was really about being strategic about the quantities that you’re placing. And we weren’t crazy.

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