Saks Fifth Avenue just launched a storefront on Amazon. It offers selections from luxury brands, such as Dolce & Gabbana, Balmain, Etro, Stella McCartney Erdem, Jason Wu Collection, La Prairie and more, under Amazon’s separate Luxury Stores banner.
The Saks online storefront is more refined and less busy than the typical Amazon page, missing the customer reviews, star ratings and the “products bought together” suggestions.
Rather, the simplified Saks product pages on Amazon might be considered plain vanilla. They lack the “complete the look” and “you also might like” features familiar to SaksFifthAvenue.com customers. However, the convenience of free one-day shipping is available to Amazon Prime members, though Saks fulfills the order.
The Saks on Amazon launch was inevitable after Amazon invested in the Saks-Neiman Marcus merger last year. It’s a big win for Amazon, which has been trying since 2020 to get a foothold in the luxury market. The Saks name lends Amazon credibility in the luxury market, yet the name that lifts Amazon’s image may simultaneously undermine the exclusivity and refinement that define the Saks brand.
“To associate luxury labels with Amazon will only benefit one party,” observed Mickey Alam Kahn, CEO of the Luxury Roundtable. “Saks Global needs to scale distribution at this moment to digest the Neiman Marcus and Bergdorf Goodman acquisition. But it must beware of cheapening its luxury luster. Real luxury is about elevation, not scale.”
Saks Under Pressure
To finance the $2.7 billion Neiman Marcus acquisition, Saks Global sold $2.2 billion in junk-rated bonds in December. The bonds traded as high as 97.75 cents on the dollar, but given rising uncertainty about prospects in the luxury market and Saks’ ability to overcome the headwinds, the bonds have lost about 40% of their value since then.
The bonds were trading around 61.43 cents as of Tuesday and a $120 million interest payment comes due in late June, according to WWD.
While CEO Marc Metrick reassured bond holders the company has between $350 million and $400 million in liquidity, it also has long past-due bills from vendors, which it will begin to payback in installments beginning in July this year.
“The Saks business is under financial pressure,” GlobalData’s Neil Saunders matter-of-factly said. “It needs to drive revenue and cash flow. Opening on Amazon is more a short-term commercial act for Saks.”
Yet one wonders if opening a digital store on Amazon will drive the revenue and cash flow that Saks so desperately needs. Next month Saks will close its San Francisco flagship store in Union Square and two Saks Fifth Avenue and 13 Saks Off 5th stores in Canada will close shortly as part of the Hudson’s Bay Company liquidation following its bankruptcy.
HBC spun off Saks Global after the acquisition of the Neiman Marcus Group, yet HBC owner Richard Baker is executive chairman of Saks Global. Baker has more losses than wins when it comes to running retailers, having failed with Fortunoff, Lord & Taylor, Gilt Group and Germany’s Galeria Kaufhof.
One can’t help feeling that Saks Global is on the ropes too. Saks Global cut 5% of its corporate workforce in February and recently announced it will eliminate 550 more positions and shut down a Tennessee warehouse to cut another 446 workers from its payroll. And CEO Metrick told WWD he plans to trim another $500 million in annual costs.
Conflict Of Interest
“Saks has a pretty dismal record these days as a retailer and you have to wonder if they can execute this effectively,” shared retail analyst Warren Shoulberg. He applauds Saks for trying something different – “Heaven knows, retail could use more of that.” But maybe opening on Amazon is a little too different for Saks.
Shoulberg sees the upside for Amazon in broadening its luxury offerings – “We know that customers is on Amazon and there’s no reason why they shouldn’t be able to buy luxury brands the same way they buy toothpaste and iphone cables.”
And that’s the crux of it. Buying luxury fashion is nothing like buying toothpaste. “There’s a bit of a risk factor in the move,” he observed, “But we may have passed that stage where it matters. It’s a fact of life that just about anything and everything is being bought online and this gives Saks an opportunity to lead the way and stake out its territory on Amazon.”
The independent luxury brands that Saks is bringing onto Amazon have to agree to being showcased there. None of the major players, such as Louis Vuitton, Gucci, Giorgio Armani, Hermès or Chanel are coming along for the ride.
“For bigger luxury labels, where and how you sell is as important as what you sell and to whom you sell,” noted Luxury Roundtables’ Alam Kahn.
Amazon may be able to expand Saks’ reach, but at what cost? “The problem is that, in the end, Saks will need Amazon more than Amazon needs Saks and that imbalance in the relationship means this may not end all that well for Saks,” GlobalData’s Saunders concluded.
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