Saks Fifth Avenue Opens Store in Manhattan’s New Luxury Battleground
Saks Fifth Avenue President Marc Metrick has little time for talk that luxury department stores are passé.
On Friday, the retailer, owned by Hudson’s Bay hbc, will open only the second New York City store in its 114-year history, a Lower Manhattan location six miles from its iconic Fifth Avenue flagship. The new store, across the street from the World Trade Center, gives Saks a “fresh canvass” to update how it sells high-end items and rejuvenate the department store format, says Metrick.
Take the part of the new Saks store that will showcase, like a museum would, an “installation” featuring the work of a specific designer, who will be changed out monthly. Or services like the “Power Lunch” offering, which will give customers a style consultation, a quick beauty treatment and a bite to eat within 60 minutes. There is even a new “Saks Save Me” hotline that distressed customers can call in case of a fashion emergency like a broken shoe or malfunctioning zipper on a gown.
Across luxury retail, the same-old, same-old doesn’t cut it anymore. In the last 20 years, the leading U.S. upscale department stores have ended up looking very much alike, carrying many of the same brands and presenting them almost identically, turning luxe into a commodity. The chains had become something of a glorified landlord to brands, weakening their own identity.
That approach has led to their worst slump since the Great Recession. Comparable sales at Saks Fifth Avenue have fallen four straight quarters, including a 1.3% drop in the most recent quarter. Its competition hasn’t been spared either: Neiman Marcus and Nordstromjwn have each reported several consecutive quarterly drops, while Macy’sm Bloomingdale’s chain has been hurting too. (Macy’s does not break out those results.)
So the strategy, paradoxically, is to return to what luxury department stores used to do: a focus on brands shoppers can’t readily find at competitors, an emphasis up-and-coming brands, and personalized service of the kind sales staff used to offer their very best customers, the ones whose names they kept in their “black books” and gave extra special service to. To that end, the Saks store will showcase edited assortments of 200 brands, with its own stylists playing a larger role in selecting what gets displayed.
“It’s de-departmentalizing the department store – you should feel like you’re in a boutique,” Metrick, a long time Saks executive who took the helm in April 2015, tells Fortune. Metrick was named president after a period of tumult at Saks that saw star executive Marigay Mckee leave after only 15 months and a number of key executives take off.
The 86,000-square-foot location, anchoring a newish luxury mall operated by Brookfield, is a fraction of the size of the uptown Saks, which at 600,000 square feet is one of New York’s grandes dames of luxury, along with Neiman Marcus Group’s Bergdorf Goodman. Saks’ strategy has echoes in Barneys New York’s move this year to open a smaller downtown store that is more edited and edgier.
Some of the ideas Saks is deploying at the store could find their way to others in its fleet as the retailer upgrades its 42-store chain. In addition to the $250 million Saks is pouring into its Manhattan flagship (believed to generate $700 million in annual sales), the company is planning to overhaul its Beverly Hills store, and recently renovated its Houston locations.
It might seem strange that it took Saks Fifth Avenue, the quintessential New York luxury store founded in 1902 as Saks & Co until now to open a store in Lower Manhattan. But the new store aims to capitalize on the affluence of Manhattan below Houston Street, an area that includes three of the 20 wealthiest zip codes in the United States (the average household income in the 10013 zip code is $220,757). It’ll also benefit from a surge in tourism: NYC&Co, New York’s tourism marketing agency, is forecasting 59.7 million people will visit the city this year, compared to 43.8 million a decade ago. And that growth has been more marked in Lower Manhattan with the opening of One World Trade Center, a museum and a memorial to 9/11 victims having opened in recent year. Some 12 million people visited Lower Manhattan last year.
It also helps that Brookfield Place, an office tower and mall that is also home to Hermès and Gucci stores (and next door to Goldman Sachs headquarters), and the brand new Westfield World Trade Center mall across the street, are turning the area into a major upscale shopping hub that will generate a lot of foot traffic.
Still, opening a brick-and-mortar store is a risky gambit at a time online sales make up more than 20% of sales at the major department stores and same-store sales are sagging. And downtown or not, the new Saks store will soon be facing a ton more competition. On top of the new Barneys, Bergdorf Goodman is getting a massive remodeling. And Nordstrom and Neiman Marcus are each opening their first-ever Manhattan stores in 2018, Neiman in the hot High Line area, and Nordstrom as the anchor of a luxury residential tower near Central Park South. Both stores will pull out all the stops to make their New York City flagships spectacular to win their share of the $79 billion New York luxury goods market.
And so that takes us full circle: the Saks in Brookfield Place embodies where the retailer is trying to take itself to stay relevant, or better yet, thrive in the face of intensifying competition.