Saks is vastly expanding its e-commerce ahead of a potential IPO

The concerns were that any brick-and-mortar retailer needs stores and e-commerce to be fully integrated for their business model to work. So far though, Saks, as the stand alone e-commerce juggernaut is known, has kept rolling amid reported plans to take the company public sometime in 2022 with a potential valuation of $6 billion. HBC declined to comment on those reports.

Saks has benefited from the soaring luxury goods market, buoyed by wealthy consumers who have spent more on retail amid their limited ability to travel. A Bain & Co report published on Thursday estimated that the global personal luxury goods market was expected to grow 29% in 2021, with the growth in the Americas, fueled primarily by the United States, growing around 40%. And indeed the quarterly results for luxury conglomerates such as LVMH and Kering have reflected that American boom.

“The world opened back up and people who entered the luxury market during the pandemic did not retreat,” Saks CEO Marc Metrick, who prior to the spin-off headed HBC’s whole Saks Fifth Avenue unit, told Fortune on Wednesday. What’s more, Metrick said, people who were spending on luxury goods when they couldn’t travel have kept spending on things like shoes and handbags.

But those are macro factors also helping Saks’ rivals. So Saks is looking to sustain its fast growth through its own efforts, including offering a lot more merchandise that customers might not readily associate with Saks. In the last two years, the number of styles sells has risen 40%, while the number of brands is up nearly a third. So far, it is helping: the saksfifthavenue.com site gets about 1 million visits a day, double the number two years ago, with business up 80% in the second quarter of this year over the same period two years earlier.

That’s the kind of growth likely to whet investor appetite for Saks, which was valued at $2 billion in March when venture capital firm Insight Partners invested $500 million into the new standalone company. (HBC, which also owns Canada’s Hudson’s Bay department store, went private in 2019.)

The valuations of e-commerce companies, untethered by slow growing store businesses, have also been in the billions: Farfetch has a market value of $14.5 billion. And Neiman Marcus Group spun off MyTheresa Group GmbH last year, and the online luxury store is now worth $2.5 billion.

More home goods and maternity clothing on its way

Saks’ assortment expansion will continue, Metrick said, with Saks offering an ever broader array of categories, including a bigger incursion into home goods and kids’ clothing, and despite Saks’ luxury aura, prices. The CEO is aware of the temptations of over-expansion, but says Saks hewing to a guiding philosophy will help it avoid those perils.

“Saks needs to stand for fashion,” he says. “People are sort of hung up on price. If it’s quality and it’s fashion, we can have it.” Saks arch-rival Nordstrom announced its own plans in February to broaden its merchandise assortment online and in stores.

On the home goods side, online shoppers can expect to see more things like china, deluxe coffee makers, carving boards with nice knives, a chess set, and high end silverware. “We have permission to go in,” Metrick said of Saks’ credibility in the home goods area with shoppers. “We weren’t selling this stuff a year and a half ago,” he said.

Another example: Metrick, a runner, envisions Saks become a destination for runners wanting upscale brands of running clothes and gear. Gone are the days of luxury only meaning fancy suits for men and cocktail dresses for men, or solely brands like Chanel. (Indeed, tailored suits are now only 1% of Saks’ sales.)

Metrick envisions Saks being a place where luxury shoppers can find the best of most categories they want to be in. “Anybody who wants the finest art, the finest wine, the finest handbag, the finest coat can come to Saks,” he says.

One of the biggest worries retail experts have about separating a store chain from its e-commerce, something Macy’s is being pressured by an activist investor to also consider, is that they won’t be sufficiently in sync to serve customers in the way they expect in today’s world. For instance, if a shopper places an order online and wants to pick it up at a store, or wants to return an online order at a store, or if a retailer wants to use in-store inventory to fill an online order, retailers need to fully integrate both pools of inventory. Indeed, 30% of saksfifthavenue.com orders were filled by stores in the last three months. It also means co-ordinating buying and figuring out who gets credit for the sale, or incurs a shipping a costs.

To avoid such problems, HBC put Metrick in charge of merchandising and marketing for Saks Fifth Avenue stores, as well, while the stores’ unit has its own executive in charge of matters pertaining strictly to the stores. Still, they have to work in lockstep, all the more given that Saks stores shape the brand’s image.

What’s more, Americans are traveling more, and international visitors, traditionally responsibly for 20% of sales at Saks’ mammoth Manhattan flagship, can finally visit New York again. And that is where they might develop a taste for Saks and even order from its website once they are home. “Tourists obviously come in and they want to be at the store,” Metrick says.

So bullish is Metrick for the holiday season just revving up that Saks bought twice as much inventory as it had for the holiday period in 2019, partly to get ahead of supply chain snafus, but more essentially, betting on the luxury shopping continuing to spend.

“These consumers, they’re good, they’re resilient, and they’re going to be there,” he said.