What challenges does Saks Fifth Avenue currently face within the fashion industry?
Throughout the past few decades, department stores are proving to no longer be the fashion powerhouses they once were. Between increased competition, economic fluctuations, technological advances, the changing consumer climate, and a variety of other variables, many “original” department stores such as Marshall Field’s are no longer in existence, while stores such as Saks Fifth Avenue are forced to adapt or experience a similar fate.
Recent years have shown several factors that have and will continue to create issues for Saks Fifth Avenue- namely changes in the economy, the creation and spread of discount stores, and the increased popularity of ecommerce.
The great economic recession of 2008 has been said to have halted the skyrocketing growth luxury retail experienced in the years prior. Several articles on economics and its effect on the industry explain that before 2008, “chains like Saks were posting double-digit quarterly sales gains” but when the recession hit, the fashion mongul’s sales were “battered”. While years have passed since the recession, economic fluctuations may pose a major issue for Saks in the coming years. The recent purchase of Saks by Hudson Bay leave many with the impression that Saks never fully recovered from the great recession, making it especially vulnerable to future economic fluctuations.
In response to the decrease in sales from the recession along with the emergence of countless discounted ecommerce sites, Saks began to open many more off-price outlets to win back consumers and increase their sales. However, this caused the department store that was once referred to as “a palace of hushed elegance”, to no longer be perceived this way by its customers and the industry. By offering more discounts, Saks hurt their image and discouraged shoppers from buying their full price items.
Lastly, the recent influx of ecommerce sites, especially discounters such as Amazon, EBay, and Gilt, has created another dimension of competition for department stores like Saks. Being able to buy products from the comfort of one’s own home with a fast delivery and discounted prices of many items have consumers everywhere going online, especially when it comes to fashion. An Alexander McQueen blouse that costs $1,900 at Saks could be bought online for much cheaper, and the customer would never even have to walk out the door. Even further, the consumer can perform a price comparison with more ease on the Internet than they can across physical stores. However, there is a downside to shopping online, especially with clothing. A customer is unable to view or try on the product before an online purchase in contrast to one in store.Many consumers are solving this problem by performing “showrooming”: viewing and trying on the product in store then purchasing it online to receive the better price.
Yet with this new introduced competition, Saks has decided to fight back.Last month Saks’ parent company, Hudson Bay, announced that it will be buying Gilt Groupe to help the company “ramp up its online business much more quickly”.This purchase, along with some strategic planning, could help rebuild the department store’s sales along with its image, aiding in its survival for the long term.
Sources:
http://fortune.com/2016/01/07/saks-hudson-gilt/
http://www.newyorker.com/news/news-desk/the-end-of-saks-as-we-knew-it
https://www.bostonglobe.com/business/2013/07/29/hudson-bay-buying-saks-for-about-billion/1l6YVqR8b9TxVkqQYc7GrN/story.html
