Shaping the next normal - how Saks Fifth Avenue is using digital savvy to evolve the “comfort food” of luxury retail

Profile picture for user slauchlan By Stuart Lauchlan January 25, 2021
Summary:
The US retail institution has built on its digital thinking to adapt to an acceleration of change brought about by the COVID crisis. Now it’s time to think about what the next normal will be for luxury consumerism.

saks
(Saks)

We call it the next normal at Saks. It’s not the new normal, it’s the next normal, because it’s going to be ever-changing.

That’s the point of view of Marc Metrick, CEO of US luxury retail brand Saks Fifth Avenue, and one perhaps with more validity underpinning it than the vague, often undefined, references to so-called ‘new normal’ that have been commonplace among commentators throughout the COVID crisis. 

For Saks, in common with other retailers, the past year has been hugely disruptive and one that, given Saks high-end luxury reputation, might be thought to have been particularly vulnerable to a spending downturn. On first sight, the company’s aisles are filled with the very embodiment of non-essential retail. But that’s proved to be an asset, suggests Metrick: 

I think what we learned is customers view luxury as the comfort food of retail…It's your Oreo cookie. It's your something that's gonna make you feel better.

Building on digital foundations

In the past, diginomica has examined the luxury retail sector as one of ‘last men standing’ in its resistance to digital transformation, with certain key brands pushing back against the idea of online shopping and clinging to a preferred model of well-heeled clientele patronizing plush stores in a well-to-do part of town. 

COVID and the physical store shutdowns that resulted may well have influenced a change of heart among some of the luddites in this respect, but Saks was not among their number to begin with. It has in fact been so successful with its omni-channel strategy that it’s now reported to be considering spinning off its $1 billion turnover dot com business in an IPO over the coming year.

During the pandemic, efforts to expand and accelerate established digital programs have been successful, such as the use of wholesale e-commerce platform NuOrder to overhaul procurement and merchandising or the upgrading of its website using Salesforce’s Commerce Cloud. 

As has been seen with a number of other retailers, having an established omni-channel mindset in place over a number of years has left Saks better placed to adapt to the changing circumstances caused by COVID than rivals who were forced into playing catch-up. Metrick says: 

The pandemic to us was actually an accelerant to change. It wasn't like all of a sudden no-one wants this or everyone wants that, no-one wants to come to the store, everyone wants to go online - this was just an accelerant to what was already happening…We re-platformed Saks.com in October, in the middle of all this a new website's spun off, and that's not because we realised in April or after we closed, 'Oh my God, this internet thing is for real!'. We were a year-and-a-half into this re-platforming activity with Salesforce. Digital advancements were there. Getting our associates on more technology so they can better meet their customers needs, that was already there.

It's silly to sit back and say, 'Oh yeah, this internet thing is really meaningful now that COVID came and showed us the way'. Obviously it was [already] important. It's been something we've been working on, the platform, the website. We've put lots of technology in the hands of our associates through the peak of the pandemic. Our stylists in our stores have generated nearly $150 million in revenue from technology, through being able to use our websites to fill our customers needs before the stores re-opened and even after they were open and folks didn't want to come in.

Luxury disrupted

Saks has an overall term for how it’s coped over the past year and how it approaches the ‘next normal’ - Luxury Disrupted. This has 3 underpinning pillars, explains Metrick, the first of which is an exhortation not to forget that Saks is a fashion retailer. Tech is an enabler for improving the way the firm operates, not a goal in its own right, a learning that is all-too-often forgotten among retailers with acute ‘Amazon-envy’. Metrick says: 

It's so easy right now to say to yourself, 'Oh I'm a data company, I'm a technology company, I'm an internet company'. We are a fashion company. That's what Saks is and we have to own that. That has to be our truth and that's what we're doing…It's so important for us not to think about who we aren't and try to become that. It's really about figuring out who we are, knowing who we are and becoming great at that.

The second pillar is ease of use and making the retail experience as frictionless as possible, while the final plinth centers on personalization. This last point is one where digital tech has brought about a certain levelling of the playing field in retail, admits Metrick: 

For ever, luxury has owned the high touch relationship. Luxury owned knowing when your birthday was, your anniversary, knowing you when you walk into the store. Over time, data became the greatest equaliser and almost everyone was able to personalize things. So we are taking it a step further and we're actually building technology to be able to connect our in-store experience with our online experience, using data to really give the customer the best possible experience when they come into our store.

But what personalization actually involves is an evolving topic, he suggests: 

The future, when I think about it, is still going to involve a stylist, it's still going to involve the product itself and it's going to involve the customer. Other than that, it's our job not to tell the customer, 'This is how you're going to experience X', but actually to meet the customer how they want to. And how [one person] wants to experience it is going to be different than how [another] wants to experience it. That's what personalization is about. Personalization is not just about what product does X prefer versus Y, or is X male and Y female? It's also about how does [a person] like to interact with us. Does she like text? Does she like email? Does she like us to still mail her a postcard? Does she like not to hear from us at all? Do you like a phone call? Do you like to come into the store? These are all the different things that we have to think about as we think about personalization.

Still loving the store

And in all this, stores matter. As noted above, luxury retail has traditionally been about the in-store experience for the high-end customer. That’s not changed, argues Metrick:

We've learned stores are still important. Stores have a very important part in the overall customer experience [when] we’re thinking about it for luxuries. Actually, it's theater. It's where people come to talk, to feel, to experience. I used to always compare it to Hamilton [the musical]. People would want to go to the theater to experience it. They don't want to just stream it online. And that's stores for us. 

The all-important desire among luxury consumers to ‘touch and feel’ isn’t going away, he adds; 

When you're shopping for luxury products, you want the experience, you almost don’t want it to be simply a transaction. There are times you do…which is why our digital properties are so important, but there's going to be a certain element of ‘touch and feel’. But I think it changes the experience a little bit with, how do you infuse technology into that, how do you really round out the experience, And how do you make it easier for the consumer to get to where they want to get to with technology?

The trick now is to combine the offline and the online worlds, the Holy Grail of omni-channel retail strategy.  The starting point for Saks is what customers experience when they come into a physical store, says Metrick: 

We have to now look at amplifying what our customer service is like in the digital world. How does that help me differentiate, from a luxury perspective, from anybody else? When you walk into one of our stores, it certainly feels different than a more modern store that you might walk into - maybe not better, maybe not worse, but different. Certainly luxury should feel different online. We have to work very hard to differentiate those experiences, so we have to work on that. 

I also think that people have learned and understood and appreciated that maybe I don't want to shop with thousands of people around me. So, we have to really bring that much more private or personalized shopping experience to the forefront. It's no longer [just] for people who spend a certain amount of money -  it never has been, but again, [that’s] been something customers feel. We offer private shopping at Saks for free. If [someone] wants to come in and have an appointment with our private shopping and spend no money, she can. But people are always hesitant to do that. Now [due to COVID] they won't be, because they’ll think about it from a safety standpoint or from a health standpoint.

As the next normal takes shape, one thing that Metrick is determined about is that Saks will plow its own furrow: 

I actually don't think about the other department stores. I think about Saks and how we could be great at being Saks. When you look back at most service companies or consumer-facing companies, the ones that win are the ones that are the ones who know who they are, who understand their identity and just want to be great at that. You don't try to do what other people are doing. You don't try to change every six months with the wind. They evolve, they prove, they innovate, but they stay true to their codes on who they are. That's what we're doing at Saks and that's what's been helping us win.

He concludes: 

I want [Saks] to be the definition of the word [success]. I don't want to define it; I want somebody to use Saks as the example of something great, something special, something unique. There is the elevator pitch -  I want to be Saks. That's it. And I want that to define itself.