The evolution of the luxury experience – a conversation with Saks CEO Marc Metrick

Marc Metrick, CEO of Saks, joined CNBC Senior Retail Reporter Courtney Reagan for a conversation about the company’s strategy to evolve the luxury experience for today’s online luxury shoppers.

Marc shared key insights into serving the full continuum of luxury consumers and Saks’ efforts to build lasting and meaningful customer relationships, prioritising high lifetime value (LTV) customers. Embracing innovation and harnessing the power of data-driven personalisation and AI to enhance the customer experience was a key theme of the discussion.

In March 2021, Hudson’s Bay Company, which owns Saks Fifth Avenue, made an unusual move, splitting the luxury retailer’s e-commerce site and its physical stores into two separate companies. The stores operate as one entity, called Saks Fifth Avenue, and the e-commerce business operates as another, called Saks.

Importantly, the split doesn’t affect the customer experience – the two entities collaborate on marketing, customer data sharing and loyalty strategies – but does create a better runway for the e-commerce business to grow.

Metrick was questioned about this move.

“A typical omnichannel retailer, with its e-commerce and stores under the same banner, there’s often tension between those two divisions. E-commerce is usually growing faster than store sales, but e-commerce isn’t as big overall, so it doesn’t get the same level of investment or access to resources.”

“It’s sort of the classic innovator’s dilemma,” Essner says. “The move was a recognition of the growth opportunity that was inherent within saks.com … and also that we have to change things to be able to focus appropriately on it.”

Metrick also reflected on how Sak Fifth Avenue had a history of “following customers where they went.”

“Saks was started in the early 20th century by Horace Saks, head of Saks & Company, which initially had their flagship store at Herald Square, midtown Manhattan. However, as the more affluent consumer moved north to the Upper East Side, a new location was constructed in 1924 on 5th Avenue, and the retailer was naturally rebranded to Saks Fifth Avenue.”

In the same way, we saw our market move out of midtown, we identified more shoppers moving online, and we followed them there.

Metrick also suggested people don’t accept or understand you can do luxury online. You can still drive exclusivity through limited volumes, limited distribution, and perceptions of scarcity.

Separating the business into two models and investing strongly in e-commerce delivered exponential growth.

“We acquired five times the amount of shoppers from pre-pandemic, due to our online geographic reach.”

Metrick indicated that the stronger focus online was an attempt to capture the younger shoppers.

“As they become ‘socialised’ as consumers, online enables them to access and interact with our brand, without feeling intimidated.”

“While we still have a very strong core, the ‘tried and true’, we are always looking for the emerging aspirational luxury consumer.

When discussing the international market and ‘travel market’, Metrick claimed that the Chinese customer is not back yet, but there is certainly growth from the Asian market.

Re-sale – is it helpful or hurtful? We are not in it. However, it is helpful to educate new emerging luxury consumers. We like it. It enables a shopper to buy a $6500 handbag, knowing they’ll get $3000 back in a few years. So, their next buy will be less.

Metrick was questioned about a potential department store rationalisation – similar to what was mooted between David Jones and Myer.

It had been widely reported in December 2023, that Neiman Marcus had rejected another takeover offer from Hudson Bay Company (HBC), owner of luxury department store Saks Fifth Avenue. The third in the past 10 years.

Discussions are continuing, however, Metrick did not see a merger in 2024.

Metrick also offered that premium and luxury brands see value in a multi-brand strategy.

“So, Louis Vuitton loves having their stores, but also a concession in Saks. Concession works, as we have moved further away from wholesale.”

Metrick was asked if the Saks Fifth Avenue physical stores always be a part of the business.

“Yes, you don’t stream ‘Hamilton’ on your television – you go and see it. Physical stores are an important part of the luxury experience.”

Metrick suggested their research supported physical stores.

“When we asked our customers where they get inspiration, the most frequent response was ‘I visit the store’, the second was ‘I read fashion editorials’, and last was ‘social media and websites’. Social media is important, but not the most important.”

When questioned on ‘Buy Now, Pay Later’ (BNPL) and the incongruency that wealthy shoppers would need such a product, Metrick indicated “Our customers want it.”

“Admittedly, demand for BNPL is softening. Before the pandemic and during the pandemic, we were seeing double-digit growth in demand for BNPL, to today is single-digit growth. We also welcome regulation around this product, because regulation will protect our customers in the long term.”

Naturally, AI was also addressed.

“We are using AI for efficiency only. It helps us write advertising copy, create images and personalise offers.”

“Right now, when you call Saks you are talking to a real person, but in 5 or so, you may be speaking with a synthetic voice AI chatbot.”

Social media shoppers – do you shop on social media – 70% said no.

Is organised retail crime an issue?

Metrick recounted that today, CSV Pharmacies have to place flexi-glass over deodorant. Today, we have to put flexi-glass over our online sites.

“In the past, people would call and say they didn’t get the product. We called that ‘Product Not Received’ or PNR. We would simply issue a credit. Today, the PNR has tripled. Yes, crime is an issue impacting all retailers – from luxury flagships to local corner stores.”