2

Saks at 70% Off

by Greg Shove on December 4, 2008

My first reaction was that this story in the NYTimes was another sensational tabloid tale about how bad the economy is and in particular for luxury retailers. It clearly is, since Saks decided to go straight to a 70% markdown on all their designer brands, including Valentino, Prada and others – brands that don’t get that level of discounting, at least not on the main floor of Saks in NYC (it’s not supposed to be an outlet mall). The brands themselves, besides being worried about getting paid by struggling department stores, now have bigger concerns once the recession is over.

Will consumers ever pay retail again, and if so, in what venue?  These high-end retailers have turned their once premium selling space into a warehouse – Costco with higher rent. The irony of course is that for the last decade most luxury brands and the retailers themselves have not fully embraced the web as a selling venue, concerned that it cheapened or poorly represented the $2,000 crocodile handbag.

The department stores have just exposed, at least in the markets where they have stores, the outrageous mark-ups that these products carry. Most consumers knew at some level that they were paying not just for the handbag but for the name, prestige, thrill and service of buying in a Saks or Bergdorf. But 70% off current season Loro Piana as the sweaters hit the selling floor?

Once this recession is over, the brands and retailers won’t be able to go back to the way it was – not without adjusting their tactics. Brands in particular will need to take even better control of their sales and distribution strategies:

• more owned and operated stores – but keep them small
• more pre-sales and trunk shows targeting their best customers
• invest more in webstores to sell merchandise to their best customers prior to release to brick and mortar stores – not after.
• choke supply of premium products or lines sold through the department stores

As AOL’s first VP of E-Commerce, over 12 years ago, I spent a lot of time trying to convince luxury brands to sell on the web. There has been a lot of progress, especially in the last five years, but I think that most of the luxury business still regards the web as an inferior selling environment. Saks just changed that.

December 4, 2008 deep discounting, loro piana, saks