December 20, 2016

How Saks Sacks Its Competitors with a Better Customer Experience Strategy

Both high-end luxury and discount chains have found themselves in an evolving landscape that is no longer reliant on brick-and-mortar. As foot traffic lags, legacy retailers are implementing flexible fulfillment and real-time inventory updates to meet consumers’ on-demand expectations, and planning innovative store activations to drive engagement.

While luxury retailers once maintained a narrative that said their shoppers weren’t going to be lured online, the sales figures have created an entirely different story.

Saks Fifth Avenue has renewed its leading position in the competitive luxury retail field by working to meet the needs and expectations of today’s consumer. This hasn’t been an easy feat, given the trend toward mobile shopping and the rapid proliferation of digital-first competitors such as Rent the Runway and Net-a-Porter.

In the process of reinventing itself, Saks has had to consider every facet of the customer experience that it provides. While digital convenience is increasingly important for every retail category, the physical store experience is still a powerful factor in defining the Saks brand. The various realms relating to customers are all crucial, and to be successful, the brand has to integrate them into one omnichannel shopping environment.

Saks’ success in carrying off this integration poses a challenge to its traditional competitors: How can other high-end legacy fashion retailers combine digital strategy and real-world customer experience to maintain their sales in the face of rapidly changing consumer demands?

Luxury Retailers Rested on Their Laurels

Luxury brands like Saks traditionally relied on the in-store experience to convey the sense of specialness that their customers expect. As digital shopping options increased during the 1990s, Saks and other iconic high-end retailers held their ground. From the time of its founding in 1867, Saks has conveyed its brand of personal luxury through its unique physical shopping experience, and it didn’t expect that fact to change. As online marketing began to spread through lower-priced stores, Saks hesitated to offer its products online. Its marketers doubted that shoppers sitting at their home computers would order $10,000 designer dresses or $900 dress shoes with just a few clicks. Other legacy high-end brands such as Barneys and Tiffany had a similar philosophy.

How Saks Moved Forward

In 2000, Saks finally responded to the digital zeitgeist and launched Saks.com, which was immediately and hugely successful. It soon became essentially a parallel store, with its own pricing, supply chain and messaging. During the first decade of this century, the two Saks divisions largely operated separately from each other.

After 2010, however, a new shift was detected in customers’ shopping habits. It became obvious that many customers did not fall into one category or the other; instead, some people who came into a store for fashion advice would then go home to do their purchasing online. Others would scout out products such as shoes online, but come into a store to see if they actually fit. In 2011, CEO Steve Sadove launched an omnichannel initiative, which envisioned offering iPads in stores and in-store delivery of items ordered online. This plan was a big factor in attracting the interest of the Hudson’s Bay Company, which bought Saks in 2013 for $2.4 billion.

The Upstarts That Pushed Saks to Reconsider

While luxury brands were hesitating about joining the online marketing fray, companies like Net-a-Porter, Stitch Fix and Rent the Runway jumped into the niche that was opening up. Agile enough to recognize the diversity of its audience, Net-a-Porter didn’t stop at providing designer fashions online to women. They launched Mr. Porter, an online retail destination for men’s style and subsidiary to Net-a-Porter. At Mr. Porter, the focus is so strongly on editorial content that the website experience is almost magazine-like. Expansive graphics and high production values on the site design replicate a luxury in-store shopping experience. Customers are taken on a journey with branded how-to guides, rich stories and style advice. Each form of content is created around a product that is offered on the site.

Stitch Fix, meanwhile, calls itself a “personal style service.” Stitch Fix asks each customer to fill out a style profile rather than simply choosing garments. Using its style expertise and proprietary software, the company then ships surprise items that it picks for the customer, offering an experience of excitement combined with the personalization of a shopping assistant. Julie Browstein, Stitch Fix chief operating officer, said that over a third of its customers spend a majority of their “apparel wallet share” with the company. “They are replacing their former shopping habits with our service,” she said. “That’s the most fascinating thing, because it’s a new service and behavior.”

Rent the Runway (RTR) takes a different approach altogether, relying on customers’ desire for novelty and the real-life situation in which, often, a dress is only needed for one specific event. Offering several subscription and rental fee arrangements, RTR lends clothing and accessories for special events. Customers don’t have to worry about cleaning, and simply ship the clothes back when they’re finished with them. With over 200,000 pieces to choose from, RTR disrupts the retail space by cutting the price of designer pieces through its innovative approach to sharing clothing.

Personalization Is the Key to Today’s Success

As Saks reviewed its competition, it realized that 21st century shoppers are looking for personalization. The online disruptors were taking profitable advantage of this customer expectation and tailoring products specifically to user preferences. The changes being made at Saks are emblematic of the realization across all retail sectors that marketing success depends on giving the consumer a truly individual experience.

At Sak’s Brookfield location in Lower Manhattan, the unique in-store experience takes the consumer through a shopping journey equipped with digital touch points. With Saks as a Service, call inquiries route the customer service center directly to an in-store sales associate. Marc Metrick, president of Saks Fifth Avenue, calls this an all-channel approach, believing that “everyone deserves personal attention at all levels. We can shepherd you through your shopping journey.”

Luxury Brands Race to Join the Digital Party

While luxury retailers once maintained a narrative that said their shoppers weren’t going to be lured online, the sales figures have created an entirely different story. Luxury e-commerce sales are expected to reach $21 billion by 2021, showing faster growth than many other e-commerce sectors. Recognizing Saks’ success in the burgeoning digital marketplace, and seeing the writing on the wall, other icons in the luxury shopping ecosystem have rushed to catch up.

Barneys recently launched Beacon Technology at its Chelsea, New York, flagship store, enabling personalized messages to be triggered by the app while customers walk around inside the store. The app also has push notifications and localization, encouraging spontaneous shopping by greeting customers when they come within range of a Barneys store.

Bergdorf Goodman in Lower Manhattan has installed digital mirrors that allow customers to take pictures with garments in the store. Clients can compare looks, save them, and share with friends via email or SMS.

Tiffany, another legend in luxury, now offers an augmented reality experience via its app, folding social media and “try on” experiences into its remote shopping channel. The outcome of these innovations has been a 20 percent increase in sales for the iconic jewelry retailer.

A Rich In-Store Experience Is Still a Hallmark of Luxury

As various luxury brands buy into the value of digital for their customers, Saks has again shown the way by maintaining an equally serious focus on its in-store experience. In April 2016, Saks opened the second largest of its stores, in Houston’s Galleria. This store replaces a previous Houston branch, and it includes some new thinking. Instead of presenting a giant unified experience, the new Houston store encompasses dozens of individual designer boutiques, putting everything at an intimate scale for discerning shoppers. The entire design of the store uses high-end nonretail materials to provide a unique communication of luxury. It also includes private dining spaces and its own exclusive parking area.

In Manhattan, a brand-new Saks branch will open in Brookfield Place, a glittering high-end mall connected by underground walkways to the One World Trade Center. Like the Houston store, this New York location will spare no expense in its decor. Architect Richard Found says he was “essentially given carte blanche” in its design, and he has built the store around an eye-catching tower and a dramatic Barry Reigate mural.

Omnichannel is the Way of the Future

Integrating the digital and physical experiences is called “the holy grail” of luxury brands in a recent research report. This report shows that consumers who use both online and in-store access to luxury goods end up spending 50 percent more than customers who only use a single channel. These statistics show the way forward for Saks Fifth Avenue and other luxury brands. The increasing use of such technologies as Bluetooth beacons and augmented reality will create a rich multimedia experience for customers browsing the luxury stores with their smartphones in hand.

Online and offline, the competition between luxury retailers continues. These companies founded in the 19th century will continue reaching out in uniquely personal ways to weave an omnichannel relationship with their customers. It’s a fascinating evolution to witness; there is no single pathway for retailers to meet their customers’ needs, but inventive thinking and grit, such as Saks Fifth Avenue has demonstrated, will undoubtedly continue to reveal fresh innovations.

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