Bricks and clicks are going to have different Fifth Avenue addresses now. (Photo by … [+]
Call it omnichannel. Call it platform-neutral. Call it wherever-the-customer-wants-to-buy-it-we’ll-sell-it. Whatever you call it, the integration of physical retailing with e-commerce has become the standard best practice in the industry over the past few years… all the more so as the pandemic has turned retailing upside down.
It’s why the announcement from Hudson’s Bay Co. this morning that it will split its Saks Fifth Avenue stores and online units into two separate companies — confirming months of rumors — is difficult to understand. That it may also prove difficult to execute and detrimental to the long-term success of the luxury retailing brand is all the more reason to find this nearly incomprehensible.
HBC, which went private in 2020 after years of twists and turns in its structure and strategy that led to ongoing poor financial performance, said it was spinning off its Saks e-commerce business to a standalone company that will be known as Saks. In doing so, it sold a $500 million minority equity share to a private investor Insight Partners. HBC will retain the balance of the ownership of the unit amid industry speculation that it will eventually take this entity public.
The 40-unit physical side of the brand stays as an operating unit of HBC, which also owns its namesake Hudson’s Bay retail operation in Canada. It once was a much larger corporate parent to brands including Lord & Taylor, Gilt.com, Home Outfitters and going back years, Fortunoff, not to mention a serious investment in the big German based department store chain Kaufhof. They are all gone now as HBC has pared itself down while struggling to stay profitable. Going private seemingly ended the public attention on its performance.
How separate Saks units will coordinate their operations remains to be seen. Virtually every other major retailing company in North America has moved the other way, integrating their physical and digital sides to better coordinate customer facing. HBC says they will work together to create a “seamless customer experience.” According to reports, consumers will still see one Saks Fifth Avenue brand wherever they shop with the online side taking charge of marketing and merchandising and the physical stores in charge of buy online, pick up in-store, exchanges, returns and alterations.
On paper that may all make sense but how they actually function together opens up issues that other retailers have sought to minimize by merging operations. It’s why the driving force behind this decoupling of what should be two sides of the same coin seems to have much more to do with returns than retailing. The half-a-billion dollar payday for HBC has to help with the expenses incurred in taking itself private while creating a company that can have all the Wall Street trappings of a techy online play, a story that has been playing well to investors these days.
In taking these steps Richard Baker, the CEO of the company who has led it through all of these ups and downs since first buying into the retailing business with his 2006 purchase of Lord & Taylor, seems to once again be focused on the return on his investment and not the long-term strategy of running a retail business. He said as much in announcing the deal this week, saying it would “unlock significant value within our company’s assets.”
After locking the doors permanently on so many retailing brands, Baker’s success in unlocking anything remains to be seen.
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