Saks OFF 5TH debuts in Europe
Paradise for "fashion-aware" ladies
Inner-city, off-price fashion concepts are on a roll here in Germany where the segment is dominated by TK Maxx. Many would love to wear international premium fashion brands, but financial prudence makes most of us wary of anything more than window shopping in swanky shopping malls. The chance to save up to 60 per cent on the recommended retail price is therefore highly seductive.
This is especially the case when you can shop on the High Street without having to drive for an hour or two to a designer or village outlet centre. Of course, one has to accept that the product is six to twelve months old and not current season. But as the fashion-conscious seem increasingly ready to make this compromise for the savings involved, we had a little look for you.
Saks and the City: Saks OFF 5TH on the Heinrich-Heine-Allee in Dusseldorf
The company's Canadian owners at Hudson's Bay Company have recently been criticised in the German trade media for presenting their concept with typical North American management hyperbole. Words such as "fantastic", "great" and "passionate" have grated on some local commentators. But a retailer who can put a smile on the face of female shoppers is surely doing something right.
Saks OFF 5TH sees potential for 40 stores in Germany, with an optimum sales surface of around 3,000m², over the next three to five years. Four more outlets will open in Frankfurt, Stuttgart, Heidelberg and Wiesbaden at the end of July. The company is also ready to start in the Netherlands. A first outlet will open in Rotterdam at the end of August, a second will follow in Amsterdam by Christmas.
The in-store signage is big and bold. This is deliberate policy, says Saks OFF 5TH President Wayne Drummond, so that customers find the store easy-to-shop. "Our 83 associates aren't there to bring the customers a belt. Our service model is to make customers aware of new items and to help them navigate the store and pass through check-out more quickly."
Big percentage signs are particularly noticeable and underline the concept's central price message. "We do this particularly to reassure our younger customers who love the brands, but who may be a little worried about whether they can afford them," says Drummond.
These obviously include men and children as both groups are catered for. Drummond's explanation as to why the ladies are obliged to hunt for bargains on a number of floors while menswear is concentrated on just one is both revealing and amusing. "You can send men anywhere, but you have to make it simple for them!"
We would guess the total number of lines in the store at around 50,000, but there are only 750 to 800 international premium and designer labels on show at any one time. "Our assortment is deliberately broad rather than deep so that we can constantly surprise and delight our customers with new, fresh items," Drummond explains.
To find out more, Lebensmittel Zeitung managed to have a quick chat with both Drummond and Bartosch, but it was quite hard going – they were surrounded by customers.
"Brands deserve excellent store ambience"
SAKS OFF 5TH President Wayne Drummond
Wayne Drummond: Our first and foremost priority is to establish the brand in Germany and Europe. In order to do that, we need to clearly differentiate and position ourselves. We also have access to some excellent stand-alone properties. Our main strategy is to be where our customers want to shop. Therefore, we would also consider what we call a 'carve-out' within an existing Galeria Kaufhof, if the location is right.
Karstadt, Kaufhof's arch-rival, also wants to enter the off-price arena. We believe that they intend to integrate future off-price outlets within their department stores...
I don't know their design plans. We have a very clear set of criteria as to when we would position ourselves inside a Galeria Kaufhof or go for a stand-alone. But I can't reveal these.
But when you decide on a stand-alone, do you deliberately opt for a site in the direct vicinity of a Kaufhof so as to profit from increased customer frequency?
No, we always go by the specifics of the site. It isn't our strategy at all to be adjacent to a Galeria Kaufhof.
Looking around your store today in Dusseldorf, none of your signs or marketing displays even hints at your relationship with Kaufhof. Isn't that a waste of co-branding synergies?
The marketing teams of both Saks OFF 5TH and of Galeria Kaufhof are also working hard at ensuring that our marketing programmes leverage our customer traffic. But in terms of the positioning of the two brands, we obviously have to clearly differentiate them.
SAKS OFF 5TH Chief Merchandise Officer Berna Bartosch
Berna Bartosch: Our priority is to buy directly from the vendors. The focus of any brand that is really innovative is to stay new, fresh and relevant. So the very competence of top brand manufacturers is in newness and not in the distribution and liquidation of stocks. There are obviously many channels which brands use to sell down their inventory, and we will access the resources they sell to at some point in time.
There is absolutely no conflict in this, and our strategy is to build better partnerships, which is the only sustainable way to do business.
A growing number of top brands are exploring designer and village outlet centres as a way of controlling the sale of excess stock from previous seasons. Why should they choose you as a retailer, when they can go it alone?
Drummond: I think we are attractive for numerous reasons. Firstly, retailing is what we do! Brand manufacturers are mainly in the on-price business, and the positioning of their brands is not focussed on off-price. So it is usually not profitable for them. The number-one source of equity for a brand manufacturer is obviously the brand itself. And a brand is probably at its highest risk in terms of value when it is at the end of its cycle or in clearance.
But we offer an integral resource for brands at the end of their season. The reason why our store ambience has been designed to show an elevation is because we believe that brands are worth it and that there is value in presenting them in the way we do. We think a brand has intrinsic value, regardless of whether it has just been launched or is twelve months' old, and that it deserves an excellent store ambience.
But fashion is primarily about freshness, the right colour, and style for the season. Why should brand-conscious ladies go for clothes which are six to twelve months' old?
Bartosch: Women are usually very loyal to their favourite brands. But not all women can or are prepared to pay the full price in the current season. Yes, six months is six months, but we offer tremendous value on a top brand.
Why don't you have an e-commerce offer?
We are working on a digital offer, but we have no set time-frame. Our first priority is to open stores.
TK Maxx dominates your segment in Germany. Do you really believe that you can challenge their supremacy?
They do a great job, but we don't see them as direct competitors.
Men dream of women, women dream of shoes...
Around 20 to 25 per cent; 50 to 60 per cent is what we call "better"; and a small percentage covers some opening price points.
In what way has Hudson's Bay Company (HBC) developed your concept since buying Saks Fifth Avenue and Saks OFF 5TH in November 2013?
Drummond: In a very significant way in terms of expansion. Like all HBC banners, we are growth-oriented. Since the acquisition, Saks OFF 5TH has grown exponentially in the US and was launched in Canada, so that we currently have around 124 outlets in North America. And, as you can see, we have now arrived in Europe.
Related articles in German: "Saks OFF 5th will Europa erobern" by Mike Dawson on page 10 of Lebensmittel Zeitung, no. 23, 09.06.17; "Saks Off 5th kommt in Deutschland an" by Manuela Ohs in LZnet; "Der Paukenschlag" by Hagen Seidel & Mara Javorovic on pages 16-20 in TextilWirtschaft, no. 23, 08.06.2017; Readers are also referred to LZ Digital's picture gallery of the store.