As retail commercial real estate specialists, we like to stay on top of what the most prominent retail chains are doing and how they’re conducting business. Understanding trends in this space gives us a better handle on what to expect the market to do over the coming years.
Saks Fifth Avenue and its entities have been household names for over a century and a half. What helps them retain their place in history is their willingness and ability to adapt as the world changes around them. Recently, the parent company made an announcement that has left people asking a lot of questions. Namely, will their new business model work?
Saks Fifth Avenue Splits Up
Back in March, the Saks brand announced that it would be splitting into four completely distinct companies – with four different presidents at the helm. The first set of companies is Saks Fifth Avenue branded. However, one is a brick-and-mortar storefront while the other is purely e-commerce.
The second set of companies is more similar to an outlet store experience. Saks OFF Fifth will become O5 and will be purely brick and mortar. The name Saks OFF Fifth will live on but as a digital-only brand.
Some experts are lauding the parent company’s decision as a great idea and a way to expand the brand in a post-pandemic, largely digital world. Others are questioning whether it dilutes the brand too much and may result in a lack of trust among consumers.
Ultimately, there are pros and cons to anything – but we at TD&A think that it was a smart decision that could change the way retailers control their businesses.
What the Saks’ Brand Change Could Mean for Retailers
Many consumers avoid going to brick-and-mortar stores altogether these days because of the ease of buying online. It doesn’t require driving anywhere or even changing out of pajamas and there is no chance of encountering a rude store clerk.
On the flip side of that coin, there is still a not insignificant group of consumers who prefer the one-on-one, personal shopping experience they can only get at a brick-and-mortar location. These days, in order to retain in-store shoppers, that service must be absolutely impeccable: quick, efficient, and friendly.
Splitting the company into four allows each president to focus specifically on catering to the store’s target demographic. Brick-and-mortar stores can focus on providing that top-notch service mentioned above, while digital stores can spend more time and energy on what works for them.
Brick-and-mortar store executives no longer have to cater to digital promotions or split their attention. Instead, executives in each company can focus on their strengths and build their customer bases.
How It All Affects Commercial Real Estate
Commercial real estate (CRE) is still highly in-demand, despite e-commerce sales becoming more popular every year. Consumers want to shop in places that have what they need with top quality service.
As a result, CRE developers are focusing their leasing and development efforts on a broad basis of retail experience in order to compete more directly with online sales. The more needs that are met at brick and mortar the more likely the customer will be to visit and spend money.
The future of retail may come down to a large split between brick-and-mortar and online locations as more companies migrate towards this type of model. Only time will tell!
If you have questions or are interested in buying, selling, or leasing retail CRE, give Rene Daniel a call today at 410-435-4004, ext. 224.
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