On March 6, Saks Global announced that it is closing additional Saks Fifth Avenue and Neiman Marcus stores. The company has been staving off collapse through emergency rounds of funding as it goes through the bankruptcy process.
That means there will be 12 fewer Saks and three fewer Neiman stores nationwide by the end of May. They join the eight other Saks and one Neiman store that announced closures last month, along with 57 Saks Off 5th stores that are also closing. Soon, just 32 Neiman and 13 Saks stores will be open across the U.S.
In a press statement, Saks Global CEO Geoffroy van Raemdonck said that closures focused on less important geographic regions for the business.
“Our go-forward store portfolio will comprise the best performing and most desirable locations in markets with the highest concentration of luxury customers, enabling us to deepen loyalty and drive sustainable growth,” he said.
But for fashion brands, the move is yet another reason to rethink the department store relationship. For many years, the value proposition of a large department store like Saks Fifth Avenue is that the brands would benefit from the company’s scale and exposure to its audience across the country. But with Saks scaling back its business and cutting regions outside of already-saturated markets like New York City, that value proposition is losing its sheen.
“For an independent designer, getting into a big store like that is as much PR as anything else,” said Ripley Rader, the founder of her eponymous Los Angeles-based women’s contemporary brand. “You used to make a pretty big sacrifice to your margins in exchange for the exposure you get from working with a big physical store.”
Rader said the shift at Saks has made that less appealing to brands. Ripley Rader sells in a few large retailers, such as Evereve, as well as smaller boutiques and online retailers.
“Fewer brands are able to make those sacrifices, and now, with stores closing, you’re not even getting the same level of exposure,” she said. “So where is the value?”
For Saks Global, the closures make sense from an efficiency perspective. Experts have told Glossy that the company operating both a Saks and a Neiman store in the same market was likely redundant.
“Saks Global has too many stores and, in many cases, in locations where a Saks is directly competing with a Neiman Marcus nameplate,” said Jonathan Lazarow, retail expert, lawyer and founding member of the M&A law firm Ambrose Lazarow, PLLC.
After the closures, only a select few major cities and shopping destinations like New York City, Atlanta and Beverly Hills will have both a Neiman and a Saks store. Data provided to Glossy by Placer.ai showed that foot traffic at Saks Fifth Avenue in January was up slightly by 1.6% year over year, but Neiman Marcus was trending down by 10.5% in the same period.
But while big physical department stores like Saks are struggling to stay afloat, it’s creating room for both smaller boutique shops to pick up business and for primarily online wholesalers to lure in new brands. Designer Hadley Pollet has stopped working with Saks in favor of hosting trunk shows and boutiques, while designers at New York Fashion Week in February told Glossy they were hoping Saks’ challenges would result in a “boutique boom.“
Rader said that e-commerce-based wholesale retailers have become far more appealing in recent years, citing Revolve, Shopbop and, especially, URBN-owned rental platform Nuuly as partners that are picking up the slack and giving the exposure that used to come from department stores.
The financial results from some of these online retailers has been a stark contrast to their physical counterparts. Revolve reported an “outstanding” quarter in February with quarterly net sales up 10% year over year to $324 million. And Nuuly reported annual revenue of over $500 million in January.
Not every department store is struggling, however. Both Bloomingdale’s and Nordstrom saw their sales increase by more than 10% in the last quarter.
“It’s surprising, but as a vendor, the online retailers are very professional, on-time and positive,” Rader said. “Evereve, Shopbop, Revolve and Nuuly have all been amazing partners for us, as an independent brand. I never thought I’d be big on Revolve, but we sell one of the top 10 most popular pants on the site.”
