Why two luxury retail giants are joining forces to stave off closure

The parent company of Saks Fifth Avenue is acquiring rival retailer Neiman Marcus in a blockbuster $2.65 billion deal that it hopes will help retain both brands’ wealthy customers.

Hudson Bay Co (HBC) Under the agreement, Neiman Marcus Inc. will gain control of 36 Neiman Marcus department stores, two Bergdorf Goodman locations and five Last Call stores.

The deal highlights the challenges facing department stores today as brands like Macy’s scale back their operations.

Amazon, which has long sought to expand its luxury offering, will also acquire a minority stake, as will tech giant Salesforce.

Neiman Marcus and Saks together form Saks Global.

Amazon and Salesforce both have minority stakes in the new company, Saks Global

Luxury retail has been slowly declining in recent years, with Neiman Marcus Group being one of the hardest hit companies.

The company filed for bankruptcy in 2020, aiming to pay off $4 billion in debt by September of that year.

Neiman Marcus began considering a merger with Saks because consumers were concerned that they would no longer want to buy expensive designer brand items.

Instead, they are increasingly turning to budget e-commerce retailers like SHEIN and Moda Operandi.

“Part of what made us so excited about acquiring Neiman Marcus was acquiring their world-class sales force,” said Richard Baker, CEO and chairman of HBC. The New York Times.

“People have forgotten how important people are. When you sell luxury products, you need beautiful stores and salespeople who trust customers.”

Marc Metrick, CEO of Saks Fifth Avenue’s online operations, supports the merger and will become CEO of Saks Global.

The company will now operate 36 Neiman Marcus department stores, two Bergdorf Goodman locations and five Last Call stores

HBC CEO Richard Baker told The New York Times that part of what made the company so excited was “their world-class sales team.”

“How do you future-proof a brand like Saks or Neimans or Bergdorf? You do it through technology,” Metrick said in an interview with Bloomberg.

“We know how to attract customers. We have the physical stores, which will always be an important part of a luxury ecosystem.”

This new combination gives more power to company employees who negotiate with designers.

The merger is expected to loosen control over physical and e-commerce stores and reduce logistics costs.

Marc Metrick, CEO of Saks Fifth Avenue’s online operations, fully supports the merger and will become CEO of Saks Global

More than 20 percent of retail purchases are expected to be made online this year, and 23 percent of retail purchases are expected to be made online by 2027.

The merger comes four years after luxury retailer Lord & Taylor filed for bankruptcy amid a massive drop in sales during the height of the COVID-19 pandemic.

According to Reuters, Lord & Taylor plans to liquidate inventory in its department stores once restrictions are lifted.

For Lord & Taylor this was enough to survive the declining sales figures. The following year the fashion chain was only active online.

Macy’s is also struggling with declining sales. Earlier this year, the company announced it would close 150 stores by 2026 as part of a restructuring plan.

“A Bold New Chapter serves as a powerful call to action, challenging the status quo to create a more modern Macy’s, Inc.,” Macy’s CEO Tony Spring said at the time.

‘We are taking the necessary steps to revitalize our customer relationships through improved shopping experiences, relevant assortments and attractive value.’

The merger comes four years after luxury retailer Lord & Taylor filed for bankruptcy amid a massive drop in sales during the height of the COVID-19 pandemic.

Despite the plans of all companies focused on selling luxury products to their consumers, more than 20 percent of purchases are expected to be made online this year, according to Forbes Advisor.

Digital ordering has grown so much that it is expected that 23 percent of retail purchases will be made online by 2027.

Amazon is currently one of the most visited e-commerce websites, with nearly three billion visitors per year worldwide.

It also accounts for over 37 percent of e-commerce sales, the highest market share of any online retailer.

“Customers in our store have responded enthusiastically to our relentless focus on selection, value and convenience,” Amazon CEO Andy Jassy said in April.

“We still have the broadest retail assortment, with hundreds of millions of products available. Tens of millions more were added last year alone, and several premium brands are starting to get listed on Amazon.”

Jassy added that some of the retailers include Victoria’s Secret, Urban Decay, Clinique and Coach — a brand best known for its expensive handbags.