Ascending a sleek new multi-colored escalator, designed by Dutch architect Rem Koolhaas, Saks Fifth Avenue president Marc Metrick is a man vibrating with excitement ahead of its grand unveiling. The escalator’s bright red and blue hues and a large LED ceiling (that creates the illusion of a blue sky) pop in sharp contrast with the grey curtains used to cordon off a dusty construction area. Change is afoot on the ground floor of one Manhattan’s most iconic department stores.
The sense of theatre epitomizes what Metrick, who has been president of the HBC-owned Saks since 2015, is convinced the company has to offer today’s shoppers, particularly at its 650,000 square-foot New York City flagship.
The dazzling new escalator connects the street level—for decades home to a beauty area teeming with sales staff trying to spritz you with perfume—to an opened-up second floor. The new ground floor space is a 53,000 square-foot emporium for leather goods and handbags, the “gateway drug” for luxe shoppers, as Metrick puts it. By late summer this year, the renovations will include “The Vault” on the lower level, once a storage basement but soon home to Saks’ priciest jewelry like Chopard watches.
The buzz of activity comes at a time when Saks has some wind in its sails again after faring a rough patch three years ago. Sales were declining quarter after quarter. It was losing market share and the Grande Dame of New York luxury, a fixture since 1924, had lost much of what made it stand out.
Now, Saks has reported seven quarters of comparable sales gains in the last eight, including a 7.3% jump in the third quarter. And, to Metrick’s big satisfaction, that recent performance bested those of two major rivals—Nordstrom and Neiman Marcus—over the same period. But those competitors are not idling: both Neiman and Nordstrom are adding their first namesake department stores in New York this year.
The luxury market might be crowded but it is booming: according to Bain & Co, the U.S. personal luxury goods market rose 5% to $85 billion in the United States. What’s more, Spectrem Group estimates there are now 10 million Americans with a net worth between $1 million and $5 million, up 67% from a decade ago.
A run of the mill store just won’t do, both in terms of the physical location but also how tech is integrated into them. Ergo a $250 million invested in the multi-year remodel of the flagship of a 41-store chain.
“There is no better time to cement your strategy as a luxury retailer than when you’re about to put a quarter of a billion dollars into your flagship store,” says Metrick.
While the renovation doesn’t feature anything outlandish like the indoor ski hill Saks installed in the 1930s (try getting a CFO to sign-off on that today) it’s still trying to channel that spirit as it looks to make the Fifth Avenue store a modern-day destination.
Last year, the beauty section moved up a floor but not without getting 40% more space and new amenities like facial workouts and offering anti-cellulite treatments. The area, historically on street level to generate shopper visits, offers clean sightlines with more natural light from outside, a feature all floors will have by 2021. (The next project is men’s shoes, now spread out over three floors, but soon to be concentrated in one lavish area.)
Shopping isn’t the only component of Metrick’s vision for Saks as a New York destination: the evening of a recent press preview, Saks had its first VIP dinner at L’Avenue, a new high-end Philippe Starck-designed restaurant on the 9th floor. It’s the only outpost of the Paris eatery that attracts A-list names like Rihanna and Beyoncé.
While Saks is thriving now, it was a different story just a few years ago. HBC, a department store conglomerate that also includes its namesake Canadian chain and Lord & Taylor, bought Saks for $2.4 billion in 2013.
There had been turmoil in the c-suite, strategy lurches, and the prevailing opinion that Saks was an icon adrift. So when Metrick, now a 23-year veteran of the brand, took the reins in 2015, he immediately began with a deep dive into customer perceptions. Among the humbling results: Saks and its archrival Neiman Marcus were interchangeable in shopper’s eyes.
“After years of trying to be all things to all people, Saks didn’t stand for anything,” Metrick recalls.
The problem, he says, was the Saks had come to play second banana in shoppers’ minds to the brands it sold. Case in point: the only time Saks and its logo were front and center in advertising was when it was holding sales events. Otherwise, Saks was an afterthought, its square logo relegated to the bottom of a fashion brand’s billboard. Metrick’s rallying cry for his troops has since been to make Saks the “hero” in customers eyes “The goal is for people to say, ‘I got this at Saks’ or ‘Have you been to Saks lately?’”
And that’s no small order, what with some 85% of any luxury department store’s offerings overlapping with rivals. It’s also not getting easier at a time brands themselves are opening more of their own stores and taking more control of how their wares are presented.
The high-end department stores added to their own problems in the last decade by getting more promotional, says Bain & Co partner Vandana Radhakrishnan. That led many brands, from Coach and Ralph Lauren on up to focus more on their own stores.
But luxury brands, particularly smaller ones, can only do so much with their own sites and stores in reaching a wide audience. So great, well-trafficked stores and strong e-commerce are remedies for that problem. Notably, Metrick says he can give detailed customer data to luxury brands, including what other brands they like.
Yet the question remains: If you want to buy a Gucci sweater that is available at Saks, Neiman, Nordstrom, a Gucci boutique, or online at Net-A-Porter—why buy it at Saks?
That’s why Metrick sees reinventing the flagship as so important, with many ideas being adapted to the 40 other stores in the fleet.
E-commerce, where Nordstrom is seen as a best-in-class operator, is another area of Metrick’s focus. Steps taken include ramping up Saks’ social media (on Instagram it now has 1.4 million followers compared to 300,000 in 2015) and introducing services like Salesfloor, where an actual sales person working at a store, and not a chatbot or overseas call center operator, is available to provide tips and book appointments at Saks for you.
Metrick says that’s already paying off: online return rates are typically 40% to 50%, a cost that pinches margins. That drops to 20% for sales clinched via the Salesfloor service.
Every year, some 30 million people visit a Saks store, while Saks.com gets 150 million visits. At stores, 20% of visits yield a sale, while online the rate is more like 2.5%. And so while not as flashy as a designer escalator, ecommerce is crucial for maintaining momentum.
“She’s thinking about every other online experience out she’s having today and is Saks as easy as all that,” says HBC CEO Helena Foulkes of the prototypical Saks shopper.
Saks was recently reminded of how hard it is to win over the modern shopper, even on its home turf. In January, it closed a women’s store in Lower Manhattan after only two years.
But Foulkes, previously president of CVS pharmacy’s $80 billion retail business, won kudos from analysts for dropping an underperforming location and zeroing in on where Saks can win. “The next dollar I invest has to be in the place with the most upside,” she says.
To enable that, Foulkes has been busy in her first year on the job making big moves to undo much of HBC’s aggressive expansion in the last half decade, one that led it to “go around chasing stars,” as Scotiabank retail and consumer analyst Patricia Baker puts it.
That has included paying down HBC’s sizeable debt by selling off half of its struggling European business, its Lord & Taylor flagship 10 blocks south of Saks’, and Gilt Groupe; moves that won it recent upgrades from debt agencies. HBC also recently announced the closure of up to 20 Off Fifth discount stores and halted its Canadian expansion of Saks, which had called for seven stores, opting instead to cap it at three.
That’s not to say HBC is only in contraction mode—the company is planning a new Saks store at the American Dream mega-mall being built in East Rutherford, New Jersey.
But it does signal that HBC is doubling down on best performing business—Saks—particularly the flagship. Though HBC doesn’t break out individual stores’ numbers, the Manhattan flagship generates at least $600 million a year, or 15% of so of Saks’ total sales.
“The Saks brand is only going to be as strong as that Fifth Avenue store,” says Scotiabank’s Baker. And Saks doesn’t want its so-called “branches” to be seen as backwaters. So edgy brands like Vêtements and Jacquemus are now sold at other stores too, not just Manhattan.
Other ideas have also made their way to its “branches” in other markets. Take ‘The Collective’, an area that focuses up and coming brands, including to solidify what Metrick calls “Saks’ fashion authority.”
“Our role in the fashion ecosystem is to be the place to introduce brands to our consumer,” he says.
A more subtle part of Saks’ store remodel has been to mix up price points and brands rather than consign all ultra high end designer items in the same areas, as they were before. On the fifth floor for instance, more accessible brands like Acne and Alexander Wang are next to designers like Comme des Garçons and Simone Rocha.
Under Metrick and Foulkes, Saks has a much faster metabolism now. Fail fast and move on. And that, he says, is merely a reflection of how customer behavior has evolved. “The luxury consumer is certainly less forgiving and less patient that they used to be,” Metrick says.
A version of this article appears in the April 2019 issue of Fortune with the headline “Taking Back Fifth Avenue.”