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[13 comments]

Saks outlets to get sloppier

February 4, 2014

Following its November acquisition by Hudson's Bay Co., Saks plans to make its Off 5th outlet boutiques "a little more unkempt" to better connect with bargain hunters, according to a profile in The Wall Street Journal.

Plans call for a switch to apparel stacked in piles and shoes sorted by size instead of brand, a look more commonly found at off-pricers like T.J. Maxx as well as Rack Room.

"Our outlet stores look too much like department stores," said Richard Baker, chief executive of Hudson's Bay, in an interview with the Journal. "Nordstrom Rack is a mess, and customers love it."

The change come along with plans to double the number of Off 5th locations to capitalize on the success many outlet centers are having reaching today's spendthrift consumer. Saks currently has 71 Off 5th locations. Other luxury brands and chains, particularly Nordstrom with its Rack concept, have likewise been expanding aggressively in recent years. To improve profitability, lower priced merchandise is expected to be brought into Off 5th, including overstocked items from Lord & Taylor.

While Saks may risk tarnishing its lux reputation with its outlet initiatives, $1 billion has been set for upgrades to its 41 Saks Fifth Ave. stores in a push to emphasize a higher level of designer goods.

Some past articles have explored whether cluttered and messy stores convey value more than cleaner locations, although they didn't focus on off-price formats from luxury stores.

A 2011 New York Times article entitled, "Stuff Piled in the Aisle? It's There to Get You to Spend More," detailed Walmart's switch from clean aisles to "a little bit of mess" accompanied by the dismissal or reassignment of "the top executives who came up with the cleaner-stores plan." Other examples given were Dollar General raising the height of their shelves, J.C. Penney adding wall displays and Old Navy lining their checkout lanes with impulse items.

"Historically, the more a store is packed, the more people think of it as value — just as when you walk into a store and there are fewer things on the floor, you tend to think they're expensive," Paco Underhill, founder and chief executive of Envirosell told the Times at the time.

FINANCIALS:     [ NYSE:SKS] [ NYSE:JWN] [ ]

Discussion Questions:

How important is the cluttered look to the success of Nordstrom Rack? Is Saks' Off 5th business smart to follow Nordstrom Rack's lead in this regard?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How important is the cluttered look to the success of Nordstrom Rack?

Comments:

I think the content inside the Off 5th stores is a bigger issue than the housekeeping. I spoke to a store manager on a recent visit, and he told me that the majority of the goods are now developed specifically for the stores (like many brands doing business in outlet malls), instead of being closeouts of merchandise from the full-line Saks stores. Nordstrom Rack, in contrast, seems to be more engaged in the "treasure hunt" model followed by TJX and others.

It's possible that for some consumers (at least this one) the neat appearance of Off 5th is actually more appealing and provides some brand differentiation. But it all comes back to merchandise content: If Off 5th messes up the store with the same merchandise content, they may not accomplish anything.

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Dick Seesel, Principal, Retailing In Focus LLC

There is a bit of "treasure hunter" in all of us. Saks runs limited risk in alienating the Saks Fifth Avenue customers by bringing the clutter up a notch in the Off 5th Stores. The later needs to find its way to profitability, and help usher in new consumers to the e-commerce and brick & mortar Saks banner.

Smart move, and one that was needed. Sometimes the best way to implement a smart idea is to "steal" it from a competitor. TJ Maxx, Marshall's, Nordstrom Rack, Filene's Basement in its heyday, and others have proven the validity of the practice.

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Roger Saunders, Managing Director, Prosper Business Development

Sounds good. It's also true that big buyer segments, including Asian-Americans and visiting Asian shoppers, expect to see glorious disorder and abundance when shopping. Heaps of artful merchandise can signal robust choice, hidden treasure and bargains. Oh - and don't be too surprised when shoppers of all stripes want to haggle. This is all part of the fun.

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Liz Crawford, VP, Strategy & Insights, Match Drive

The cluttered look is something that customers are willing to put up with to get a good deal on desirable merchandise, not something that they revel in.

'tmlens'

The Australian grocery market provides a very concise look at this issue. Coles is arrayed as a classic multi-department store that merchandises food much the same as dry goods. Woolworth's is as close as you can get to Safeway in Oz. And Franklin's is a traditional European style hard discounter. You need a steam shovel to push your way through their aisles, and the place is usually mobbed. At least, that's the way it was.

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Ben Ball, Senior Vice President, Dechert-Hampe

I have to be honest, I enjoy going to Off 5th when I visit the outlets because it ISN'T as cluttered and messy as many of them. Nordstrom Rack has racks sorted by size, yes, but they also have racks sorted by designer at the front of the store. I would prefer a more combined approach, keeping coveted designers (the ones I'm especially looking for) segmented out with the lesser-known brands combined.

'JRausch'

Saks is not Nordstrom and this move will only tarnish the Saks name.
Saks should be careful about the entire outlet strategy. today outlets no longer sell seconds or leftovers, they sell cheaper merchandise specifically designed for outlets. For Saks moving to a messier store only further emphasizes that these are not Saks.

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Gene Detroyer, Professor, Independent

Methinks this is an example of spurious correlation; but regardless, in answer to the specific question, while it may be good idea to follow best practices, it's not good to follow someone else's lead: i.e. strategy shouldn't be expressed in those words...it's not just a matter of semantics, it's your way of thinking.

'notcom'

I would have to agree with Dick Seesel that I personally love both good value and an organized shopping experience - not all bargain hunters are homogenous.

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Alexander Rink, CEO, 360pi

The "cluttered" look of Nordstrom Rack fits perfectly with the brand. It is approachable, reflects the brand image of the discounted outlet, and the playful nature of the store (colors, funny slogans on associate shirts, etc.) makes this perfectly targeted toward the intended demographic.

I do think that Saks Off 5th is wise to pursue this, however, it cannot look like a 'me-too' approach and must be differentiated enough to stand up in its own right.

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Jesse Karp, Omnichannel Consulting Manager & Loyalty Practice Lead, Cognizant Business Consulting

I think the dynamic messy versus neat is the wrong way to think about it. I think it's more revealing to think in terms of cluttered versus clear. At whatever level we're talking about, premium or outlet, shoppers prefer clear. It just makes their job, as shoppers, easier.

To Richard Baker's assertion that, "Nordstrom Rack is a mess, and customers love it," I'd just ask whether they really love it because it's messy, or do they love it despite it being messy.

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Ted Hurlbut, Principal, Hurlbut & Associates

Stack it high and watch it fly. Works in grocery and elsewhere, too. "Discovery shopping," or "surprise shopping," are attractive in certain situations. B-b-but, it doesn't have to be sloppy and randomly mismanaged. That's not necessary. Just check out a Costco store. Discovery shopping in a structured way.

Isn't it interesting that it's OK for retailers to profile customers according to race (thanks, Liz Crawford), but it's not acceptable for those protecting our country's safety.

It appears that outlet shopping is becoming "charade shopping," with numerous reports of faux merchandise being passed off (legally) as the real thing to gullible customers. There are numerous reports supporting this allegation. Sorry, JRausch, but "I have to be honest" should be "We must always be honest, not just some of the time."

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Mr. Hurlbut is likely correct. Do the Rack shoppers like the Rack DESPITE its messy nature? The deals are pretty great. And as Mr. Seesel stated, the CONTENT is the important thing; how it is presented may make a difference, and a neat and clean experience would certainly fit more with the tradition of the full-line stores. However, the messiness may remove some lingering intimidation in the minds of some potential shoppers.

It will be interesting to watch over the next few years. I do not think it is bad to at least try what shoppers at Rack and Marshalls/TJMaxx know as "norm." If it doesn't work, it can always quietly be "tidied-up."

William Passodelis, associate, ML Co.

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