The National Retail Federation kicked off its annual conference on Sunday with keynote addresses from John Furner, CEO of Walmart; Paige Thomas, CEO of Saks Off Fifth; and Macy’s CEO Jeff Gennette.
The conference, which brings together over 35,000 attendees from 75 countries, is hosted at the Jacob K. Javits Center in New York City.
Thomas, Saks Off 5th’s CEO, participated in an on-stage conversation with CNBC’s Melissa Repko about Saks Off 5th’s pricing strategy; its approach to trends in fashion; customer research; and partnerships with companies like Rent the Runway. Saks Off 5th focuses on discounted luxury fashion, and operates 100 stores in the US and Canada. It is part of Hudson’s Bay Company, a privately-held retail group based in Toronto.
We’ve compiled the highlights of their conversation below.
Being conservative — and agile
Thomas said it’s the right time to be both conservative and agile as uncertain times and a potential economic downturn loom. Instead of preemptively predicting what customers will be looking for six to 12 months in advance, Thomas said, the company has shifted its focus to follow consumer trends as they arise — what she calls “chasing” the customer.
“Winning in off-price is all about the chase, and when we don’t stay in that position, we hurt ourselves,” she said. “Overcommitting becomes the challenge, and our operating model and our customer doesn’t require us to do that. We can always put our foot on the gas and start to chase when the customer is ready.”
She said this helps to mitigate problems in volatile environments — and to avoid excess inventory, a problem many large retailers faced in 2022. In fact, Thomas said, that excess has played to the company’s advantage, giving its buyers a wider selection of surplus merchandise.
“Luckily, it’s quite an opportunistic market for our buying team, and so we can take advantage of that luxury right now,” Thomas said.
Building a more robust digital infrastructure
Thomas joined Saks Off 5th in February 2020, and she said that at that time, the company did not have a consumer-facing app, despite offering web-based online commerce.
Thomas said she prioritized creating a mobile app and shifting toward a digital-first mentality at the company. Private equity investors put $200 million toward spinning out the company’s digital business in 2021. Since then, Saks Off 5th has launched its app, as well as a loyalty program — and Thomas said she expects digital initiatives to continue to roll out in 2023.
It really is about a digital-first mentality, and thinking about the customer journey to remove friction points and make it easy for them to convert.
“We have experienced nearly a decade of double-digit growth in our online business, and that is inclusive of 2022. We do expect our e-commerce business to be larger than our [brick and mortar],” she explained.
She said as the e-commerce business continues to grow, a key focus will be on converting browsers into buyers.
“It really is about a digital-first mentality, and thinking about the customer journey to remove friction points and make it easy for them to convert,” she said.
Partnering to get into re-sale
Thomas said resale has become increasingly popular among consumers, a trend which is only expected to continue gaining steam.
To ensure Saks Off 5th was playing in that profitable market, the company launched a partnership with the clothing rental startup Rent the Runway last year, selling some of Rent the Runway’s used designer apparel on its platform.
“[Among] our core customers, over 80 percent of them wanted us to participate in resale, and 85 percent of them actually trusted us to lead in that business… So we were thinking, ‘Well, what are we waiting for?’ Thomas said.
She said Saks Off 5th expects to partner with more resale partners in 2023.
Tools to predict what consumers desire
Thomas said Saks Off 5th has a number of tools it uses to forecast what consumers want. One approach is by mining search insights.
“The consumer gives us an incredible amount of intel through search,” she said. “When they’re on [our] app, what are they looking for? We can monitor the things that are trending within the app.”
But while she knows social media influencers and other trends affect consumers, Thomas said that, because of her background as a merchant, she’s always aware that things can change on a dime.
“That… consumer could wake up on a Tuesday and change her mind,” Thomas said. “And so even when you use all the data analytics, [and other] capabilities that we put into place, and our team’s experience, it’s really just about staying agile.”