By guest author Suzanne Kapner from Wall Street Journal
Flagship store devotes coveted ground floor to luxury satchels, even though category’s growth has slowed
The art of Saks Fifth Avenue’s new plan to woo shoppers: USD 50000 handbags.
The luxury retailer on Tuesday unveiled at its Fifth Avenue flagship store a remodeled ground floor that includes a handbag emporium featuring 50 brands, ranging from a USD 45 Saks tote to a USD 49500 alligator bag from The Row. Of those brands, 14 are new to Saks, including Celine, Bottega Veneta, and Salvatore Ferragamo . The selection also includes 100 bags, many of which are inspired by the archives of European fashion houses, that are exclusive to the retailer.
To make way for the sea of luxury satchels, Saks last year moved fine jewelry to the lower level and its beauty department to the second floor, part of a USD 250 million renovation of the landmark building. Another new addition: the famed L’Avenue restaurant, the first outside of Paris.
“We are changing the way people experience Saks Fifth Avenue,” said Marc Metrick, the luxury chain’s president. To ensure shoppers continue to visit stores rather than buy everything online, Mr. Metrick said he had to “create something epic.”
Moving beauty, a category that is soaring, upstairs while devoting more space to handbags runs counter to some industry trends. U.S. retail sales of luxury handbags rose 2.6 % last year to USD 7.56 billion, down from 9.2 % growth in 2014, according to Euromonitor International Ltd.
“Handbags aren’t the status symbols they once were,” said Milton Pedraza, chief executive of the Luxury Institute, a research and consulting firm.
He said they have been displaced by shifting priorities, as consumers spend more money on experiences such as travel, food and entertainment in addition to wellness regimes such as spa treatments, Botox and SoulCycle classes.
Moreover, rising prices have put luxury handbags out of reach for many consumers, who instead are turning to the resale market, where preowned bags are cheaper.
Mr. Metrick said Saks wasn’t seeing a slowdown in its handbag businesses. He added that department stores ceded their dominance in beauty years ago to digital start-ups and other chains such as Sephora and Ulta Beauty Inc.“Beauty has been one of the hottest businesses, but not for department stores,” Mr. Metrick said. “We had to reinvent department store beauty. You can’t do that if it’s in the middle of the main floor.”
Shoppers said they were impressed with the remodel, which includes a multicolored, Rem Koolhaas-designed escalator linking the lower, main and second floors through a 3,000-square-foot opening. The lower level, which has been renamed The Vault, will reopen this summer.
“I love it,” said Lynn Wallack, a 68-year-old retired interior designer, who browsed the Fifth Avenue store on a recent afternoon. “It’s all about accessories, and I’d rather buy a handbag than anything else.”
Department stores are trying to reinvent themselves in the face of declining sales. Macy’s Inc. is investing millions of dollars in its best stores and shrinking others. Bon-Ton Stores Inc., which filed for bankruptcy last year and closed all its locations, is reopening stores that have a more boutique-like feel with added services.
Saks has been a rare bright spot for its owner Hudson’s Bay Co. Sales grew 7.3% in the most recent period. But it is facing steeper competition in its home market from Nordstrom and Neiman Marcus, which have put down stakes in New York City. And Saks recently retrenched when it closed its women’s downtown store last month just two years after opening it.
Shannon O’Toole, who owns 10 designer bags, said she just can’t get enough of the high-price satchels. “To me, it’s an investment,” the a 41-year-old Dallas resident said. “But that may just be me justifying how much money I spend on them.”