Northfoto/Shutterstock
Saks Fifth Avenue's decision to separate its online business from its brick-and-mortar stores is more of a financial move than a focus on consumer trends, a Global Data analyst said.
The luxury retailer is splitting its e-commerce business, Saks.com, from its store sales to raise money and capitalize on the shift to online shopping amid the pandemic, the Wall Street Journal reported, citing company executives.
The move to split the two is a "financial play" that will give the online business a higher value than if it remained part of the brick-and-mortar business, said analyst Neil Saunders, the managing director of retail at GlobalData. The separation "is completely at odds with how consumers shop and how retail is trending - which are shifting towards omnichannel where both store and online work together to drive sales," he said.
The split is designed by HBC, the owner of Saks Fifth Avenue, to raise money, Saunders told Insider. Insight Partners is taking a minority stake in Saks.com and investing $500 million, valuing the unit at $2 billion, the Journal reported, noting that the money will be put toward improving shipping, returns, and customer service.
"The plus side of separation is that it may allow the online teams to accelerate growth and innovate more than if they were part of a larger business," Saunders said. In theory, the online and store operations will act as sister companies, he added.
Insight and Saks Fifth Avenue were not immediately available to comment for the story.
Saunders noted that other retailers, like Target, Walmart, and Nordstrom, are doing just the opposite by integrating online and offline operations "as much as possible."
The COVID-19 pandemic pushed traditional brick-and-mortar retailers to focus more on e-commerce with many businesses now looking to revamp their online presence.
The pandemic was a chance for big retailers that were struggling to pivot to "get off of the forward conveyor belt" and figure out how they wanted their businesses to be structured, said Simeon Siegel, a senior analyst at BMO Capital Markets. Though there will always be a place for stores, e-commerce has seen an acceleration because of the pandemic, he said.
"It's fair to assume the industry is going to be on a constant hunt to best optimize the e-commerce experience, to best utilize data, to best reach their consumer, and I don't think that's going to stop," he said.
