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Upscale shoppers aren't doing enough for Saks (SKS) this holiday season. The luxury retailer, which has been struggling with sales for the past two years, is moving into less expensive products as a way to bring customers in the door, even though it's putting its brand at risk. If the wealthy continue to stay at home, Saks will have to look for revenue where it hasn't had to play in the past.
Brand experts, according to a Reuters report, don't think it's a good idea for Saks to stray from its traditional area of expertise. Pushing lower-priced items and using gift cards and coupons to bring people inside -- not to mention discounting -- could cost the company in the long term. Milton Pedraza, chief executive of the Luxury Institute, told Reuters, "All these tactics erode the halo effect of a luxury brand."
Yet, Saks has to address its immediate concerns. Same-store sales declined 26.1% in November, though the 2008 results were likely pumped up by deep discounts (up to 70%) on high-priced products, as the company braced itself to withstand the effects of the financial crisis. Nonetheless, the substantial drop speaks volumes. According to Pedraza, "There is no question that aspirational consumers are out of the market now -- they're gone."
Saks isn't the only luxury retailer that's trying to navigate this difficult market. Neiman Marcus saw same-store sales fall 12.7% last month, as well.
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