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Talk of the bay

Saks to ditch most of its less expensive items

By MARK ALBRIGHT
Published July 18, 2005

Saks Fifth Avenue is saying bye-bye to most of its less-expensive store brands that served as many customers' introduction to luxury goods.

With sales of top-shelf goods soaring, Saks seized the opportunity to de-emphasize its store brands and disband this fall the 15-person product development team in Manhattan that creates them.

The strategy copies luxe rival Neiman Marcus, which cut its store brand to make way for more designer goods at ever-loftier prices. The Neiman brand is seen now only on a few items such as cashmere sweaters, pajamas and bathrobes.

Saks is following same route as it drastically cuts back its Folio, Real Clothes sportswear line and the Saks Fifth Avenue label.

"The discontinuation of our private label brand is consistent with our merchandising strategy, permitting us to focus our resources on unique, upscale merchandise from our most productive designers," said Ronald Frasch, chief merchant of Saks Fifth Avenue Enterprises.

Store brands can be more profitable to retailers, but they also expose stores to the risk of missed fashion trends. That means profit-gobbling markdowns. Macy's can afford to take chances on a $40 dress shirt. But luxury goods cost a lot more and customer taste is more fickle.

So they're a much bigger gamble that retailers prefer to foist back on vendors.

"Saks started trading down for customers about seven years ago with more private-label like Real Clothes and nondesigner lines like Liz Claiborne and Donna Karan," said Howard Davidowitz, a New York retailing consultant. "It's been a debacle. People go there to buy Prada and Hermes."

Saks will not drop the Saks Fifth Avenue brand completely.

It's more likely that Saks merchants will prod designers to produce more exclusive offerings for Saks that can be sold at value prices. Saks, however, will not follow Neiman's strategy of buying majority interest in suppliers. Neiman owns Kate Spade accessories and the manufacturer of Laura Mercier cosmetics.

[Last modified July 15, 2005, 17:37:02]