Clarkston’s Beauty Industry Expert Shares Retail Insights on the Saks/Neiman Marcus Deal
July 10, 2024 | Clarkston partner and beauty industry expert Sarah Broyd spoke to Beauty Independent about the recent news that Saks Fifth Avenue parent company HBC is acquiring Neiman Marcus Group for $2.65 billion. See Sarah’s feature from the article below, and read the full article here.
Saks Fifth Avenue And Neiman Marcus Are Finally Uniting. Should Beauty Celebrate?
“With the rise of luxury brands and the decline of department stores, the merger between Saks and Neiman Marcus will create greater power on their side for negotiations across brands and products. Consolidating two stores with high level of overlap in brands, offerings and consumers will increase their strength in negotiating against brands. Given their similar consumer sets and stores, I suspect they will consolidate their real estate and corporate functions.
Beauty companies should expect increased pressure from the retailer, but likely less storefronts to sell into. In most department stores, the beauty counter typically brings in a significant portion of the foot traffic, so brands have leverage. Luxury department stores also understand they also contending with prestige brands being sold at other retailers like Ulta and Sephora.
The combined companies will benefit from a larger customer base, as most customers shop at both retailers, but only ultra-loyal customers only shop at their favorite. A large percentage of the retailers’ revenue comes from a very small percent of high net worth, so retaining these and attracting younger customers will be critical for their future success.
The new Saks Global will need to continue to contend with the decline of the department store as brands navigate around traditional brick-and-mortar and continue to develop direct relationships with their consumers.
Neiman Marcus, historically, has had a smaller brick-and-mortar footprint and stronger online presence, so the new company should plan to tap into Neiman’s backbone of online business. While direct-to-consumer is not a new concept, it has continued to grow over the past several years and the luxury category has become more focused on their omnichannel strategies. Beauty brands should continue to build their brand loyalty with consumers through direct selling on their websites, if they are not already.
With funding from Amazon, who has been anxious to get into retail, Saks Global can be poised to innovate in the retail and department store space to continue to keep them competitive in the marketplace. Innovation for department stores will help beauty brands sell through in stores, but they should continue to build maturity in other channels.”