Are brick-and-mortar luxury retail stores a thing anymore? Apparently, not so much. Saks Fifth Avenue's Canadian owner, Hudson Bay Company (HBC), is acquiring Neiman Marcus for $2.65 billion, creating a new luxury retail entity called Saks Global. The merger brings together Saks Fifth Avenue, Saks Off 5th, Neiman Marcus, and Bergdorf Goodman under one umbrella.
One key element: Amazon is investing in the merger and will collaborate with Saks Global on innovation for customers and brand partners. Amazon's participation could enhance Saks Global's logistics and online retail capabilities, potentially attracting younger shoppers. The merger is a response to luxury brands' growing power and shift towards direct-to-consumer sales.
A Closer Look
The merger between these two former luxury retail powerhouses aims to increase Saks’ negotiating power with luxury brands and respond to industry shifts, including the decline of department stores. The deal follows other consolidation efforts in the luxury retail sector, such as Tapestry's proposed acquisition of Capri.
Although the merger may face scrutiny from regulators, similar to the FTC's opposition to the Tapestry-Capri deal, all three entities stand to benefit. While Saks and Neiman Marcus brands could be significantly helped by Amazon’s e-commerce and logistics strength, Amazon has been trying, unsuccessfully, to expand into physical retail. It opened—and then closed—Amazon Style clothing stores in California and Ohio. Saks operates 39 stores, while Neiman Marcus has 36, plus two Bergdorf Goodman stores in New York City.
What Does This Say About Premium Brands And The Economy?
According to Bain & Company’s June report, although the luxury industry faces headwinds, the personal luxury goods market is projected to grow by 0% to 4% this year, reaching between $388 and $403 billion. They cite challenges such as a decline in disposable income and consumer confidence, lower GDP growth, and growing geopolitical uncertainties. The worldwide luxury market, after its post-pandemic surge, is slowing down and is projected to stabilize at its usual rate of 4-7%.
Some industry experts maintain that luxury goods are on their way out rather than just experiencing a momentary downward blip. Others disagree. Just-style.com predicts that the market will revive in 2025 as inflation rates come down and shoppers come out of austerity. They forecast the luxury market to grow by 27.8% by 2028.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...