Richard Baker Confirms Saks Global to Cut Up to 600 Vendors
Tianwei Zhang
5 min read
LONDON — Saks Global’s executive chairman Richard Baker said the retailer will slash 500 to 600 brands that don’t work within the portfolio, a figure that’s roughly in line with the 25 percent cut revealed in February.
It was the first time that Baker, who was speaking at the World Retail Congress on Wednesday, specified the number of proposed cuts to the vendor matrix.
“We had to rightsize our vendor matrix. When we put all these companies together, it turned out we had 2,660 vendors. Too many and terms of many of these vendors weren’t right. We had to reset our expectations for what vendor relationships would look like,” Baker said.
Baker, who took part in a panel alongside Jamie Salter, chief executive officer of Authentic, added that Saks Global will work increasingly with “controlled brands” via partnerships similar to the 50/50 joint venture it has with Authentic, known as Authentic Luxury Group.
First reported by WWD last October, Authentic Luxury Group was formed to promote Authentic’s high-end brands including Barneys New York, Judith Leiber Couture, Hervé Léger and Vince. The plan is to roll them out to retail locations or in-store shops, and widen their distribution in the U.S. and abroad.
Saks Global runs a business with more than $9 billion in annual gross merchandise value, representing around 60 percent of luxury fashion sales in the U.S., Baker said.
“As part of our transaction, we have over $600 million a year in synergy. We all know how hard we have to work to make an additional $600 million a year, and that’s what we’re first and most important was getting that figured out at Saks Global,” Baker said.
“If I can bring our mix to 20 percent controlled brands with a larger margin and an ownership position with Salter, that’s a tremendous win for us, and a much more conservative and appropriate cash flow,” he continued.
Salter added, “You take 20 percent of $9 billion, that’s $1.8 billion. He’s gonna make 25 percent more on that product. That’s almost a $400 million change. That’s why this relationship is so critical.”
Saks Global has been hammering out many deals, both commercial and financial, of late.
This week, S&P Global put the luxury retailer’s “CCC-plus” rating on credit watch negative due to the company’s “less-than-adequate liquidity” as well as “the uncertainty of how the company will remedy its current liquidity position.”
Baker and Salter touted the recent launch of Saks on Amazon in a room that was packed with retail leaders from around the world at the London Hilton on Park Lane.
“The idea was to create a place on Amazon where the walls were high enough that when you shop at Saks on Amazon, you only see the assortment available at Saks, no low-priced items,” Baker said.
“We had to be super-safe and attractive for our vendors, and all of these tremendous numbers of customers from Amazon can now switch over. Amazon is building for us walled gardens in India, Japan, Great Britain, Europe and the Middle East,” said Baker, adding that it took him six years to seal a deal with the online giant.
He believes that luxury on Amazon will become the norm in five years. “They have the most elegant execution and the most reach of anyone in the world, online. The luxury consumer wants the best of everything, and that means how [a company] interacts online,” Baker added.
Authentic Luxury Group is also looking at new ventures in entertainment and hospitality in partnership with Amazon.
It was announced May 8 that Josh Schwartz and Stephanie Savage have struck a deal with Amazon to produce a Barneys-themed show. “It’s ‘Gossip Girl,’ but it’s all about shopping and your experience at Barneys. It’s going to be incredible. It’s basically a commercial for Barneys,” Salter said.
“A lot of people think we’re just in the clothing business. We’re not. We’re in the hospitality business. We already have Barneys Tulum in Mexico. There are six or seven projects already on the go. We already have people in the Middle East and Asia Pacific looking to actually do a Saks retail store and then a condo,” Salter added.
Baker believes cities like Bangkok will be ideal for these projects.
“They’re building these unbelievable luxury residences, and they have a lot of U.S. high-level executives coming to Bangkok to work. So the conversation of having a Barneys-branded tower, when you come with your spouse and they immediately understand that Barneys is a luxury apartment house, and those kinds of cues in certain markets are very important,” Baker said.
Looking ahead, the two said they are open to exploring opportunities to partner with other major retailers globally to create a Saks Retail Alliance, and expand the reach of their brands.
“We were flying around Asia for three weeks. The number of brands from ABG that are out there living unbelievable lives outside in the U.S. was eye-opening. And that’s why we think we have so much more opportunity,” Baker said.
