Wednesday, October 28, 2009

Private Sales at Saks

I read with great interest that Saks has launched a "private sales" experiment. What are private sales? For some time now, a few retail startups such as Gilt Groupe and HauteLook have used viral marketing techniques to launch intense limited-time sales of discount designer apparel. Vanessa O'Connell of the Wall Street Journal explains:

"The sites had carved out a niche with a new retail formula: Short, intense sales, usually of 36 hours—and constant Web updates on which items "sold out"—to create a sense of urgency and a deadline for shoppers. Sites like Gilt have been a boon to high-end designer brands such as Marc Jacobs and Tory Burch, because their sales of discounted merchandise are held in a controlled setting that is perceived to be more discreet and upscale than the typical off-price chain store."

Saks and other high-end department stores have traditionally relied on their own outlets (Off Saks) or other discounters to sell out of season or older merchandise. Naturally, such discount selling comes with risks. Could the brand be damaged by too much discounting? These private sales offer an opportunity to create a controlled environment for selling such merchandise, while creating an intense feeling of scarcity that can create buzz among fans of the high-end merchandise for sale.

Interestingly, though, Saks did not use this private sale experiment to sell old merchandise typically sold through its outlet stores. Instead, it specifically purchased items to sell via this private sale. This represents an interesting twist on the strategy employed by startups such as Gilt Groupe. Achieving competitive advantage is always about finding a unique way to compete, rather than just employing a me-too strategy. Thus, it's refreshing to see Saks experiment with a slightly different model than that adopted by their upstart rivals. I'm sure more experimentation will follow by Saks and others, and perhaps new revenue streams for high-end department stores will result.

1 comment:

Brian said...

This strategy has been adopted throughout retail. Companies became addicted to the profits and proliferation of outlet malls, but quickly realized the risks, as well as the necessity of incentivizing people to return regularly. Now companies like Banana Republic, Gap, Nike, etc. use the outlet spots as a way to move dead inventory as well as pick up profits on basics and other knock offs of their own general styles. Customers, in return, get bargains and better variety.