Amazon & Saks: Luxury Retail's Most Asinine Partnership?

Summary

Omni Talk Retail Podcast Summary

Episode Title: Amazon & Saks: Luxury Retail's Most Asinine Partnership?
Release Date: May 9, 2025
Host: Omni Talk Retail
Guests: Ben, Chris
Duration: Approximately 10 minutes

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Introduction

In this episode of Omni Talk Retail, hosts Chris Walton and Anne Mezzenga delve into the controversial partnership between Amazon and Saks Fifth Avenue. Titled "Amazon & Saks: Luxury Retail's Most Asinine Partnership?", the discussion analyzes whether this collaboration signifies Saks' downfall or represents a strategic evolution in luxury retail.

Launch of Luxury Stores at Amazon

[00:00] Alex:
The episode kicks off with Alex introducing the new venture where Amazon and Saks Fifth Avenue have launched "Luxury Stores at Amazon." This exclusive section on Amazon's platform showcases a curated selection of high-end products, including women's and men's apparel, beauty products, shoes, handbags, and accessories, all available via Amazon's app and website. The launch is visually complemented by digital displays inspired by Saks Fifth Avenue's iconic New York flagship store.

[00:48] Alex:
Alex prompts Ben to share his initial thoughts on whether this partnership signals the impending demise of Saks or if it is a strategic move for survival.

Ben's Perspective: Dual Viewpoints on the Partnership

[00:48] Ben:
Ben begins by outlining two primary perspectives: Amazon's and Saks' motivations. From Amazon's standpoint, attracting luxury consumers—characterized by high spending and preference for high-margin goods—is inherently appealing. Despite Amazon's previous attempts to penetrate the luxury market since 2020, traction has been minimal. Ben highlights a fundamental mismatch, stating, "Luxury retail is the game of making people want things they really don't need. Which I thought was great. And that's absolutely not what Amazon is designed for. That's the antithesis of Amazon." [01:30]

He emphasizes that Amazon's collaboration with Saks grants them access to Saks' established supplier relationships, a significant advantage that likely motivated Amazon's investment in Saks Global last summer. Additionally, Ben points out Amazon's financial involvement in financing Saks' acquisition of Neiman Marcus through entities like Salesforce and Authentic Brands Group, underlining the strategic intertwining of their business interests.

[02:57] Alex:
Alex interprets Ben's analysis to suggest that from Saks' perspective, the partnership lacks consumer value and may be primarily aimed at appeasing investors rather than enhancing the customer experience.

[03:19] Ben:
Ben concurs, recognizing that while Amazon has clear motivations, the rationale behind Saks' decision remains elusive, especially given Saks' financial struggles.

Chris's Insights: Critiquing the Partnership's Viability

[03:32] Chris:
Chris offers a critical viewpoint, agreeing that for Amazon, the partnership is a logical extension. However, he cautions against the assumption that all Saks brands will seamlessly integrate into Amazon's platform. Drawing from his experience with Target and other retailers, Chris notes the challenges in obtaining brand permissions for online sales, stating, "they have to give permission to sell. And I lived through that at Target... it just doesn't happen that way as much as people want to think that it does." [04:00]

He vehemently criticizes Saks' strategy of promoting the Amazon storefront through their physical store's window displays, branding it as the "death knell" for Saks' traditional business model. Chris argues that this approach inadvertently signals to consumers that Saks' physical stores are becoming obsolete, undermining the very essence of luxury retail.

[04:44] Alex:
Alex counters by suggesting that while department stores need to evolve, the Amazon-Saks partnership might offer tangible benefits to consumers, such as enhanced convenience and faster delivery options.

Ben and Alex on the Future of Luxury Department Stores

[05:10] Ben:
Ben acknowledges Chris's points but introduces nuance by citing Nordstrom as a successful exception among department stores. He attributes Nordstrom's success to its emphasis on in-store experiences and personal selling, which resonate deeply within the ultra-high-end market. Ben notes, "there is this ultra high end market whereby a physical environment of departments of curated products really resonates." [05:10] He suggests that while economic downturns might drive consumers towards price and convenience, luxury retailers still have a role in providing experiential connections.

[06:33] Chris:
Chris reiterates his stance, emphasizing that except for a few exceptions like Nordstrom, department stores are becoming obsolete. He underscores that Saks' decision to promote Amazon through their windows is misplaced, failing to adequately position the store experience in a way that aligns with luxury retail's future.

Alex's Rebuttal: Emphasizing Consumer Convenience and Technological Integration

[06:53] Alex:
Alex introduces a different perspective, arguing that the integration with Amazon enhances consumer convenience. He points out the advantages of Amazon’s logistics, such as faster shipping and leveraging technologies like Amazon's Rufus—an advanced virtual assistant that facilitates personalized shopping experiences. Alex contends that these innovations provide tangible value to luxury consumers, enabling quick delivery of desired items and enhancing the shopping experience through advanced search capabilities.

[09:19] Chris:
Chris rebuts Alex's points by questioning the necessity of integrating with Amazon's Prime for shipping benefits, suggesting that Saks could achieve similar advantages by utilizing "buy with Prime." He further argues that since Amazon already features items from these luxury brands independently, the new partnership doesn't significantly alter the consumer experience. Chris emphasizes, "anyone that wants to put a brand on the website as a third party seller can do that and that's been a problem on Amazon for years." [09:58]

Conclusion

The episode presents a multifaceted analysis of the Amazon-Saks partnership, juxtaposing Amazon's strategic ambitions with Saks' financial vulnerabilities. While Amazon stands to gain by accessing Saks' luxury clientele and supplier relationships, critics like Chris argue that the partnership undermines Saks' traditional luxury brand and signals a decline in the relevance of physical department stores. Conversely, proponents like Alex and Ben recognize potential consumer benefits through enhanced convenience and technological integration but acknowledge the inherent challenges in aligning luxury retail with Amazon's operational model. The discussion encapsulates the tension between traditional luxury retail paradigms and the evolving digital marketplace, leaving listeners to ponder the long-term implications of such high-profile partnerships in the retail industry.

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Notable Quotes:

• Ben: "Luxury retail is the game of making people want things they really don't need. Which I thought was great. And that's absolutely not what Amazon is designed for." [01:30]

• Chris: "Putting the devoting your windows to selling on Amazon is not that." [06:53]

• Alex: "I'm going to come in here with a different perspective... we've said that it's okay for Walmart.com to sell luxury, but now we're saying it's not okay for Amazon.com to sell luxury." [07:27]

• Chris: "Anyone that wants to put a brand on the website as a third party seller can do that and that's been a problem on Amazon for years." [09:58]

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This episode of Omni Talk Retail offers a comprehensive exploration of the complexities surrounding the intersection of traditional luxury retail and modern e-commerce giants. By dissecting the motivations, benefits, and potential pitfalls of the Amazon-Saks collaboration, the hosts provide listeners with valuable insights into the future trajectory of the luxury retail landscape.

Transcript

[Alex]

Amazon and Saks Fifth Avenue have launched a luxury e commerce storefront. According to Retail Dive, the new shopping section is called Luxury Stores at Amazon. It features a selection of merchandise curated by Saks Fifth Avenue, including women's and men's ready to wear beauty, shoes, handbags and accessories. Merchandise is available through Amazon's app and website. The launch is accompanied by specially designed digital displays inspired by the windows of Saks Fifth Avenue's New York flagship. And. And the online storefront is also being promoted via a window installation at the Saks Fifth Avenue New York flagship store. Ben, we're going to go to you first. Our guest today. Did Saks just signal its ultimate demise with the new Amazon partnership or do you think the partnership is the right move to make?

[Ben]

Thank you. I think there's two perspectives on this. There is the Amazon perspective and the Sacks perspective. Yeah. So let's do Amazon first. Okay. So who wouldn't want luxury consumers on the platform? High spenders, high net value, high margin goods. And it's something that Amazon has been trying to do for a while. They've had these kind of luxury stores since about 2020 and there's been really limited traction to this. And somebody said to me the other day, which really resonated. They were talking about luxury retail and they said to me, luxury retail is the game of making people want things they really don't need. Which I thought was great. And that's absolutely not what Amazon is designed for. That's the antithesis of Amazon. So there's always been a mismatch. So for Amazon bringing the Saks brand onto the platform and crucially getting access to their supplier relations, that's a win. And that win for them is probably what led them to invest in this new Sax Global formation last summer. And ever since they did that, this move has felt pretty inevitable. So, and that I think that context is really important because Amazon, along with Salesforce and Authentic Brands Group, helped finance Sax, the acquisition of Neiman Marcus. So they helped finance the creation of Saks Global. And I think that's the rub. Yeah, really, if you start going from the Saks perspective, there's been so much coverage about this acquisition, we could, I'm sure we could do a podcast series in its own right. But yeah, I think, I think everybody's aware it's not going very well. It's got a huge amount of debt. It's raised over 2 billion in junk bonds to finance the acquisition. He's got a really large debt repayment coming up soon. So Sachs has To find the cash flow to be able to make that payment. And he's got to keep Amazon, one of his big investors on side. And I think when you strip it all back, I think that's what's driving this activity above anything else.

[Alex]

Interesting. So you, so you think there's no value? If I'm reading between the lines, you don't think there's value from a consumer perspective. You just think you, you think that it's, they're not going to be going to Amazon for luxury. That's, that's just, this is a, this is a move to pacify investors not so much or keep the peace not so much for the consumer.

[Ben]

I think the rationale is really strong for why Amazon would want to try and make this happen. I think it's really challenging to see why from a Sax perspective.

[Alex]

Yeah, yeah, that makes sense. Chris, where do you land on this? What are your thoughts?

[Chris]

Yeah, I mean a couple thoughts. On what, on what Ben's, what Ben said and then kind of add my own twist to it too. I think, you know, for Amazon it's kind of a no brainer in a way. But I would caution the idea of Amazon being able to get all the brands under the Saks umbrella onto the platform because the brands still have to give permission to sell. And I lived through that at Target when we, we acquired some high end cooking online websites with the idea or the premise that we would get access to their brands, which turned out not to be true. We saw the same thing with Moosejaw and Walmart, the kerfuffle that they had trying to do the same thing. It just doesn't happen that way as much as people want to think that it does. So but you know, for Amazon. So like let's try it. But the other point I would make on the sacks side for on the investor side, this move, I mean this thing is just silly. I mean to me it's like signals the death knell of eventually sacks. Because the most ridiculous part of the announcement to me is is that someone at Saks actually thinks it makes sense to use the windows along fifth Avenue to advertise this. It's like don't come into our store. Everyone walking by on the greatest shopping street in America. You know, you could just go to get the goods on Amazon. I mean that is just absolutely asinine when I say that out loud. I mean you guys have to agree with that. I think so.

[Alex]

I don't know.

[Chris]

I mean I.

[Alex]

Driving awareness, right? Like it's, it's awareness to consumers that you could that now they are the.

[Chris]

Awareness of the death of your business model. Like if people start to do, do that your, your stores are going to become obsoleted that quickly. And so it just goes back to my point again of barring a few exceptions, department stores are the 21st century retail equivalent of the horse and buggy. They're going away and this is just a further example of it. And man, I think the proof's in the pudding.

[Ben]

I think that's a really interesting point around the department store model. And I think the exception to that is the success that Nordstrom's having. And Right. Not Nordstrom is having because it recognizes that at the moment to sell luxury you need experience, you need personal selling. You know, there is, I think there's lots of stories about the number one personal seller in the Neiman Marcus estate having moved to Nordstrom and taken her account book with her and she's turning over the equivalent of a, of a department store on a, on her own through personal selling. So there is this ultra high end market whereby a physical environment of departments of curated products really resonates. Now as the economies contract, you know, where is price and convenience going to become more compelling to consumers and more compelling for brands to get there? Possibly. Does luxury have a level of protection from that? Possibly. But I think there is still a role to play for that connection, that experience. You've just got to look at the buzz of the Printom store in New York, create experience and you and sell luxury. So I'm not, I'm not quite sure that the department store in luxury isn't the right thing to do. I'm not sure that Saxon necessarily taking the right route to unlock it.

[Chris]

Yeah, right. You have to position it that way. That's why I said barring few exceptions for the most part it's going away. Just like there's still horse and buggies riding around Central park if you do it right. Right. You know, like you have to position the store experience in the right way. And this particularly putting the devoting your windows to selling on Amazon is not that.

[Alex]

I don't know guys, I'm going to come in here with a different perspective. I think that on one hand I totally agree. Like the department store as we know needs to evolve or it's going to die. And does this Amazon connection dilute the Sam's, the Saks brand a little bit? Maybe. But I do think that there's an important thing to call out here and that is that we've said that it's okay for Walmart.com to sell luxury, but now we're saying it's not okay for Amazon.com to sell luxury. I think there's a major disconnect there because I think when you think about.

[Chris]

How people are selling, that's a different question. But that's, that's from a different starting point and that's, that's Walmart selling luxury, having access to luxury. That's different than then that's to the point about Amazon. Yeah, it makes sense for Amazon, but you know, for the, for the point of Sachs, that's Saks going on. Amazon is different than the Walmart example.

[Alex]

There's still a point of Saks going on this to keep their business model alive. The convenience stuff is, is number one here because if you still order something from Saks, from Nordstrom, from any of these retailers, the shipping take, you know, for me to cover shipping, even when I'm spending a certain amount of money to get free shipping, it still takes, I'm still waiting a week for an order from Nordstrom, for example. Now I can go on. If I'm a luxury shopper, I've already been in the store, I know what handbag I want. If I want that delivered to me or that dress delivered to me for an event the next day, and I already have all of my Amazon information there and I can get it in one day, I think there's value to that. And that's not something that with the current SAX model they're able to deliver on. Second, I think when it does come to searching for something like yesterday, I'm looking for basic black T shirts, but I want a high quality black T shirt. When you start to think about things like Rufus, that Amazon's deployed where I can have an engaging conversation with somebody. So the new version, the, the like now version of what that sales associate was able to help me with online in a store. When you think about how that's happening on Amazon and now I can be served up not just Amazon essentials T shirts, but I can also say, you know, Rufus, I want something that's a little bit more high quality and maybe I'm getting a James Purse T shirt that I would only be able to get if Saks is on the Amazon platform. So I do think that there's value and this is Saks and Amazon kind of evolving together into the new definition of selling luxury.

[Chris]

Wow, we're starting off hot today. So shots fired there, but okay, I'm going to refute the point on two things. The first part of that, just use by with Prime. Then why do you have to do all this? Like you could get all those shipping benefits just by linking up with buy with Prime.

[Alex]

You could, but I think that assumes that people are going directly to Saks.com, which we know they aren't going to as frequently and they're going to Amazon.

[Chris]

But that was the premise of what you said. Like they can't. They're shopping there and they're not confident in the delivery and the experience. So okay, then get confidence in the delivery experience by leaning on with buyer Prime. But then the second point is you're thinking about this in isolation. You have to remember too that Amazon already has items available from these brands on their website. So this isn't changing the experience.

[Alex]

Not all of the brands.

[Chris]

Well, the, the brands. Anyone that wants to put a brand on the website as a third party seller can do that and that's been a problem on Amazon for years. So. So the search experience is not really going to be augmented by this in any way, shape or form as well. So.