Amazon Briefing: What the merger between Saks and Neiman means for Amazon
This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →
Merger talks between department chain rivals Saks Fifth Avenue and Neiman Marcus have powered the retail industry’s rumor mill for years. But when Saks parent HBC announced last week that a deal was finally reached, a surprising name came up: Amazon.
Amazon agreed to back Saks’ $2.65 billion buyout of Neiman Marcus and take a minority stake in the combined company, Saks Global. The exact size of the stake was not disclosed. Salesforce also joined as an investor. Marc Metrick, chief executive officer of Saks Fifth Avenue’s online operations, told Bloomberg in an interview that the company is betting that Amazon and Salesforce can “future-proof” the new luxury e-commerce behemoth by offering technological and logistical expertise.
All told, the merger gives Amazon a greater foothold in a space that has largely eluded it: luxury retail. And it comes at a time when Amazon is simultaneously pursuing new ways to compete with discount players.
“I suspect there are people at Amazon who hope this gives access to brands, but that may be wishful thinking,” said Sucharita Kodali, principal analyst at Forrester Research. “Brands don’t like mass marketplaces.”
Look no further than former luxury e-commerce darling Farfetch, which was bought by South Korean company Coupang in December. Like other high-end fashion players, Farfetch struggled with waning consumer demand after a pandemic-era boom fueled discretionary spending. But Farfetch’s woes also came at a time when many top luxury brands were — and still are — reducing their wholesale presence in favor of selling to customers directly. Other casualties in the luxury retail space include Britain’s Matches Fashion, which shut down in March after being acquired by retail company Frasers Group late last year. Beleaguered e-commerce business Yoox Net-a-Porter is also reportedly up for sale.
Despite struggles in the broader luxury market, Amazon has increasingly looked to break into the space — with mixed results. In 2020, Amazon launched Luxury Stores, which attempts to give high-end brands more control over how their storefront looks on the platform. Although Amazon has managed to woo high-end brands like Coach and Clinique, the number of top luxury brands on the marketplace are still few and far between.
In 2022, Amazon also tested out its own department-like stores called Amazon Style. But the Seattle-based company shuttered all locations of its physical clothing stores only a year after opening the first one. Amazon has long looked to crack the code of traditional brick-and-mortar retail, and its involvement in the merger between Saks and Neiman Marcus is just the latest sign that the e-commerce giant is continuing to test out new strategies to see what sticks.
Now is certainly an interesting time for Amazon to be involved in a luxury retail acquisition — the platform is also planning a new Temu-like discount section on its website that will sell ultra-cheap goods directly from China. The news sparked outrage among Amazon’s third-party sellers, Modern Retail reported.
In the case of the Saks deal, there are more questions than answers, such as what exactly Amazon plans to do with the new partnership, according to Greg Portell, senior partner and global markets lead at strategy and management consulting firm Kearney. As he put it, “That’s the shoe that hasn’t fallen yet.”
Portell also pointed out that “Amazon didn’t need to make an investment position to provide advanced logistics and fulfillment services.”
Amazon’s involvement may risk dampening the relationship between Saks Global and their portfolio of brands, especially as Amazon looks to add more ultra-cheap goods from China to its marketplace, according to Neil Saunders, managing director at GlobalData Retail. Still, Saunders doesn’t think the deal is an outright attempt to get more luxury brands on its web store. Rather, he views Amazon’s minority stake more as a testing and learning opportunity for the retailer.
“I don’t think that this is a very direct play just to try and get the brands on Amazon’s site because the licensing restrictions and deals worked out with brands are much more complex than that,” said Saunders. “What they could do, though, is gather data and information that would help them to understand more about the luxury market.”
It remains to be seen whether the deal will close at all, as Saks Global may face opposition from the Federal Trade Commission for being anti-competitive. In April, the FTC sued to block Tapestry’s proposed $8.5 billion acquisition of Capri, a deal that would’ve brought brands like Versace, Coach and Kate Spade under one roof. Plus, Amazon is contending with an antitrust lawsuit against it from the FTC, which accuses the e-commerce company of operating an online retail monopoly.
Whatever Amazon’s modus operandi is, the strategy is consistent with the company’s reputation for experimenting and testing things out, according to Scott Markman, founder and president of global branding agency MonogramGroup. How it will play out, or whether it pays off or not, remains to be seen.
“Saks and Neiman invited Godzilla into the room,” said Markman. “My bet is Amazon did not enter into this deal to be a sidecar player at all.”
Amazon news to know
- A U.S. court has dismissed a class action suit levied at Amazon that alleged foul play with its buy box.
- Amazon announced earlier this week that it reached its goal of using 100% renewable energy seven years before schedule. Some critics are skeptical of the claim.
- Amazon unveiled upgrades to its AI products at a conference in New York.