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Saks Embraces Omnichannel but Stores Remain the 'Big Kahuna'
By Jessica Binns
Saks Inc.'s $100 million CapEx investment, spread over four to five years, is part of an ambitious plan to transform the retailer's core IT platforms with the goal of creating an omnichannel retail enterprise, CIO/COO Mike Rodgers said at June's Oracle Retail CrossTalk conference in Chicago.
The impetus behind this strategic shift came from the top. The luxury retailer lost 30% of its business during the economic downturn, and according to Rodgers, CEO Stephen Sadove charged Saks leadership not to "let the recession go to waste."
A big part of the omnichannel shift that began in 2012 involved Saks reevaluating some of its long-held assumptions about its customers and their shopping habits. For example, the company assumed that its highest-value Diamond customers were primarily brick-and-mortar shoppers, but a look at the data revealed that those shoppers were engaged in all channels, from store to Web to mobile, Rodgers said.
Mobile and Social Growth
Traffic through mobile platforms, such as smartphones and tablets, is growing the most rapidly of all channels, he added. In fact, roughly 41% of shoppers use their smartphones while in the store to visit saks.com, research product information or compare prices with competing retailers.
Saks customers are highly social, with 60% engaged in social media every day. Using social channels as listening posts helps Saks to be responsive to consumer needs. "If you're not keeping a pulse on customer feedback, you're missing out," Rodgers said.
With the single view of the enterprise that omnichannel enables, Saks will gain a better perspective on, and performance from, its inventory, shipping from either stores or DCs according to which makes the most financial sense.
Saks has made investments in the fulfillment side of its direct to consumer business – which generates 30% of the company's revenues – by partnering with Kiva Systems to improve the pick, pack and ship fulfillment processes, shortening cycle times significantly. Saks' new Tennessee distribution center features the largest number of Kiva robots in one location in the U.S.
E-Mail Multiplier Effect
Saks shoppers who buy in multiple channels spend three to four times as much as customers who are active in only a single channel. The retailer's e-mail marketing programs are highly effective in driving traffic to physical stores, generating $5 in brick-and-mortar business for every $1 spent on the Web. Rodgers said shoppers respond to e-mails by showing up at the store because customers tend to be "concentrated where the stores are located." Because Saks relies heavily on a high-touch clienteling-style retail experience, it can identify who the purchaser is for 95% of its sales.
Though much of the buzz in retail is about the rise of e-commerce and the death of the physical store, Rodgers believes brick-and-mortar is still "the Big Kahuna," and is not so much going away as merging together with the online and mobile channels. Shoppers want the advantages of the digital channels as well as the advantages offered by physical stores.
Moving toward an omnichannel enterprise required an organizational realignment that eliminated silos across the business. "This is a business transformation enabled by technology," Rodgers said. "Don't view it as just an IT project."
For related content: Saks Deploys 2,000 iPads in Stores, to Launch OFF 5th Website in Fall
Saks Fifth Avenue Unveils New Loyalty Program
Saks Uses Hundreds of Robots in DC to Streamline Processes
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