Private equity pours $500M into Saks Fifth Avenue's e-commerce spinoff

Dive Brief:

In the latest push online in the luxury space, HBC, with $500 million from Insight Partners, is establishing a standalone e-commerce company known as "Saks." Marc Metrick, who has been running Saks Fifth Avenue (minus, since last year, its off-price business), will be CEO.
The private equity firm will take a minority stake in the new company, which is valued at $2 billion, according to a company press release Friday.
The department store's 40-store fleet will operate separately as "SFA" and remain wholly owned by HBC. "Saks Fifth Avenue" will be the customer-facing branding for both, per the release.

Dive Insight:

High-end retail has been a latecomer to e-commerce, but any misgivings about marketing or logistics have been overwhelmed by the reality that consumers, even wealthy ones, do plenty of shopping online.

"Luxury e-commerce is poised for exponential growth, and as a stand-alone digital company with an existing strong position in luxury, Saks is primed to win significant market share," HBC CEO Richard Baker said in a statement.

Farfetch — which a few months ago forged a strategic partnership with Alibaba and Swiss luxury house Richemont and snagged over a billion dollars in the process — has arguably been the one to demonstrate that potential. Other players have also recently made the pivot. Neiman Marcus, which was already boosting its digital capabilities before the pandemic and its bankruptcy last year, recently took major steps to realign its workforce and investments away from its brick-and-mortar operations to capture more online sales.

For Saks, it's not clear how the split might affect the cohesiveness of the brand. The rationale behind separating the Saks Fifth Avenue physical and digital enterprises appears to be financial rather than operational, with Baker stating further that "this transaction reinforces HBC's ability to unlock significant value within our company's assets." Baker also said that Insight Partners is "globally recognized for its ability to scale Internet, software and e-commerce leaders."

The Saks e-commerce operation will ultimately "feature a hybrid retail and marketplace platform, expanding its assortment while maintaining a curated experience," per the release. That presents a thorny challenge, given marketplaces' poor track record with counterfeits, an issue of particular concern to luxury brands, if not to consumers. HBC itself also recently moved to establish a marketplace.