World Retail Congress: Saks Global/Authentic say JV means "luxury on Amazon" will become very natural
They said they believe the Authentic Luxury Group JV could boost margins, take control of luxury away from vendors and towards retail and make the most of the brand strength of Saks to drive global partnerships.
Authentic is well known as the acquisitive buyer of brands such as Nautica, Volcom, Aéropostale, Lucky Brand, Nine West, Ted Baker, Juicy Couture and many more. But while it had a presence at the higher-end, its 50/50 joint venture link-up with Saks Global last autumn was key.
'We wanted to get into the luxury space but it's all about distribution,' said Salter. 'When we look at brands, what is really important with us is that they can make the right margin. If you look at the business model today, margin is everything. Getting together with Saks was critical for us. If you are not making low-to-high-60s in the maintained margin it's very difficult.'
Baker also commented on the rationale for the partnership, saying that in premium and luxury, there were too many vendors, too much discounting, and not enough margin. "We had to do it, or there would be no industry left in the United States.' With more than $9 billion in GMV, control of over 60% of the US luxury market, and the backing of Amazon, Salter and Baker believe they're creating a next-gen model where retail, data, licensing and media converge.
The JV has bold ambitions and Salter said 'the model truly works. But we're not just in retail, we're also in hospitality business, we'll see Saks branded residences going out, which also means people will buy home products for those. We already have projects on the go, and have people in the Middle East and Asia Pacific looking at doing a Saks store, a condo and a hotel'.
For now, a key part of the deal is the newly launched Saks store within Amazon — a digital 'walled garden' that preserves brand integrity while giving access to Amazon's mega-sized global audience. Salter said that with Amazon building similar luxury platforms in the UK, Japan, India and the Middle East, within five years 'luxury on Amazon is going to be the most natural thing you ever imagined because they have the most elegant execution and most reach of anyone in the world online'.
The link-up between the two also sees them overhauling the Saks business, cutting underperforming brands and prioritising premium partnerships.
And they're helped in this process by customer data as they share over 250 million customer profiles across their businesses, offering them up-to-the-minute insight into who's buying what, where, and why.
With that weapon to wield, Saks is likely to edit out 500-600 brands out and shift towards 'controlled brands', with a larger margin, aiming at around 20% of sales from these product ranges.
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