4 Min Read |

  • Retailer takes beauty to second floor in break with tradition
  • Revamped department on Fifth Avenue is larger, less frenetic

Saks Fifth Avenue wants to elevate cosmetics shopping to a whole new level. Literally.

The luxury retailer is breaking with decades of tradition by moving its beauty section from street level to the second floor of its flagship store in midtown Manhattan, expanding its size by 40 percent and offering high-end services such as face workouts and slimming massages.

With 15 treatment cabins and “concierge” service to help customers navigate more than 120 brands, the new floor that opens Tuesday is the latest attempt by a department store to rekindle interest in brick and mortar in the era of e-commerce.

“The decision to move it upstairs is completely contrary to what is the standard in department stores all around North America,” Saks President Marc Metrick said in a phone interview Thursday. “It wasn’t just space, it was being able to make the experience less frenetic.”

The launch is part of a $250 million renovation at the 94-year-old store on Fifth Avenue, which includes a revamp on the main floor to focus on luxury leather goods and accessories such as scarves and sunglasses, and adding an outlet of the Parisian eatery L’Avenue. Saks, which runs 42 stores in the U.S. and Canada, has been recovering from slumping sales to become one of the few bright stars in the portfolio of struggling Toronto-based owner Hudson’s Bay Co.

Getting Out of the Woods

Saks’ same-store sales are recovering.

Saks’ makeover is “bold” because beauty is traditionally on the main floor for a reason: it’s a traffic magnet with high productivity, Bloomberg Intelligence senior analyst Poonam Goyal said. For it to work on the second floor, it must become a shopping destination, something Saks managed before with its shoe department, she said.

That’s what the company is aiming for. The 32,000-square-foot space paved with Italian tiles is designed to give a serene feel, with windows restored to let in more light and walls kept low to open up the horizon.

Saks says it will offer more than 85 free services, such as express facials and color tips. If money isn’t an issue, you can exercise your facial muscles at U.K. import FaceGym, get your brows threaded, or indulge in a $220, 50-minute silhouette-reshaping massage designed by French expert Martine de Richeville. You can also grab a bouquet on your way out from EB Florals.

Catching Up

Department stores have had a hard time catching up to the likes of Ulta Beauty Inc. and LVMH’s Sephora, which changed the way beauty is sold by making it easier to explore and feel beauty products, Goyal said. Macy’s Inc. is testing new sales formats for cosmetics, while J.C. Penney Co. has a partnership with Sephora.

Saks is going big on treatments.

“One thing that was important to us was to really focus on the experience,” Chief Merchant Tracy Margolies said in the interview. “You could come to Saks and you could spend the day.”

The company is taking elements of design and some treatments to a few other locations, Metrick said. Saks opened three stores last year and comparable-store sales — a closely watched measure — rose 2.1 percent in the fourth quarter, the most in three years. The luxury chain accounts for about a quarter of Hudson’s Bay’s overall sales, according to estimates by Macquarie Capital Markets Canada analyst Chris Li.

“Saks is in a sweet spot right now because it’s a luxury brand, it’s in the U.S. where the consumer is doing really well and tourism sales are coming back,” Goyal said.

Underperforming Assets

Still, Hudson’s Bay is being dragged down by online retailer Gilt, its European business and the Lord & Taylor chain. Selling underperforming assets such as Lord & Taylor would be a “positive catalyst,” according to Macquarie’s Li, who last month cut his stock price target and earnings estimates.

HBC’s shares have lost 18 percent this year and 65 percent over the past three years. To revive sales and cut costs, the company has overhauled management and brought in a new chief executive officer, centralized e-commerce operations and cut jobs. It also sold the landmark Lord & Taylor building in Manhattan, unloaded a minority stake to a private equity firm to reduce debt, and struck partnerships with Walmart Inc. and WeWork Cos.

“The retailer needs to develop a long-term plan and vision to drive growth and greatness,” Cowen & Co. analyst Oliver Chen wrote in a note to investors last month. “HBC needs to provide a seamless customer experience and build upon its unique portfolio of stores to reset its business on the path of growth.”

Written by Sandrine Rastello, with assistance by Kim Bhasin, for Bloomberg 

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