Investment in E-Commerce Is Working for This Retailer

Gayatri is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Saks (NYSE: SKS) has been on a nice run recently--it's up 42% versus only 16% for the greater market.  The luxury retailer is implementing different strategies to increase its customer base and to attract investors.  Its working to develop not only its online market but also supporting channels to increase sales. Omni-channel retailing is extremely popular and its a growing trend.  It has also re-launched its loyalty program in an effort to reach all its customers.  Add it all up and Saks looks like a nice buy.

Omni-channel

In this system, all Saks Fifth Avenue stores become distribution centers.  The customer buys online and the item is packed and shipped in the stores.  So instead of establishing separate inventory storage warehouses and distribution centers, Saks uses its in-house resources.  So when it puts up a new store, its really putting up a new warehouse.

By investing in information technology, Saks is able to better reach and gain new insights on its customer.  It's also investing in e-commerce by adding iPad stores with different customization options.  Between its Omni-channel and investments in e-commerce, Saks should enjoy strong online sales and better inventory management.

E-commerce and loyalty

It has also enhanced its online shopping experience at Saks.com.  With more product offerings, better website development, and  more appealing digital marketing, Saks.com is starting to gain some traction. The company has also developed a robotic fulfillment center in Tennessee for developing and maintaining the operational efficiency of its website.  All these e-commerce enhancements will only improve the efficiency of its Omni-channel initiatives.

Saks re-launched its ‘SAKSFIRST’ loyalty program in January.  It now includes more benefits and no longer requires customers to spend $1000 on merchandise to participate.  These steps have been taken to increase customer engagement and appeal to a different kind of shopper.  These changes have tripled the number of members and have been driving sales.

Competitors

Macy’s (NYSE: M) and Nordstrom (NYSE: JWN) are direct competitors to Saks. Currently, Macy’s appears to be focused on a particular age group and following its MOM strategy, where Nordstrom is targeting online growth and unit expansion.

Macy’s is focusing on customers aged 13 - 30, as this is a large, free-spending demographic.  The company has launched new brands and announced expansion of some existing brands to attract these shoppers.  

The term MOM is collectively used for three different strategies: My Macy’s, Omni-Channel and Magic selling strategies. My Macy’s involves groups of 10-15 stores and satisfies the customers with a greater focus on localization. The second key strategy, O in MOM is Omni - channel. The company is trying to provide a great experience to the customers who shop online. The third strategy is Magic selling. This strategy looks to empower and improve store associates through better training.

Nordstrom had purchased the online discount site HauteLook back in 2011. The company is trying to integrate its capabilities so that it can do a better job online. The company is also looking to get more product offerings in its online channel.

It's also looking for fast expansion of its Rack store as its trying to double that brand over the next 2 to 3 year's.  Nordstrom is planning to enter Canada with approximately 9 - 10 full line stores and 16 - 18 rack stores. Its new fashion reward programs has gotten positive feedback from its customers.

Conclusion

Saks is trying to expand its online presence and build out its Omni-channel. It has developed better digital marketing plans and it provides more a personalized online shopping experience for its customers.  Heavy investments in e-commerce, its existing store count, employees, and Rack brand, makes Saks a better buy than Macy's or Nordstrom.

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Gayatri Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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