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How Gilt and Saks Off Fifth Are Creating New Synergies for Retail

Hudson’s Bay Company’s combining of its Saks Off 5th discount chain and the Gilt flash site it purchased last year is turning out to be a happy marriage.

Jonathan Greller president of Saks Off 5th and Gilt, speaking at the Glossy Forum in New York City this week, said, “They absolutely complement each other. When I thought of two brands that really own the luxury market at a value, that’s Gilt and Saks Off 5th. So already there was a lot of synergy. We crossed over 80 percent of the brands that we already purchased together. But our customer base was only a 15 percent crossover. It makes us much more powerful in the marketplace and more seamless on the back end.”

In January 2016, HBC bought the struggling e-commerce site known for its flash sales for $250 million. Immediately upon the acquisition, Gilt purchases were able to be returned to Saks Off 5th stores, Greller noted. That’s because customers had complained that Gilt had a very difficult return policy.

Greller said Gilt has 9 million active members and “the Gilt customer is really cool.”

“We’re taking the best of the best from both operations,” he said. “It’s one buyer now and we’re also enhancing the technology, integrating what Gilt had and bringing it to Saks Off 5th. Now, what Saks Off 5th has brought to Gilt is it brought brands back into the Gilt business that hadn’t been working with the site for a while.”

[Read more about Gilt’s integration: Hudson’s Bay Overhauls Gilt Site, Integrating Saks Off 5th Business]

Greller noted that Saks Off 5th is a value channel, but only 10 percent of merchandise comes from Saks Fifth Avenue.

“In Gilt, we see it as not only a value channel, but with an opportunity to move more into full price,” he said. “Because 70 percent of the customers are millennials, they want to stay with us. Full price right now is roughly 5 percent and we think it can get up to 30 to 40 percent over the next few years as we work closely with the vendor community and we’ll layer in events as we go along.”

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While buying is centralized, each operation has a separate marketing department. Gilt is much more editorial driven, he noted, with the ability to create stories and work with brands on launches, product extensions and buy-now wear-now, off-the-runway fashion.

In the area of technology, Gilt has brought data analytics that provides customer feedback and allows for more personalization in trends and styling.

Greller said come November, all Gilt customers are going to have access to all the inventory available at Saks Off 5th.

“We also have a Gilt shop at the 57th street store here in Manhattan, so Gilt can have an in-store experience,” he added. “We also have Gilt City, which integrates experiences with fashion.” This could be areas such as buying a new outfit and then dinner reservations or Broadway show tickets, or purchasing a pair of yoga pants and a one-day gym membership.

The bottom line is that both operations are now seeing double-digit out-the-door increases, Greller said, “so the customer is very engaged with us.” He added, “We understand there’s less store traffic out there, but there’s not less traffic in the digital land.”