Saks Fifth Avenue: Project Evolution Case Solution
Cody Kondo, the General Merchandise Manager (GMM) of Saks Fifth Avenue Company was considering to implement the Omni-channel project evolution, along with his partner Michael Burgess(Fairchild & Kassam-Adams, 2014). The company had been a traditional retailer of the fashion apparels, shoes and accessories, but it was-faced with critical decisions as the buying patterns and trends had changed over the time. The customers started preferring online retail stores, which increased the cost of traditional stores.
The company had its separate online and traditional retail stores with independent operations, processing, sales, pricing and other strategies but due to an evolving preference and threat from the online retailers; the company’s management focused its attention on implementing an integrated Omni-channel to serve its customers. Now the management of the company was concerned about the implementation of such project evolution,as the firm remained successful in the past, so it needed to ensure the successful implementation of the likely coexistence between the existing business and the emerging online retail processes.
The management was concerned regarding various factors including the wages and compensation, reward systems, cultures, operations, technological platforms’ requirement to be merged in best interest of the company and such merging would be very complex. Would the old-traditional retailers be able to cooperate with the dot com or online retailers? Would the company grab more market markets or would it lose its existing value for its customers? What should be the right speed for the implementation of the Omni channel?
The Saks Fifth Avenue was founded by Bernard Gimbel and Horace Saks in 1923. These both investors had their retail stores initially, inherited from their ancestors. Earlier, Gimbel and Horace both ran their separate businesses, but in 1923, Gimbel sold his entire business to Horace in order to generate cash to open up a new business. This merger led to the integrated operations and management, but with two separate brand identities. Sak became the president of the company and Gimbel was his main lieutenant. In 1926, a branch was opened by Saks in Palm Beach of Florida,and another store was opened at Southampton in the same year.
Till the retirement of Gimbell in 1969; Saks was the national fashion retailing icon in its market. However, in 1973, Gimbels along with its subsidiary Saks was acquired by Brown 7 Williamson, which created its separate holding subsidiary (i.e. BATUS), and then it sold to Invest corp (an investment affiliate from the Middle Eastern Countries).
Even in the time of recession; the company expanded its operations by opening a new outlet, titled Clearing House,by the end of year 1992. The company was incorporated as a public company on the New York Stock Exchange (NYSE) in 1996. Afterwards, in 1998, Saks was acquired by Profiteer’s Incorporation, which changed its name from Saks Fifth Avenue to Saks Incorporated, which remained listed in the NYSE.
Question # 1
Saks Fifth Avenue became the epitome for high-class fashion and taste, by providing an excellent customer service and the finest quality of fashion for both men and women. The company merged with “Lord & Taylor” and “Hudson’s Bay” in 2103 to further establish their business. Saks Fifth Avenue wanted to become one of the luxury retailers of fashion around the globe. Saks Fifth Avenue was well known for offering an efficient customer service in their stores as well as for being the international front runner when it came to the luxurious brands.
Iconic fashion retailers faced a tough time during the early and mid-2000. The technology was being introduced in every aspect of life. Saks Fifth Avenue also wanted to adopt this change. By running a successful business in-store; the company now wanted to provide its customers with an online buying facility as well. This was the primary pressure Saks Fifth Avenue was facing in the high-end fashion retailing.
Saks Fifth Avenue needed to update their current site with new cutting edge technology since all the competitors were also doing the same. The company wanted to use the technology to further strengthen its position as the primary online target for luxury shopping for its customers and to reach more people around the world. The company needed to hire skilled engineers who were technology savvy and knew how to work with the latest technology to help Saks Fifth Avenue in achieving its vision.
The pressure to move with the market and grow with it was taking a toll on the company. Saks Fifth Avenue, when started its online fashion business, it made multiple policies and strategies for the business. Its store policies and online policies differed from each other. Pricing, quality, etc. everything was differed on the website than what they were at the store.
The supply chain system of Saks Fifth Avenue was separated from the store and inventory system. Sales were not recorded or updated on the system. This impacted the business of Saks Fifth Avenue negatively. Customers when trying to purchase an item online would see that the item was sold out, but in reality, that item was available at the shops. This caused the sales of Saks Fifth Avenue to have a significant decline. The investment, time and resources that Saks Fifth Avenue needed to bring in all its systems in sync, were very expensive. Employees or the company’s workers were not skilled enough to manage this technology on their own.
The consistency, availability, and accuracy of information systems were critical for Saks Fifth Avenue as these systems and websites were responsible for the company’s finances, merchandising, planning, managing human resources and managing the product inventories, etc.
Saks Fifth Avenue in the heat of the moment did not plan efficiently and designed different strategies for their stores and their online business. Saks Fifth Avenue was running its business in an intensely competitive environment. The company also faced huge scrutiny by the regulators. Since business practices were changing and every new competitor was adopting them, Saks, unfortunately, found itself on the wrong side of the disputes.
Chief operating officer (CEO) of Saks Fifth Avenue stepped down from his responsibility and two of the chains of Saks Fifth Avenue got sold in 2016. The company was under an immense pressure, which had impacted the company devastatingly. It was reported that Saks Fifth Avenue forgot to file a key annual financial filing, due to which its debt was reduced and the stock price fell rashly. During this downtime of Saks Fifth Avenue; its competitors kept on growing and increasing their businesses. Saks Fifth Avenue was also the favorite takeover target for many private firms……………………
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