Enhance the Brand
During a recession, consumers value brands more than any other time, even as they move to buy less expensive goods.
One of the most important duties of a leadership team, no matter the industry, is brand management. Cheapen the brand, and sales will fall — often quickly. Need proof? Look at what happened to Toyota, Netflix, Yahoo, and Hewlett-Packard in recent months.
“During a recession, consumers value brands more than any other time, even as they move to buy less expensive goods,” says Steve Sadove, chairman and CEO of Saks Inc. in New York. During a recent visit to the Saks Fifth Avenue store at the Somerset Collection in Troy (the company also operates a discount store called Off Fifth at Great Lakes Crossing Outlets in Auburn Hills), Sadove recalled how the luxury retailer managed its brand through the recent, tough economic period.
Saks lost roughly 25 percent of its sales during the 2008 national recession, as consumers limited their spending. Rather than stand pat, Sadove and his team lowered prices by up to 80 percent to clear inventory and boost cash reserves. “In hindsight it was the right decision, but not everyone agreed with us at the time,” he says. “We’ve since regained half of the sales we lost.”
For the first half of this year, same-store sales at the luxury retailer rose 13 percent, while Internet sales were up 36 percent (although the latter accounts for less than 10 percent of the company’s overall revenue).
The Troy store is one of the bright spots of the recovery for Saks, Sadove says. “Detroit is an underappreciated market, but for us Troy is performing well above average. There’s a lot of press about unemployment and (falling) housing prices, but the domestic auto industry is back on solid ground and that bodes well for Detroit and Michigan.”
That’s one reason why Sadove approved the renovation of the store’s Contemporary Collections section last year, and it’s why more upgrades are in the works for the Somerset location, which opened in 1967. “Consumers are starting to move up in brand spending, and we’re seeing sales accelerate within accessories, handbags, shoes, and jewelry,” he says. “Fashion-forward goods are on the rise, and shoppers are gravitating to quality materials and sterling workmanship.”
For the holiday season and into 2012, Sadove believes the national economy will muddle along. Given the presidential election cycle, talk of a double-dip recession, and economic challenges in Europe, Saks is forecasting growth of between 5 percent and 10 percent next year — but Sadove admits that could change quickly if the stock market experiences a dramatic drop in value.
In addition, long-term prices are expected to rise among such commodities as gold, platinum, and diamonds. Energy prices, meanwhile, are expected to remain stable. Still, Sadove only concerns himself with what’s in reach. “We can’t rest on our laurels,” he says. “We must deliver exceptional merchandise and memorable customer service or our gains will dissipate. It’s that simple.” db