Currently, there are 48 Off 5th stores in 23 states. The new version, scheduled to open in April, is bigger--26,400 square feet, compared to the 21,800 square-foot store now in the same mall--and more modern.
The company describes it as "luxury in a loft environment" and says it creates "an easy shopping environment. The store will be bright and uncluttered, with no hard aisles. Over time, we believe there is meaningful new store growth opportunity for Off 5th, and we look forward to expanding this new format into other markets in the future."
But bulking up its "value-priced" brand during an economic downturn--as logical as it seems--carries significant risk, says Milton F. Pedraza, CEO of The Luxury Institute. "For wealthy consumers, the existence of discount outlets definitely erodes the luxury brand. Wealthy shoppers are as knowledgeable as every other shopper, and it makes them say: 'Wait, why am I paying a premium for this brand, when it's so ubiquitous?'"
Saks' announcement comes at a time when forecasts for luxury spending (okay, forecasts for all consumer spending) range from glum to gloomy. And while many luxury retailers have managed to post gains in same-store sales in December (Saks' sales rose 0.8 %), Pedraza says it was often due to deep discounts, often started early in the season. "So while stores like Burberry reported that sales were up, much of that was on heavily discounted items."
Unity Marketing's Luxury Consumption Index has declined sharply in the last two quarters, falling to its lowest level since 2003. "The most vital question on luxury marketers' minds going into 2008 is how to get the luxury consumers, especially the 25 million mass affluent consumers (incomes less than $150,000) who have put a tight rein on their luxury indulgences, to begin buying again," writes Pam Danziger, president of Unity Marketing and author of Let Them Eat Cake: Marketing Luxury to the Masses, in her most recent report.
That demographic schism is likely to get wider, depending how long a downturn lasts. "The truly rich are truly different," says Pedraza. "They don't need to cut back during down times the way that the merely affluent and borderline rich do," he says. "But these new and often less wealthy customers can leave as quickly as they arrived when the macroeconomic environment turns less hospitable."
In a separate announcement, Saks also says it's readying the spring version of its "Want It!" campaign, set to launch March 13. Like previous efforts, the campaign will highlight a handful of key fashion trends, illustrated by graphic artist Piet Paris, combining the items with New York landmarks like the Chrysler Building, the Guggenheim, and the New York Stock Exchange. The illustrations will appear in ads, catalogs, online, on shopping bags and throughout the stores.
For women, Saks has decided this season's must-haves are bangles, a chic shoulder bag, florals, a luminous face, a maxi dress, slides, a tunic and vibrant color. For men, the Want It! list includes contrasting collar and cuffs, a hoodie and light grey suits.