Map of Fashion Show Las Vegas
The recession took a deeper toll on high-end luxury in Las Vegas than the rest of the country and the market will take longer to recover than others, the chief executive of Saks Inc. said.
“I think you’re starting to see a comeback in high-end retail in Las Vegas, but probably not as quickly as some other marketplaces across the country, because Las Vegas got hit harder than most any other market,” said Steve Sadove, who was in Las Vegas this week meeting with company human relations executives.
“You took a big hit in the housing market and so much of the employment is tied to construction and tourism. There’s a lot of clawing back to do,” Sadove said.
Sadove said Saks lost 20 to 25 percent of its sales during the recession but has since recovered about half that. The decline was even greater in Las Vegas, he said.
The company’s sales rose 11.1 percent in March and 15.3 percent in February, after increasing 6.4 percent in the year ending in January — the first profitable year after two consecutive years of losses.
Sadove remains optimistic about Las Vegas’ recovery and future, saying “in time it will get back to what it was.” The impact of increased room rates and occupancy rates will be felt by high-end retail, he said.
Saks, at Fashion Show Mall, is substantially driven by tourists, but local customers are vital, too, he said.
“The core customer is coming back, and they’re spending again,” Sadove said. “We are seeing it in the local customer base as well. We aren’t seeing it at pre-recession levels, but it’s substantially higher than it was.”
A large part of the 20 to 25 percent decline in business was the loss of so-called aspirational customers, Sadove said. Those customers will take longer to return and, Sadove said, the main focus is on the core customers who are well off. It’s about gaining share in that area and luring those shoppers with customer service and exclusive products, he said.
The downturn showed the industry that customers love their brands whether it’s Hermes, Prada, Gucci or Chanel, Sadove said.
Shoppers didn’t want to trade down to lower-priced brands. Instead, they wanted less expensive items in the brands they liked.
“What you’re finding is they stayed true to their brand. They’re shopping less often, and they may have foregone purchases altogether. They may have bought a less expensive dress or handbag or the entry price within a brand,” Sadove said.
“What’s happening, and what I’m seeing in Las Vegas and other markets, is they’re now starting to buy more of those specialty pieces. That special piece of jewelry, that higher-end watch, that higher-end handbag with the exotic materials,” he said. “They’re selling again, and they weren’t early on.”
The single biggest bellwether of luxury market spending has been the stock market, Sadove said. When the stock market was riding high, people had the mindset that if they saw it, they’d buy it.
When the recession hit and the stock market tumbled, more people said they didn’t need anything and shopped their closet.
Today, they are looking at the value of a product and whether it fits with what they own or complements their wardrobe, he said. Workmanship and materials factors more into their decision today and, if they like it, they buy it, he said.
“If I believe it’s worth it, I’ll buy it (is the mentality)” Sadove said. “But I’m not just going to do it to see a logo on an item.”
Saks also operates an Off 5th outlet in Las Vegas that wasn’t hurt as badly as its store at Fashion Show Mall, because it had lower price points that people continued to shop, he said. That business remains healthy, he said.
Saks opened its store at Fashion Show Mall in 2002, and while it continues to renovate, it has no plans to open a second store, Sadove said.
“How many Saks Fifth Avenues do you need in a market?” Sadove said. “We’re a specialty store. We’re about service and differentiated products.”
Online traffic, meanwhile, increased 30 percent last year and attracts younger and fashion-forward customers, he said.
Saks allows its local stores to develop their own marketing plans, and customer-service improvements of particular stores help determine compensation.
Because Las Vegas is heavily tied to the tourist industry, Sadove said, the focus here has been on hotel and convention programs to lure those visitors to Saks. He declined to talk specifics of the programs but said with convention business expected to increase over the next two years, they will be important to the retailer.
Social media, through the use of blogs, Facebook and Twitter, are used on a national basis, but Saks hasn’t decided on a strategy for local stores, because it has yet to resolve how to control it, he said.
When the recession hit, Saks slashed prices 70 to 80 percent to clear a few hundred million dollars of excess inventory to generate cash and weather the economic downturn, Sadove said.
“In hindsight, that turned out to be the right strategy, because it took others a long time to clear some of that inventory,” Sadove said.
The strategy today isn’t about promotions, which have been reduced, he said. It’s about limited distribution and availability and more exclusive brands, along with service. Full-price selling has done its best ever, he said.
Las Vegas has plenty of luxury retail along the Strip, but it has plenty of customers to draw from, Sadove said.
“I think there’s a lot of luxury retail here, and that’s why, in the end, it’s about differentiation through not just product but service. That’s what we’re focused on,” he said.
As for Crystals, Sadove said, the luxury retail center at CityCenter is gorgeous, and he has heard that retailers such as Louis Vuitton have done well there. But the timing could not have been worse for its opening in December 2009, he said.
“You open one of the mega-luxury retail shopping experiences in the world at the time the recession hits. It’s tough. I walk it and say there great restaurants there and shops, but whether customers over time will come, I don’t know,” he said.