“The department-store customer has changed enormously, but the department store itself, not so much,” says Robert Burke, a former Bergdorf Goodman executive who runs his own retail consultancy. “There’s always a risk the investment doesn’t pay off, but you have to do new stuff.”
WSJ | JOSHUA LEVINE
WHEN I WAS a young boy in New York, it was always a special treat to eat lunch in the big department stores when my mother dragged me downtown with her. I will never forget the tiny tea sandwiches and the clatter of purposeful feeding in B. Altman’s Charleston Garden, done up to look like an antebellum plantation house. (This would be unthinkable today.) Or the shopping ladies hunched over dainty salad bowls under the empty bird cages in Lord & Taylor’s restaurant, called the Bird Cage.
Both stores and their restaurants are gone now, swept away in the rush of modern life. B. Altman closed in 1989, and its landmark building is now occupied by CUNY. The New York Lord & Taylor recently announced it will be leaving us, to be replaced by workspace landlord WeWork.
Saks Fifth Avenue is still very much with us. The 11-story neo-Renaissance palazzo, right next to St. Patrick’s Cathedral and across Fifth Avenue from Rockefeller Center, remains a stalwart purveyor of luxury fashion to New York’s carriage trade after nearly a century. But it is not accidental that Saks just opened a flashy new restaurant this month, replacing the kind of shopping canteen I might have patronized with my mother had she not considered Saks above our station. It is called L’Avenue at Saks, and the store imported it from Paris at great expense. L’Avenue is meant to be a lot more than a brisk pit stop between purchases. For Saks, it is the gilded figurehead on a refitted flagship as it pushes out into stormier seas.
“I think over time, whether it’s because of the internet or brands opening their own stores or new entrants to the market, making a transaction wasn’t going to be why you came into a department store. You have to come to a department store for other reasons,” says Marc Metrick, Saks’s president. “That’s what we’re talking about with L’Avenue.”
Anyone who has shopped their way down the boutique-lined Avenue Montaigne in Paris will recognize the name L’Avenue (as Saks means them to). It is one of the brightest jewels in the crown of Paris restaurants and hotels owned by the Costes brothers, Jean-Louis and Gilbert. (The Parisian L’Avenue is owned by Jean-Louis Costes and Alex Denis.) Over the years, the Costes restaurants have made a killing with a simple formula, executed with military precision and consistency: reliable if unsurprising food in haute-design habitats at the city’s postcard hits—the Louvre, the Pompidou Center, the Esplanade des Invalides and, bien sûr, the intersection of Avenue Montaigne and rue François Premier. “Paris without us—well, that would be rather a different story,” Jean-Louis Costes told me in an interview for Time in 2003 (he almost never speaks to the press, and he declined for this article). As immodest as that sounds, he’s right.
You go to L’Avenue to see who’s eating le club sandwich next to you, not so much to eat one yourself (although it happens to be very tasty). Few in Paris can beat the Costes brothers at attracting the human plumage the French refer to as people, pronounced pee-pole—though in the past L’Avenue has been accused of culling its waiting flock a bit too selectively. What the Costeses have managed—and it’s a very tricky thing—is to make their restaurants and cafes feel insidery and outsidery at the same time. Somehow the regulars don’t seem to mind all the irregulars who come to gawk. For Jean-Louis Costes, as he said in the same interview, the secret is steadiness: “Chez nous, you won’t find much that pisses you off.”
Metrick, 45, expects similar magic from the new L’Avenue at Saks, which will be the first Costes outpost in the U.S. Patrons can expect to find several of the Thai-tinged specialties that Costes restaurants serve in Paris, like le tigre qui pleure, a spicy beef tenderloin, or tom yam chile sea bass. L’Avenue at Saks will keep its portions small, the way Paris does.
“The restaurant is a big bet,” Metrick says. “You and I both know you’re not going to win on the ninth floor of Saks just by saying, ‘We’re going to have the best food in the city.’ You’re not going to out-restaurant anyone in New York. So we said, ‘How do we build an environment where people are going to want to come whether or not they’re shopping in our store?’ It can’t be kitschy or derivative. The new luxury loves authentic. It doesn’t like fake. It doesn’t like ornate. It likes behind the scenes. It likes real.”
“The new luxury” is a phrase Metrick sprinkles around liberally. He has a lot to say about it, but in the main, he means that his customers today favor warm, sticky experience over cold, frictionless commerce. His benchmark is a surprising one: Starbucks . “I got a lot of shit for saying that, but think about it. Coffee is a commodity, and I don’t even know if Starbucks’s coffee is any good, but they made it so I paid $5.06 for one this morning, and I didn’t care. No one’s getting coffee anymore, they’re getting Starbucks.” That’s what he wants for Saks, he says.
Metrick walked me around L’Avenue at Saks while it was still a work in progress to show me what he’s talking about. The view is to die: The neo-gothic spires of St. Patrick’s shoot up just outside the north-facing windows, while the splendid Art Deco of 30 Rock towers over it to the west. The Paris L’Avenue was designed by Jacques Garcia, who has worked hand-in-hand with the Costes brothers for a long time. For the Saks version, Jean-Louis Costes tapped Philippe Starck, who created the brothers’ first venture, Café Costes, in 1984. Starck, barely known back then, borrowed the look of the old Budapest railway station’s waiting room. It was a wild idea. Paris cafes had their own strict visual codes. The thunderous reception put both Starck and the Costes brothers on the map.
In the ninth-floor dining room at Saks, Starck conceived a salon that you might find in Paris, in beige and ivory, with tables surrounded by curio-filled cabinets. Customers enter a long hallway lined with a stained-glass window that highlights the silhouettes of busy chefs behind it. The new luxury loves to peek into the kitchen, says Metrick. “Here’s where someone like me could be dangerous, because I’m like, ‘Open up the kitchen!’ and six months later open kitchens are over. I know what I’m good at, and I know what Philippe Starck is good at.”
A bar area one floor down gets the full-on dude treatment, with red upholstery, tree-trunk beams, hanging moose heads and old ski photos. This is where Metrick sees patrons taking meetings or chilling with laptops—Starbucks with booze. He doesn’t necessarily imagine all 337 seats filled with Saks customers, either. A separate entrance on 50th Street leads directly to the restaurant, which stays open long after Saks closes for business. “I want my customers to eat here, but I want their customers to shop with me,” says Metrick.
Starck has a grand vision for the spaces. “What I do is symbolic and semantic, based on functional requirements, but enlarged—almost Freudian,” says Starck. “I’ve lived in New York, and sometimes it can get oppressive, tough, not funny. I wanted to create two bubbles here—two worlds. One is an ideal bubble—ivory, refined—where everything carries you towards an elegance of thought, and where everybody will try to be more intelligent. The other bubble is more masculine, where you forget about time in a European chalet in Grindelwald or Gstaad or St. Moritz.”
L’Avenue is just the last piece of a much bigger puzzle. In 2015, Saks started a $250 million renovation project, turning itself inside out to embody Metrick’s new luxury. As we rode down the escalators, he pointed out all the little ways Saks is chipping at the eternal verities of department-store style, which the writer Alice Munro once called “the old-fashioned modern look of the Fifties.”
“The department-store customer has changed enormously, but the department store itself, not so much,” says Robert Burke, a former Bergdorf Goodman executive who runs his own retail consultancy. “There’s always a risk the investment doesn’t pay off, but you have to do new stuff.”
First, Saks cleared away all the stockroom space lining the building’s blacked-out windows on every floor. Sunlight now enters for the first time in decades. Traditional thinking had long been that no store wanted its shoppers gazing dreamily out the window when they could be browsing.
Next, Saks knocked out the interior barriers that had made each floor a warren of, yes, little departments. Metrick has called it “de-departmentalizing the department store.” This too was a minor heresy. “It had been like that for 80 years, and not just at Saks,” says Metrick. “Now you can see across the whole cavernous floor. We’ve gutted everything. People want to see other customers; they want to see who’s shopping. They’re social!”
The second floor is where Saks took a sledgehammer to convention. Saks moved its beauty department up from the first floor last May. The redone main floor will now be devoted largely to handbags, the high-margin pedestal on which so much of today’s fashion industry rests.
Beauty on One could be the Nicene Creed of department stores—an unshakable faith that the woman dashing in for a quick lipstick must be served first and fast. The melee just inside the front door comes close to capturing what every department store used to feel like. “We all have the same exact memory,” says Metrick. “My mom drags me there, it smells, people are spritzing in my face, people are bumping into you, strollers are coming through.” Not the new luxury by a long stretch.
Saks’s new second-floor beauty department is another thing altogether. It is spacious, wide open and chockablock with vehicles for much fussier personal attention: 15 treatment rooms, a “beauty concierge,” a “beauty curator,” a FaceGym, a Blink Brow Bar and a Skinney Medspa. Bottom line: “No one’s going to be spritzing you,” says Metrick.
The outcome of all these changes will determine whether Saks can flourish in much thinner air or whether it will one day go the way of the New York Lord & Taylor, owned (as Saks is) by Canada’s Hudson’s Bay Company, led by Richard Baker.
HBC acquired Saks Inc. in 2013 for $2.9 billion. (There are 41 U.S. stores. The deal also gave HBC the Saks Off Fifth discount outlets, which now number 133 locations.) HBC has struggled recently—it lost just over $800 million between January 2016 and January 2018. But Saks has been a bright spot, despite closing the much-ballyhooed Brookfield Place women’s store in downtown Manhattan after just two-and-a-half years. Same-store sales have risen for six consecutive quarters, the latest quarter by a very healthy 7.3 percent. Beyond that, the acquisition now looks particularly canny for one big reason: the Saks building on Fifth Avenue.
Saks & Company started life on Herald Square, old New York’s department-store hub, across the street from bigger rivals Macy’s and Gimbels. Horace Saks and Bernard Gimbel ended up getting friendly. Together they hatched a plan to open a posher store farther north, closer to the new big money on Fifth and Park avenues. A merger of Saks & Company with Gimbel Brothers paved the way, and Saks Fifth Avenue opened in 1924. The building, designed by the firm of Ernest Van Vleck and Goldwin Starrett, boasts not one but three imposing facades—one limestone, one brick and one cast stone.
Sadly, Horace Saks died one year later of septic poisoning. It was a Gimbel—Adam Gimbel, Horace Saks’s second-in-command—who steered Saks to prominence as one of the city’s first luxury department stores. (Edwin Goodman’s Bergdorf Goodman had beaten Saks to the punch, opening across the street in what is now Rockefeller Center in 1914. Bergdorf moved to its current location in 1928.)
By the time Metrick joined Saks straight after earning a degree in business administration from Boston University in the mid-’90s, its upper-crust image, while still intact, had acquired a thin coat of dust. “You had your suits. You had your ties. You had your jewelry. It still stood for luxury, but Saks was definitely that staid department store,” says Metrick, who worked his way up the ranks at Saks. In 2012, he moved to Hudson’s Bay, where he worked on the deal to buy Saks, which was finalized in the next year. A year later, HBC took out a loan against the flagship store that valued the building at $3.7 billion—far higher than the price HBC had paid for the whole company. “Honestly, the real estate behind this deal made the rest of the thinking and the rest of the imagination possible,” says Metrick.
To some people, the treasure in its brick and stone makes Saks look like a future real-estate development waiting to happen. (Indeed, one of HBC’s biggest shareholders, Jonathan Litt, has been badgering the company to sell the building off.) The looming shadow of luxury condos puts even greater pressure on Metrick to make the new Saks work—particularly since he wasn’t originally meant to come back to Saks at all. In 2013, HBC hired Marigay McKee away from Harrods, where she had given the ponderous Knightsbridge merchant just the kind of pizzazz Saks was also looking for. McKee lasted only a year and a half.
Metrick replaced her. “Coming back as president after starting out as a trainee in 1995 is like being principal of your old high school,” says Metrick. “You get to come back and do all the things that you said you would do.”
Except that everything has changed since Metrick’s high school days, and not for the better. Across the country, department stores are under siege. Online retailers keep taking bigger bites of their business. So do their own biggest brands, which have shown a growing appetite for opening their own stores and cutting out the middleman. Overall, revenues at big-box and department stores in the U.S. have fallen from around $250 billion in 2006 to an estimated $149 billion in 2018, according to advisory firm Mazzone & Associates, and they are expected to keep falling.
Even within the department store, the most powerful brands have started to change the ground rules. Increasingly, they insist on operating as wholly owned concessions—basically, free-standing stores within the larger store. The old way of doing things, where a merchant buys wholesale and sells at marked-up retail, is disappearing. This past November, Chanel became the latest fashion powerhouse to move to the new model in the U.S. (it is already a more accepted way of doing business in Europe).
“As concessions, the brands will pay a fairly low rate back to the department stores, under the threat of exiting their doors,” says Ron Frasch, a retail consultant who served as Saks’s president until 2013. “It’s a very difficult environment—the brands are becoming much stronger, and it’s mandatory for a department store to have them.”
None of these trends has discouraged two of Saks’s toughest out-of-town competitors from coming to New York. For all the turmoil, this is where luxury lives. Last April, Nordstrom, the Seattle department-store chain, opened a big men’s store on West 57th Street (a women’s store will follow). In March, Neiman Marcus will open a store in the new Hudson Yards development on the far west side. Both of them will do many of the same things as Saks. The game has changed for everybody, and the new game plan is no secret. Hudson Yards is already boasting about restaurants co-curated by star chef Thomas Keller. Things are going to get scrappy.
Metrick grew up on nearby Long Island, and he sounds like it when talk turns to the new kids on the block. “I’m not overconfident. I think our competitors are smart and they know what they’re doing. We aren’t sitting back. We are spending $250 million.
“But this is New York City, and we’re Saks Fifth Avenue. We said, ‘You’re not going to come to our city, where we’ve been since 1924, open a store and think you can steal my customers.’ Not a chance.”