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Will Continued Consolidation in the Retail
Industry Benefit or Hurt Watch Manufacturers?
Industry Benefit or Hurt Watch Manufacturers?
When retail giant HBC Holdings announced on July 29 that they were purchasing luxury retailer Saks Fifth Avenue, it signaled a continuation of the trend toward consolidation in the retail industry. The purchase, valued at $2.9 billion dollars, will bring together Saks Fifth Avenue, Lord & Taylor and Canada’s Hudson’s Bay Company to create one of North America’s premier fashion retailers.
With the addition of 41 Saks Fifth Avenue stores, 67 Saks Fifth Avenue OFF 5TH stores, the saks.com online business, and Saks-licensed stores in Dubai, U.A.E.; Polanco, Mexico City, Mexico; Manama, Bahrain; and Almaty, Kazakhstan; the combined company will operate a total of 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores. These retail stores, along with three e-commerce sites, are expected to generate $97 million in annual sales within three years.
Retail consolidation typically provides significant economies of scale and as HBC chairman and CEO Richard Baker said recently “This acquisition will increase our growth potential both in the U.S. and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders.”
Potential Growth for Luxury Manufacturers
Does retail consolidation have any benefits for manufacturers and luxury goods buyers? Probably so. Luxury manufacturers are typically smaller than mass-market manufacturers and it is often not practical to ship full truckloads to a lot of small independent retailers. Consolidation allows these manufacturers to ship a single large quantity to a consolidated retailer like HBC Holdings and then let this company use its own distribution system to get the merchandise to individual stores. As a result, exclusive products like luxury watches and jewelry become available to a much wider audience.
The economies that come with a large consolidated inventory and distribution system are a big reason why giants like Wal-Mart and Target are able to offer low prices on such a wide variety of merchandise. Saks Fifth Avenue, Lord & Taylor and Canada’s Hudson’s Bay Company are all popular destinations for the latest in jewelry and fine timepieces. Now that these three luxury retailers have joined forces, it should provide luxury goods manufacturers with a more effective way to get their goods to market while providing customers with a wider selection to choose from.
If you’re a watch aficionado who likes to shop, stop by one of these retailers when the sale is completed. If history is any guide, you should see some exciting new choices that weren’t available before.
About Gevril Group
Gevril Group is the exclusive US representative for select European watch brands, distributing and servicing luxury, fashion and sports timepieces at a wide range of price points. Gevril Group also operates a full-service watch repair department staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.
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