Ritson: Why Saks couldn’t scale its way out of irrelevance

When Richard Baker announced Saks’ acquisition of Neiman Marcus in late 2024, he deployed the kind of corporate poetry that should set off alarm bells in any trained marketer’s head. The deal to create Saks Global, the executive chairman declared, had “created an unparalleled multi-brand luxury portfolio with tremendous growth potential.”

Fourteen months later, Saks Global filed for bankruptcy. Amazon wrote off its $475 million investment as “presumptively worthless.” Chanel was left with $136 million in unpaid fees. And the 159-year-old department store that once dressed Grace Kelly and brought Louis Vuitton to the American elite slipped into ignominy.

What happened? The short answer is too much debt. The more interesting answer is not enough brand strategy.

Baker’s thesis was seductively simple: combine America’s two great luxury department stores into one colossus, gain leverage over suppliers, and dominate the high-end retail market. Scale, in other words. The same logic that has driven every holding company merger since time began: bigger is better.

The problem is that luxury doesn’t work that way. And anyone with even a passing familiarity with how wealthy people actually shop could have told you as much.

Saks didn’t have a scale problem. It had a relevance problem. Department stores used to be the gateway to luxury. You went to Saks because that’s where you discovered Chanel and Gucci and Burberry. Even into the latter decades of the 20th Century you went to a proper department store to be educated through consumption. The department store was curator, tastemaker, and trusted advisor all rolled into one.

Inside Saks Fifth Avenue in the 1950s (Saks)

But that role is gone. The age of the internet opened an always on, international update machine that could inform consumers about everything from the latest pant suit to the hot new crockery. The entire value proposition of the department store – “we’ll introduce you to brands you can’t find elsewhere” – has evaporated in an era where every brand is one Google search away.

To make things worse, the luxury brands that once populated and promulgated department stores discovered independence. They’ve got their own stores on Madison Avenue these days. Their own websites. And people. And as the ultimate mercantile control freaks they like it that way.

In control and loving it: Gucci at Sydney International Airport (Gucci)

So what did Saks do in response to these existential shifts? Did it reinvent itself? Reposition? Find a new reason to exist?

No. It bought another department store. One that had already been through bankruptcy.

The logic, presumably, was that two irrelevant retailers are better than one. That if you can’t beat the direct-to-consumer trend, you should at least be a bigger loser. It’s the corporate equivalent of responding to a sinking ship by lashing yourself to another sinking ship.

The subsequent disaster was predictable. To service the debt from the acquisition, Saks squeezed its vendors, demanding longer payment terms. Vendors, understandably miffed about not getting paid, started withholding inventory. Shelves went bare. Customers – the actual people whose money keeps retailers alive – walked into Saks, found nothing to buy, and walked out again.

I had an old French boss who ran one of the great luxury brands. She would always tell me that you did not need a PhD to work out which brands were in trouble, “just look through the windows”. There is no way to hide demand problems in retail. Whenever I visited Saks the silent, empty floors were deafening. Morose sales associates picked their nails and sighed. Impending doom was palpable on every floor.

Fairly lonely: Inside Saks Fifth Avenue in 2025 (New York Walker)

Saks didn’t fail because it had debt. It had debt because it pursued a strategy that required massive capital outlays while generating declining returns. The debt was a bet that the merger would work. The merger didn’t work because the underlying category was in decline and both brand propositions broken.

“Rich people are still buying,” a Morningstar analyst observed drily. “Just not so much at Saks.”

Consider the contrast with Bergdorf Goodman, which Saks also owns. Bergdorf’s has a reason to exist. It’s a New York institution with genuine cultural cachet. It offers a curated, rarified experience you genuinely cannot get elsewhere. Saks tried to sell a minority stake in Bergdorf’s to raise cash, which tells you everything about both brand’s relative value.

When your customers go to Bergdorfs because your shelves are empty because you can’t pay your vendors because you took on debt to buy a competitor who was already bankrupt once … that’s not a financial problem. That’s a positioning problem. Saks forgot what business it was in. Hint: it wasn’t ‘acquiring other department stores.’

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The lesson here extends well beyond luxury retail. Every industry has its version of the Saks fallacy: the belief that operational scale can substitute for brand relevance. We have Mosaic Brands here in Australia, for example, to tell the same tale with a little less glitz and 5th Avenue glamour. You cannot merge your way to success when the fundamental customer proposition is eroding beneath your feet.

Customers don’t care about synergies. They don’t care about debt covenants. They care about whether you offer them something valuable, something distinctive, something worth showing up for. And if you don’t, they’ll find someone who does. The market, as always, is brutally efficient. And the retail business is incredibly febrile. Huge stock inventories and relatively small margins mean every store is only ever a few quarters from catastrophe.

Saks had 159 years of brand equity. It had flagship stores in the best locations on earth. It had relationships with every luxury house that matters. And it squandered all of it chasing a financial thesis that ignored the only question that matters in retail: why should anyone shop here?

In the end, the answer was they shouldn’t. So they didn’t.

Joan Rivers once planned to scatter her husband’s ashes at Neiman Marcus so she’d “visit him every day.” Rivers and her husband are gone. And there’s every chance Neiman’s and Saks will join them. Bankruptcy doesn’t always mean the end. But the golden era of the American department store? It’s doors are closing.

Mark Ritson is a former marketing professor, brand consultant and award-winning columnist. He is also the founder of the MiniMBA in Marketing which kicks off on April 7th and invites you, yes you, to join him (www.minimba.com).