Discount Strategy Analysis on Saks.com and Saks Off5th.com
In the late 1980’s, the off-price store concept started to gain more and more popularity in the retail industry. OP retailers provide merchandise at discounted price, as the products they sell are usually coming from the pass-seasoned or overstocked inventory from a regular department store or the brand. The low whole-sale buying price from the venders ensures a lower sale price to vast customers for the OP business mode.
Saks Fifth Ave is one of the largest and most famous luxury department store chain in the United States. In 1990, Saks decided to join the OP retail market, opened its own off-price store Saks Off 5th and made it a parallel off-price store chain. Saks Off 5th was running under Saks as a subsidiary until 2013, when they were both acquired by the Hudson Bay Company, and became two independently run sibling companies under the group.
When the two companies are sharing the same brand, they are potentially attracting a similar customer group. Even though the off-price store offers discounted merchandise, the routinely on-going sale cycle on Saks.com may cause competition between the two. Nonetheless, when people are shopping online more often, it becomes an intriguing question that how the two differentiate their online presence.
This python web scrap project hope to provide some insights for answering the question. In particular, the research will be focus on two major aspects: 1) Do the two retailers’ websites carry the same brands? 2) Do the discount mark differently on the two sites?
The data was collected on Saks.com and Off5th.com on 10/27/2020 and 10/29/2020. At the time, there is a regular end of sale going on at Saks.com. Products from three categories were included in the collection: Dresses from Women’s department, Dress shirts and Casual shirts from Men’s department. 8 columns were scraped from the websites:
'website': where the data is from. Values include: 'Saks', 'Off5th'
'brand_name': the brand name of the product
'product_name': the name of the product
'category': the category of the product, values include: 'dresses', 'casual-button-down-shirts', 'dress-shirts'
'department': the department of the product, values include: 'men', 'women', 'women-apparel'
'original_price': product original price, float
'discount_price': product after discount price, float
'discount_amount': marked percentage off (not available on saks.com), float
The data was scraped by Selenium. In the end, there were 4003 rows of data collected from Saks.com, after removing 11 rows that failed to extract the original price data, 3989 rows were used in the analysis. 5111 rows of data were collected from Off5th.com, all included in the analysis.
Three additional columns are added in the data set to assist the analysis.
All brands showed up on the two websites are coded into three separate types based on the brand average price point on Saks.com, they are:
Trendy: Brand average price point below 25th percentile. (i.e. BB Dakota, Kappa, Sam Edelman)
Contemporary: Brand average price point between 25 and 75th percentile. (i.e. BOSS, Theory, Rebecca Minkoff)
Luxury: Brand average price point above 75th percentile. (i.e. Burberry, Prada, Dolce & Gabbana)
Exclusive: The brand only exists on Saks.com or Off5th.com.
Shared: The brand exists on both sites.
Private: The brand is created by Saks company.
Non-Private: The brand is owned by a independent company.
Overall, the price distribution of the clothing products on the two websites are very different. The average original price and discount price per item on Saks.com is $815.8 USD and $343.4 USD, comparing to $530.5 and $171.7 USD on Off5th.com.
More importantly, each website covers a price range that is absent on the counterpart. Off5th holds a group of lower price range items (priced from $0 to $30) that are missing on Saks.com, and Saks.com has an inventory of items priced from $2000 to $3500 which are also not seen on Off5th.com.
*X-axis was shortened. Price range end around $3500 on Saks.com.
Brands that are exclusive to Off5th have higher proportion of trendy brands, while Saks has high proportion of luxury brands. The biggest category is Contemporary on both sites, however the second and third place are reversed.
As a result of different brand assortment, the price range for the exclusive brand products on the two sites are drastically different. The discount price, which is the price customer pays to get the product, at lowest 25th percentile on Saks.com, is actually at the upper whisker of the discount price on Off5th.com. People who are shopping $200 clothing item must be in every way different from people who shop $60 items. The two websites are using different merchandise to attract very different customer groups.
Saks company has posted 8 private brand information online, they are: Cashmere Saks Fifth Avenue, Saks Fifth Avenue, Saks Fifth Avenue BLACK, Saks Fifth Avenue Collection, Saks Fifth Avenue Made In Italy, Saks Fifth Avenue OFF 5TH, Saks Fifth Avenue Travel, Pure Navy. Except for one (Saks Fifth Avenue Collection), all the private label brands belong to Trendy category. Overall, Off5th has more private labels and items than on Saks.com.
Overall, the discount amount on Off5th.com is higher than that on Saks.com. However, the more interesting finding is about how the discount is taken: It turns out, discount on Saks.com is preset at certain levels, while discount on Off5th.com is arbitrary.
One possible explanation for this is the seasonality difference of the products on the two sites. Usually, retailers have a shared agenda with brands on when certain merchandise will be on sale, and how much discount they can take. In this case, retailers won’t have much flexibility in deciding the discount rate. However, for the long past season items on Off5th.com, the company has more autonomous in pricing.
As mentioned, there are many brands appear on both sites. This potentially indicates a competition relationship between the sibling companies themselves. Two sample t-test for discount amount of the exclusive and shared brands on Off5th.com returns a significant different, the shared brands on average have a higher discount rate. This might be resulting from the competition pressure.
- Overall, Off5th has a lower average selling price and a higher discount rate than Saks.com sale section
- The majority of brands on the two sites are the same but each has a proportion of exclusive brands, catering to a different customer group.
- On Off5th.com there are higher proportion of private label items.
- Discount is offered at a few preset levels on Saks.com, while on Off5th.com the discount is on a continuous spectrum.
- Discount rate of the brands carried by both sites is significantly higher than the exclusive brands on Off5th.com.
Most of the findings are not surprising under the off-price store business mode. The more important insight of this project is discovering that Saks company is trying to customer segments on two sites. Moreover, it seems that Saks is not very into the private label concept. Usually, big department stores try to cut cost in the middle links by selling products of their brands in the store, like Bloomingdale’s and Nordstrom. However, there is only a relatively small portion of product on Saks.com and Off5th.com are private label. With more time and resource, scraping the other two major competitors may provide more insights into the topic.