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In Third Physical-Digital Split This Year, HBC Divides Hudson’s Bay Into Online and In-Store Businesses

Hudson's Bay
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HBC will separate Hudson’s Bay into distinct brick-and-mortar and ecommerce businesses in an effort to accelerate the brand’s digital-first transformation. The new operating model will help each organization focus on their biggest growth opportunities while still working together to provide a seamless customer experience across both channels.

Going forward, the ecommerce business will become “The Bay,” while the banner’s 86 stores will continue operating as Hudson’s Bay. The Bay, which will be led by President and CEO Iain Nairn, will be responsible for overall brand direction, marketing, buying, planning and technology for both businesses. Wayne Drummond will lead Hudson‘s Bay as President.

The Bay kicked off its initial ecommerce expansion in April 2021 with the launch of the Hudson’s Bay Marketplace. The retailer has since introduced more than 1,500 new or expanded brands and more than 25,000 new products on the site. Hudson’s Bay stores continue to play a role in the ecommerce ecosystem by providing customers with a place to handle returns and exchanges, as well as by accepting Hudson’s Bay Rewards and Hudson’s Bay credit cards across both channels.

“Establishing e-commerce and stores as distinct businesses is a pivotal next step in the future of Hudson’s Bay,” said Richard Baker, Governor, Executive Chairman and CEO of HBC in a statement. “With the launch of Marketplace on thebay.com earlier this year, Hudson’s Bay set in motion a rapid expansion of its ecommerce business to gain significant market share and become the country’s largest premium hybrid online shopping experience. To date, digital performance and onboarding of new sellers has dramatically exceeded expectations.”

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Hudson’s Bay is actually the third retail banner HBC has divided in 2021 — both Saks Fifth Avenue and Saks OFF 5TH underwent a similar separation process. The Saks Fifth Avenue deal brought in investor Insight Partners, which made a $500 million minority equity investment in the newly minted ecommerce business, now called Saks.

Insight Partners also led a $200 million investment round for the newly spun-off Saks OFF 5TH ecommerce business, which retained its old name. The 105 Saks OFF 5TH stores are now controlled by O5, which is a wholly owned subsidiary of HBC.

Splitting up the ecommerce and brick-and-mortar operations makes sense for all three banners. The division will enable each ecommerce arm to focus on strategies aimed at ecommerce growth, which can be significantly different compared to what a brick-and-mortar retailer needs to succeed, without sacrificing omnichannel capabilities.

“There are multiple investment areas — customer experience, customer data, fulfillment spend — that tend to get prioritized more highly in digital-only businesses,” said Hilding Anderson, Head of Strategy, Retail, North America at Publicis Sapient in an interview with Retail TouchPoints. “It obviously reduces costs as well (by divesting physical assets), potentially enabling these companies to reach profitability more quickly.”

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