Saks Global and Authentic Brands are looking to diversify their partnership into retail, hospitality and events as they seek to exert more control over the luxury market, Authentic Brands CEO Jamie Salter and Saks Global Executive Chairman Richard Baker said at World Retail Congress this morning.

Speaking in the opening session in London, the duo said that they believed the partnership could drive higher margins, wrest control of luxury away from vendors and towards retail and leverage the brand strength of Saks to form global partnerships.

“We wanted to get into the luxury space but it’s all about distribution,” said Salter. “When we look at brands, what is really important with us is that they can make the right margin. If you look at the business model today, margin is everything. Getting together with Saks was critical for us. If you are not making low to high 60s in the maintained margin it’s very difficult.”

Authentic Luxury Group is a 50/50 joint venture between Authentic Brands and Saks Global and Salter stressed that for the retailer it meant it gained revenue via sales of merchandise plus 50% of the rent received as he likened the deal to another partnership Authentic had entered into with mall landlord giants Simon and Brookfield in terms of a royalties and rents model.

“The model truly works. But we’re not just in retail, we’re also in hospitality business, we’ll see Saks branded residences going out, which also means people will buy home products for those. We already have projects on the go, and have people in the Middle East and Asia Pacific looking at doing a Saks store, a condo and a hotel,” he said.

Baker said that the combined businesses under the Saks umbrella accounted for 60% of premium sales in the US and said that the acquisitions to create the new group came after long negotiations with “an industry that was getting weaker and weaker and finally capitulated”.

Saks has launched a walled garden on Amazon and is building out sites for Japan, China, the UK and Middle East.

“When we sit here in five years luxury is going to be natural on Amazon,” he insisted. “We needed to bring the department stores together for efficiency, with $600 million of synergies achieved. We also had to right size our vendor matrix, because we had 2,660 vendors and we had to reset vendor relationships.”

Baker said that without making big decisions “there would be no industry left in the US” and said that Saks expects to edit 500-600 brands out, with a shift towards “controlled brands”, with a larger margin, aiming at circa 20% of sales from these product ranges.

Salter added that combining customer bases would also help propel the business.

“Data is critical, that tells us what brands are working and what brands are not working, which gives us such an edge in the competition. Let’s dig into the data,” he said. “We believe we will be able to take this all over the world and find partners. In luxury the power has been at the vendor level and we need to shift it towards the retail level.”