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Upscale retailer Nordstrom seemingly presses all the right buttons, whether it relates to customer engagement, customer experience, or customer loyalty.
But Nordstrom co-president Blake Nordstrom talked about the brand’s evolution during the company’s recent first-quarter earnings call.
“Over the past decade, we’ve transitioned from being a predominantly mall-based store business to one that is more diversified, with multiple ways for customers to shop with us,” he explained. “During this time, we’ve invested in capabilities to better serve our customers and gain market share. This fueled our ecommerce growth, increased our customer base, and enabled us to expand into new markets.”
In keeping its customers at the forefront of everything it does, Nordstrom’s business looks very different today. Nearly 25 percent of its sales are from online purchases compared to roughly 5 percent from 10 years ago. It has added more ways to serve customers through acquisitions of Trunk Club and HauteLook.
What’s more, it continues to invest in critical talent and capabilities around technology, mobile, data analytics, and supply chain.
“We have strategically grown our off-price business, which represents roughly 30 percent of sales,” Nordstrom added. “It’s positioned as our largest source of new customers, with the average age skewing younger than our overall business. About one-third of customers who start shopping at the Rack will also cross-shop in our full-price business. We believe this is a unique competitive advantage in the market.”
Because their customers’ shopping experiences may be influenced by multiple touch points, Nordstrom officials believe it’s important to view the business from the perspective of the markets in which customers are served.
First-quarter sales increased 2.7 percent while comps fell less than 1 percent.
“We’re finding that measuring our outcomes through discrete channel metrics, such as store comps, are becoming less relevant,” Nordstrom explained. “As we continue to head in this direction, we’re increasingly looking at our business as full-price and off-price, inclusive of stores and online, to better capture the synergies of having a physical and digital presence.”
Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, told Loyalty360 that Nordstrom is one of those retailers that seemingly does everything right.
“It has sophisticated omnichannel shopping, smart ecommerce acquisitions, and a great customer experience,” Magliocca explained. “Yet, it’s still not seeing great results, which obviously forecasts badly for many other retailers that haven’t had great foresight. That being said, I’m very encouraged by the co-president’s candid comments on comp-store sales. The model is highly outdated and much of the ‘retail apocalypse’ conversation is falsely generated because the model is simply broken.”
Magliocca expanded on his opinion about comp-store sales.
“With comp-store sales, let’s say 25 percent of sales come from ecommerce,” he explained. “That number is probably conservative, but where were those 25 percent of sales coming from a year ago? The answer is stores. Every year stores lose market share to digital, it’s virtually impossible for stores to compete against the year prior. That’s not to say sales are dropping, they just aren’t happening in the same venue. Brands need to relook at their models and find a way to meld the old models with new digital initiatives. The good news is any new models will start with data. The bad news is it needs to have some sophistication, which many brands don’t have yet.”
Chirpify CEO Chris Teso told Loyalty360 that Nordstrom has done well to focus on the service excellence that helped build the brand, adjusting to meet service expectations of new and younger customers, including more focus on the digital presence.
“Similarly, we’d like to see Nordstrom’s loyalty program extend its inclusivity to embrace digital channels, promoting exclusive perks−like private shopping parties or early access to sales−to its loyalty members active on mobile and social media,” Teso explained.
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