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Any marketer that has a loyalty program wants it to perform well and represent a significant percentage of overall sales. For Nordstrom, its loyalty program is booming.
Michael G. Koppel, Nordstrom’s CFO and Executive Vice President, noted the loyalty program during the company’s Feb. 18 fourth-quarter earnings call.
“In addition, our loyalty program is an enabler of growth to help increase our engagement with customers and attract new customers,” Koppel said, according to Seeking Alpha. “With Rewards members representing 40% of our sales volume, we look forward to expanding our program with a tender-neutral offer in the second quarter. In evolving with our customers, we made significant investments to enable customers to shop in multiple ways.”
This resulted in market share gains, Koppel said.
“For example, ecommerce now represents over 20% of our sales, a notable increase from 8% five years ago,” he said. “This business model has a high variable cost structure driven by fulfillment and marketing costs in addition to ongoing technology investments. With our increased investments to gain market share along with the changing business model, expenses in recent years have grown faster than sales. In technology, we are planning productivity improvements by focusing on fewer, more meaningful projects, such as a scalable merchandising solution that supports seamless integration across multiple channels.”
Blake Nordstrom, co-President and Director, said the company added about $1 billion to its top line, delivering total sales growth of 8%.
“From a merchandising perspective, we’re always pursuing newness in fashion to increase our relevance with customers,” Nordstrom said. “For example, we continued our success with brands like Topshop, Madewell, Brandy Melville, and Charlotte Tilbury. These brand partnerships have contributed to the strength of our contemporary department and attracted new customers to Nordstrom. Additionally, we had continued momentum in Beauty, which has been among our top performing categories for the fourth straight year. Going forward, it is even more important for us to remain focused on the customer as our business continues to evolve.”
Nordstrom has made significant investments to enable customers to shop seamlessly across stores and online.
“While we're on track with our $20 billion sales ambition by 2020, our efforts to serve customers in multiple channels are having an impact to our business model,” Nordstrom explained. “In response to changes in our business and current conditions, we’ve started to implement a number of opportunities to improve profitability. From a CapEx perspective, we reduced our plan by $300 million over the next five years. From an earnings perspective, our expenses have grown faster than sales to support our multichannel growth. We are taking action to moderate our expense growth over the next several years. Specific to 2016, we have planned expense savings of $100 million relative to our plans a year ago. This equates to a reduction of $50 million relative to 2015. We are actively pursuing additional opportunities to improve profitability this year and in the years to come. We view this as fluid and iterative process as we stay focused on the customer and proactively ensure resources are aligned with customer expectations.”
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