15 September 2021
The Weekly
United States

Founded in 1901, Nordstrom has ever been evolving and pioneering its retail business journey. In its forward-looking design, there are three main strategic avenues put in place:

Deepening Engagement

Nordstrom has always been customer-centric and sees its Nordstrom and Nordstrom Rack brands and digital expertise as opportunities for deepening engagement. The company’s “Closer to You” agenda calls for widening the aperture, meaning a massive expansion of the digital assortment from 300,000 items to potentially 1.5 million within three to five years; injecting lower price offerings into the Nordstrom Rack off-price matrix to gain share from less expensive off-pricers such as T.J. Maxx, Ross Stores and Burlington Stores, and finessing the three-year-old market strategy, which revolves around linking Nordstrom full-line department stores, Rack off-price stores, Nordstrom Local locations and a variety of services, in different ways to deepen customer engagements, such as through BOPIS, ship from stores and faster deliveries.

Nordstrom’s market strategy is fundamental to sustaining the company’s large and loyal customer base, service reputation, and recapturing what it had for so many years — an edge on the competition. “Buy online, pick up in stores is one of the fastest growing parts of the company’s business,” said Jamie Nordstrom, President of the Department Store Division. “Having a big selection of merchandise ready for next-day pickup at local stores, using all the inventory available in that market, be it from local stores or from online, requires a lot of people to make that work.” Thanks to the market strategy, in each of Nordstrom’s top 20 markets, four times more inventory is available for next-day pickup of a nordstrom.com order at the most convenient, Nordstrom, Nordstrom Rack or Nordstrom Local store. “We have nearly 350 physical locations to supplement our digital capabilities,” said Jamie. “In the Los Angeles market alone, we have 16 stores with inventory available for next-day pickup at the store. A lot of people for whatever reason don’t want merchandise delivered where they live. They actually prefer picking it up.”

Last July, Nordstrom revealed that it had acquired a minority interest in the Topshop, Topman, Miss Selfridge and HIIT brands owned by Asos. The transaction reflects Nordstrom’s efforts to bolster its appeal to younger shoppers. For decades, the retailer’s image was rooted in catering to more traditional and mature audiences, though in the past decade Nordstrom has made several initiatives to achieve a greater balance in the business, including staging pop-ups and collaborations with emerging and advanced designers, notably the Dover Street Market Incubator Brands, as well as establishing a wholesale relationship with Madewell. Nordstrom said the company’s e-commerce operation is “moving to more of a hybrid commerce model,” though it wouldn’t be accurate to consider it a marketplace model, at least at this point in time. It’s generally believed that retailers make more money by selling an item in a store rather than online where there’s rising fulfilment and delivery costs.

But at Nordstrom, “It’s parity, profit-wise. We’ve been there for a few years now,” said Erik Nordstrom, CEO. He also said that sellers online don’t get commission, whereas store sales associates do, and that Nordstrom fulfils many of its online orders from stores, which makes deliveries faster and less expensive. “We absolutely do not care whether we make a store sale or a digital sale. A big part of our strategy is valuing engagement — not the sale in that visit. If we do a great job making a return in a store faster, or making an order pickup faster, customers don’t necessarily buy on that trip, but they come back and become a customer in that store, even if they never visited that store before,” said Erik.

“Heritage brands can have a lot of meaning”, said Pete Nordstrom, President & Chief Brand Officer, “but it’s because they evolved to something else. That’s the lesson for us: We’re proud of our legacy. We’re proud of the reputation it affords us. Yet we’re really humbled by the fact that if we don’t continue to evolve and stay curious and nimble, we could be the generation of Nordstroms that screw it up. We’re interested in the long-term view and setting up our company for success for another 120 years.”

Modernizing its Beauty Strategy

Hoping to be a one-stop shop for its customers, Nordstrom has expanded its services offering in recent years. Last month it unveiled body treatments from Cowshed, injectables by Dr. Dennis Gross and facials by HydraFacial at its New York flagship. There were over 30,000 appointments in the beauty department alone during Nordstrom’s anniversary sale.  Driving discovery of new products is also essential. In August, Nordstrom inaugurated the Centre Stage discovery hub in its New York flagship with a partnership with Valentino Beauty. Key categories the retailer is eyeing follow broader industry trends, such as wellness, sustainability and inclusive beauty. Devices across hair and face have also become more indispensable to Nordstrom’s offering, Lionello said, as well as collection fragrances. Color cosmetics are back on the upswing for the retailer. To meet customers’ growing consciousness, Nordstrom signed the 15 % Pledge earlier this year. The Black-owned brands that were launched in beauty are being received well by customers. Brands like Uoma Beauty, Briogeo, Bomba Curls or BeautyStat. Last year, Nordstrom also introduced its partnership with TerraCycle called BeautyCycle, which aims to recycle 100 tons of beauty packaging by 2025.

Inside Nordstrom 3.0: Discovery, Connection and Personalization

In addition to acquiring technology companies like BevyUp, maker of digital sales tools — primarily style boards — and MessageYes, which developed an artificial intelligence-powered personalized product recommendations engine, Nordstrom built out a responsive analytics platform capable of churning out deeper insights and predictions. The system can work for different ends of the business, whether personalized experiences for customers or optimized processes in the back end — from inventory control to fulfilment and order routing. By the company’s count, it leverages more than 100 AI models a day. Nordstrom Analytical Platform treats the business as a single entity, not a collection of disjointed channels. With access to a greater amount and variety of data, NAP can paint a fuller picture of customers and weigh the store’s bevy of product and inventory information across its own brands and those of partners.

The end results are more personalized experiences and more predictive discovery, all in real time. For Nordstrom’s latest annual Anniversary Sale, it created personalized digital catalogues for hundreds of thousands of its best customers. Stories, merchandising and brand teams came together with data and AI to offer a blend of personalized content and product recommendations. More than half of Nordstrom’s business came from e-commerce last year. (Extract WWD 13/9/2021)