Omni-channel is about customers, not channels, at Nordstrom

August 14, 2015 By Stuart Lauchlan

SUMMARY: Nordstrom is building its omni-channel strategy with some success, but the emphasis is firmly on the online and offline customer experience.

We don’t think the customer is loyal to channels. We don’t hear customers talk about channels very much. Customers value experiences.

It’s an interesting point of view from James Nordstrom, President of Stores at US high-end brand fashion Nordstrom as it, in common with the rest of the retail sector, re-invents itself around the omni-channel customer.

With that in mind, the firm’s not doing too badly at all. While the company doesn’t want investors to get into a ‘by channel’ mindset, scrutiny of the firm’s second quarter numbers yesterday tells its own story:

• A $211 million profit on $3.7 billion in revenue.
• For the six months to end June, online sales for Nordstrom overall come to $1.34 billion.
• Sales at Nordstrom.com grew by 20% year-on-year.
• Nordstromrack.com and HauteLook each grew by 50%.
• Growth at Nordstrom’s bricks-and-mortar business – a mere 1%.

Blake W. Nordstrom, Co-President & Director, adds that the emphasis needs to be placed on differentiated experiences seamlessly delivered. In this mix, bricks-and-mortar and online need to work together:

Our customer is at the center of our strategy as we focus on creating a differentiated experience in each of our businesses. While we’ve been pursuing distinct strategies to grow each business, we’re also working to link them together to provide our customers with a seamless experience. This is important because we know that when customers engage with us across multiple touch points, their lifetime value and spend increase significantly.

We are focused on further integrating our businesses through service and experience, product, and capability. Our recent initiatives around stores and mobile, along with our Trunk Club acquisition, are ways to create a more relevant experience with our customer.

What this means is ongoing investment in opening new offline stores, he adds:

We consider full-line stores to be the core of our brand, providing our customers with a high level of service they expect from us. Not only are we serving more customers through new stores, we are benefiting from synergies across our channels.

For example, when we opened in Calgary and Ottawa, we saw a meaningful increase in online sales in those markets. With two stores open to-date, our Canada business is performing ahead of plan. Next month, we will open our Vancouver flagship store with an elevated service offering. We plan to open three stores in Toronto over the next couple of years and introduce Racks in the fall of 2017.

These stores act as an introduction to the wider Nordstrom omnichannel offering. The example of the Nordstrom Rack brand is a case in point:

The Rack business now represents our biggest source of new customers, attracting around four million in 2014. The Rack also serves as an entry point to the Nordstrom brand providing opportunities for customers to cross-shop. For example, last year, we had one million Rack customers start to shop at our full-line stores or nordstrom.com for the first time.

Synergies

It’s all about what Nordstrom refers to as shared synergies across channels:

From a merchandising perspective, we’re also focused on integrating our business to provide our customers with a differentiated offering. This is enabled by our vendor partnerships, where we can offer a one-stop-shop for distribution across channels and categories.

Through these partnerships, we’ve been able to better serve customers by complementing our curation in store with breadth online. For the past several years, we’ve expanded online selection by over 20% annually through key brands that are resonating with customers. These brands also help us create excitement and attract new customers.

While there’s a reluctance to drill down on individual channels, Nordstrom is keen to play up the firm’s investment in mobile:

Mobile is an important enabler of convenience as customers increasingly desire a more seamless shopping experience. Of the U.S. population, two-thirds own a smartphone and roughly one-half shops on their device, presenting a meaningful opportunity for us with over 90% of our customers using smartphones.

To evolve with our customers’ rapidly changing expectations, we’re rolling out new features at a rate three-times faster than last year. In addition to our ongoing mobile enhancements, we launched a unique text-to-buy feature for our salespeople, enabling customers to buy product via text.

As customers continue to want a more integrated shopping experience, we view mobile as a long-term priority to provide a richer experience for our customers.

All of which brings us back to James Nordstrom’s argument:

We’ve been focused for a number of years on really trying to create a seamless experience for our customers, whether they’re shopping online or in the store or on their phone, and we’ve made, and we continue to make progress on that. We don’t think the customer is loyal to channels. We don’t hear customers talk about channels very much. Customers value experiences, and so the more successful we’re at in creating a great shopping experience, no matter how they’re choosing to shop, I think the better our business will be. And so we’re talking about mobile and the things we’re doing there.

The sale can happen all over the place. They might be shopping in a store and buying on their phone. The customer doesn’t care where the sale gets recorded. They just want the best stuff and they want to have the best experience on their terms. And so the more we’re focused on that and less on the channel, I think the better our business will be.

My take

A pragmatic stance on the omni-channel experience that other retailers would do well to emulate.