Nordstrom needs "digital velocity" to be sustained. Can an ASOS 'love-in' provide the spark?

Profile picture for user slauchlan By Stuart Lauchlan August 25, 2021 Audio mode
Digital velocity is the goal so there's a lot riding on Nordstrom's relationship with ASOS.


Mixed fortunes at Nordstrom this week as the US retailer talked up a one percent rise in sales from its annual Anniversary Sale from its pre-pandemic level. Good news perhaps, although if that’s the comparison on offer, then the bad news is a 6% drop in quarterly earnings over the same period.

While other US retailers have been talking up the ‘return to the store’ momentum, that was less on show with Nordstrom as CEO Erik Nordstrom spoke about:

Customers are increasingly engaging with us both in-store and online, as evidenced by continuing improvements in our store traffic and sales, along with robust digital growth. Our loyalty program remains a powerful engagement driver, with loyalty club members contributing 70% of our Q2 sales, up 500 basis points from 2019.

But it’s the Anniversary that he really wanted to focus on:

Our Anniversary performance was an encouraging example of our evolution of our merchandising capabilities. By leveraging a more data-driven approach along with our evolving partnership models with our vendors, we were able to increase event selection by 12% and reduce the rate of items sold out by 35% versus 2019, while at the same time maintaining a comparable sell-through, and finishing with a healthy position in owned inventory as we exited the event.

We are encouraged by the customer response to Anniversary, with record volumes on and continued improvements in store traffic. Customers also leveraged the convenience of our integrated touchpoints, with order pickup in stores increasing 52% during the event, compared to 2019. Our merchandising and supply chain teams, along with our brand partners, executed well, ensuring that we had the right assortment in the right place at the right time to serve demand.

All told, he concluded:

There are also lessons from the Anniversary, both how we engage customers digitally and connecting them to our physical assets, as well as having a more data driven approach to our inventory mix that showed great results during Anniversary. And certainly, we will continue that through the back half of the year.

Digital drive

There will also be more focus to come on “digital velocity” across the Nordstrom range of brands. For Q2, digital sales increased 30% over last year and 24% over the second quarter of 2019. Nordstrom said:

We continued to drive growth at and even as store traffic improved, a testament to the power of our interconnected digital and physical assets. We also completed the integration of onto the platform, delivering a more seamless shopping experience and improved reliability, while positioning us for more profitable growth as we continue to scale our business.

The firm has also taken another strategic step forward by acquiring a minority interest in four brands owned by UK online-pureplay ASOS - Topshop, Topman, Miss Selfridge, and HIIT.  Working with ASOS is something that will clearly be a major priority for the second half of the year, as Chief Brand Officer Peter Nordstrom confirmed:

It's definitely a real highlight of last quarter, and it represents a wonderful opportunity for us. ASOS is a great retailer, and they're real leaders in the digital space with young fashion customers. They got a strong point of view. They're really interesting, and exciting people to work with, and we were thrilled when they took the lead on making the investment with Topshop. They were a big customer of Topshop as were we, so we have mutual interest in having that go well.

It seemed as we were in discussions with them about that, that the mutual opportunity was great, and it was an opportunistic situation for us to be able to take an equity stake of that and invest alongside with them, which I think really helps demonstrate that we both have skin in the game, which creates a lot of focus and energy about what we could do. The reason that it was worth investing for us is, while it was a big business, we also think there was a lot of upside.

And then the frosting on the cake for us with that is ASOS also has a stable of brands that we now have access to potentially and are working with [CEO] Nick [Beighton] and the team there to see how we might be able to bring some of those products to market here in North America through Nordstrom. There is just a lot of wonderful things about that.

Depending on how successful this relationship is in practice, it might well influence other alliances moving forward. Nordstrom (p) would only say:

We'll be opportunistic about those types of things in the future if the potential is there. I think we should read into this that there's a lot of potential, it's exciting and as things develop and when we make decisions about what we are doing together and that results about that, we will certainly inform you about it.

My take

Not a disaster by any means, but hardly a blazing indicator of any kind of ‘return to normal’ retail environment. I suspect a lot is going to hang on the lessons Nordstrom can learn from ASOS as it tries to build out an omni-future in the Vaccine Economy. That’s something diginomica will be tracking closely.