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Two decades of online doesn't guarantee the necessary omni-channel balance for Nordstrom

Stuart Lauchlan Profile picture for user slauchlan November 18, 2018
Nordstrom reckons that two decades of online presence is validation of its digital investment and progress, but the omni-channel alignment is still elusive.

Nordstrom bag
While the struggles for ‘legacy’ retailers to get their omni-channel acts in gear has been a popular theme in recent years, it’s useful to remind ourselves that there are those who took steps to put at least the building blocks in place quite some time ago.

A case in point is US retail institution Nordstrom which last month marked the 20th anniversary of its online presence. Clearly the functionality of two decades ago was more promotional than transactional, but from that early stake in a digital presence, there’s been a lot of progress, as CEO Blake Nordstrom is keen to point out as the Holiday season kicks off this week.

Our early investments in our digital capabilities are paying off. The combination of our digital capabilities and local market assets have enabled us to be at the forefront of serving customers on their terms…this business has grown to roughly 2.5 million visitors per day, ranking among the top 10 e-commerce retailers in the United States. Year-to-date, overall digital sales grew 20% and made a 30% of our business.

Not that everything online has gone Nordstrom’s way. Last month also saw the CEO having to apologise to employees for a data breach that exposed personal information, including names, Social Security numbers, dates of birth, bank details and salaries. It was attributed to actions on the part of a contractor and didn’t involve customer data, but following breaches at Macy’s and Hudson’s Bay earlier this year, retailers are understandably twitchy about the impact on brand of the words ‘data’ and ‘breach’ in any context!

But for Nordstrom himself, the emphasis is inevitably on bigging-up the digital transformation work that’s going on to create a better omni-channel customer experience. This includes a new feature called Get It Fast, which does what it says on the tin - enables customers to enter zip codes onto the website or the mobile app and get access to a real-time inventory of stock that can be delivered or picked up the next day.

This was launched last month in Los Angeles, which remains Nordstrom’s biggest local market, and has delivered impressive initial results, reckons Nordstrom:

Since the launch, we have seen a 50% lift in buy online and pickup in store. This is a great example of how we’re leveraging our digital and physical capabilities to increase convenience for our customers. Enabled by our supply chain investments, we have potential to increase selection by four times to seven times for product available, same or next day in a given market.

The supply-chain aspect of such an offering is of course essential and to that end, the firm is opening a new fulfilment center and a local omni-channel hub next year to support demand. Nordstrom explains:

These facilities should increase inventory efficiencies. And more importantly, they should significantly improve the customer experience by getting product to them faster. Nordstrom Local, which are small neighborhood hubs provide customers with more convenient access to our services.

He adds:

[Fulfilment] is such a key component of our strategy and the ability to take care of the customer. So fulfilment years ago was done in bulk and just from a store point of view and now it’s about reaches and it’s about anywhere the customer wants to be able to buy [goods] or return [goods].

Our fulfilment centers outside of our distribution centers are based on the Midwest and the East Coast. We do a lot of business on the West Coast and specifically Southern California. So we were challenged in terms of our delivery times to be able to service those customers. We’ve made a significant investment for a local omni-hub there and two facilities to be able to not only take care of fulfilment, the store’s Full-Price and Off-Price, but to be able to service the customer that we’re aspiring to do to our Nordstrom Local efforts on which we are embarking in LA. So a key component of being able to execute Nordstrom Local is improving the supply chain and we’ve certainly made a significant investment along those lines and that hopefully will bear fruit over the next 24 months.

Happy Holidays?

But for now it’s all about Thanksgiving, Black Friday, Cyber-Monday et al and the need to keep on top of demand and deliver a good customer experience. The pieces are in place, insists Nordstrom:

We’ve worked hard to take the friction out for the customer experience and we want to be a destination for gift giving and that requires having the right product and being in stock and having that inventory where the demand is for the customer. So our merchandising team is really taken to heart both last year and previous years Holidays results and have made some adjustments to it.

We think we’re in a good position there. But again, we also tried to convey that inventory management is important. We’ve managed inventories well throughout the year. We don’t want that signal to be mixed because we fully intend to continue to have our inventories in line.

Beyond logistics, it’s also all about tapping into the Nordstrom name and reputation in a febrile retail competitive environment. Again, digitally-enabled initiatives around loyalty and customer retention come into play as Nordstrom observes:

We’re also leveraging the Nordstrom brand to drive increased customer engagement. We know that when customers engage with us across various touch points, both their trips and spend increase. Our robust loyalty program gives us the opportunity to serve customers in a more personalized way. We have more than 11 million loyalty customers contributing 56% of year-to-date sales, an increase of roughly 15% over last year.

Last month, we launched The Nordy Club, an evolution of our loyalty program that offers enhanced services and experiences and a faster earn rate for credit card members. While it’s still early, we’re encouraged by the uptick in enrolment trends. We look forward to building on the connections our customers have with our brand through The Nordy Club.

He adds:

Loyalty is marketing, and we’ve worked hard over the years to have a personalized approach with our customers and to improve that relationship and bond. We’ve had various programs over the years to enhance the loyalty experience. The Nordy Club [is] just another step along those lines. We’ve only got about 30 days under our belt, but we’re getting some really positive feedback. We see that through just the adoption in the Nordstrom app. It’s up considerably. We now have the ability to get the rewards or points back to the customer quicker. We’re able to communicate closer with the customer. We had four levels before; now we have five. We’re able to, again, in a more personalized way, support our most loyal customers.

In conclusion, it’s a case of ‘bring on the Holidays’ from Nordstrom:

We’re focused on establishing Nordstrom as the gift-giving destination and making it more convenient to shop. We’re well positioned to improve the customer experience and believe our combination of digital capabilities and local market assets, our people, product and place, make us uniquely positioned for success in the market.

My take

Time will tell how Nordstrom fares over the coming weeks of retail madness of course, but the retailer can take some credit for its pragmatic expansion of its digital endeavors. It’s a different story when it comes to its traditional store footprint, where traffic continues to fall. Like so many others, Nordstrom talks up the idea of the ‘store of the future’, but to date that’s had little impact. It’s never been the ‘sexiest’ of retail brands and there’s a danger of being seen to be ‘dad dancing’ if there’s too much focus on trying to expand too far from its core demographic. But clearly there’s still a lot of work to be done to strike that elusive omni-channel balance, even if you can point to two decades of online activity in some form or another.

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