Deeper Dive On…Nordstrom
Nordstrom Inc. has become the first retailer to launch the Like2Buy platform, which allows Nordstrom.com customers to directly purchase items featured on the retailer’s Instagram page. The commerce-enablement of visually oriented social platforms, such as Instagram, Pinterest and Vine, is an inevitable development as social media becomes more focused on photos and videos and less on text. The preference most Millennials have for visually oriented social media reinforces the value that commerce enabling these platforms has for retailers.
However, Nordstrom’s Like2Buy rollout has a couple of interesting wrinkles. As previously covered in “Deeper Dive,” both Facebook and Twitter are tinkering with their own direct e-commerce functionality, while to date Instagram can only be directly enabled for e-commerce via third-party solution. But considering Instagram is owned by Facebook, it is presumably a matter of time before this changes.
In addition, it is interesting that a retailer targeting an older, more established base such as Nordstrom is pioneering Instagram e-commerce, as opposed to a more youth-oriented retailer. But Nordstrom has also been in pioneer in tying Pinterest to the in-store shopping experience, so perhaps it is indicative of a broader willingness to innovate in the social/omnichannel space.
An offer Family Dollar can’t refuse
The Family Dollar board is under new pressure to walk away from a deal with Dollar Tree after Dollar General further increased an already more generous counter offer.
Early Monday Dollar General increased its all cash offer to $80 a share from $78.50 a share and increased the number of stores it said it would be willing to divest to 1,500 from 700. The company also said it would be willing to pay Family Dollar a $500 million reverse break-up if the deal failed to secure antitrust clearance.
Family Dollar already has an acquisition deal in place with Dollar Tree for $74.50 a share, consisting of $59.60 in cash and $14.90 in Dollar Tree shares. While Dollar General’s initial proposal was richer and all cash, concerns surfaced that regulatory approval could be an issue even though Dollar General indicated it would divest up to 700 locations.
“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s board of directors to reject our prior proposal without any discussions between our companies,” said Rick Dreiling, Dollar General’s chairman and CEO. “Even as a secondary antitrust review supported our previous proposal, we revised our offer to demonstrate the seriousness of our commitment. Our revised proposal provides Family Dollar shareholders with significantly increased value over the existing agreement with Dollar Tree, as well as immediate and certain liquidity for their shares. If the Family Dollar Board fails to seize this opportunity to maximize value for its shareholders, we will consider taking our superior proposal directly to the Family Dollar shareholders.”
Dollar General believed its earlier 700 store divestiture commitment would have been sufficient to clear any review by the Federal Trade Commission and suggested those analyzing the deal on behalf of Family Dollar are using a flawed methodology.
“Perhaps Family Dollar’s advisors are analyzing this transaction as if it were a potential grocery store merger or utilizing data that tells a story much different than Dollar General's documents and data,” according to a Dollar General statement. “Dollar General is confident that this matter would not be evaluated as a traditional grocery store merger and that, as the acquirer, Dollar General’s documents and data would be more important to the FTC in its analysis than those of Family Dollar.”
Those documents indicate that Dollar General is more concerned about competition from Walmart than Family Dollar and it makes pricing decisions accordingly.
In a letter to the Family Dollar board, Dreiling expressed disappointment that the Dollar General’s earlier bid was rejected without any conversations but said the company was committed to the deal. The company took the added measure of engaging Richard Feinstein of Boies, Schiller & Flexner to independently review the company’s earlier antitrust analysis. Feinstein led the FTCS Bureau of Competition until 2013 and determined the deal can be completed on the company’s initial terms.
“We look forward to the time when our companies and their advisors are able to discuss these matters more openly with one another once you have taken the appropriate steps under your existing merger agreement to allow that to happen,” Dreiling said. “Only by engaging with us can you ensure that you have fulfilled your duty to your shareholders to be well-informed and that you have acted in the best interests of your shareholders to maximize the value of their shares.”
Books-A-Million makes online move
Amazon and Barnes & Noble still pose an enormous threat, but things may be looking up for Books-A-Million where losses are declining and the company just hired an e-commerce veteran.
Books-A-Million said revenue for its second quarter ended August 2 declined 0.5% to $108.3 million, same store sales increased 0.1% and it lost $3 million, or 21 cents a share. The loss was significantly less worse than a prior year loss of $9.1 million, or 62 cents a share.
“In our (Books-A-Million) retail stores, the continued improvement in our core book business was a key driver of our performance. The teen and children’s book business was particularly strong, led by the positive impact of media, particularly movie related tie-ins such as John Green’s Fault In Our Stars, and Disney’s Frozen,” said Books-A-Million president and CEO Terrance Finley. “In addition we had a broad group of merchandise categories showing stronger results for the quarter. These included bargain books, general merchandise including gifts and toys, media, and our cafes.”
In a noteworthy development prior to the release of second quarter results, Books-A-Million said it hired James Phelps to serve as vp of e-commerce. In that role he will be responsible for executing the vision, branding, merchandising and marketing strategy for Booksamillion.com. Phelps has held a variety of e-commerce roles during the past 15 years with retailers such as HSN, Kohl’s and Brookstone.
“We are pleased to welcome James to Books-A-Million, and look forward to him bringing his expertise to our team as we continue to build our digital business,” said Cy Fenton, Books-A-Million’s CIO and president of Booksamillion.com.
Phelps said his focus would be to create synergy between the online and in-store shopping experience and give customers compelling reasons to make Booksamillion.com their primary destination for the best selection of books, toys, tech and other products.