Reimagining Retail: Nordstrom
On a recent trip to Seattle, my luggage was lost and I found myself without anything to wear except for the clothes on my back. I urgently needed a suit for a business meeting and decided Nordstrom was the best place to start given I was in the retailer’s hometown.
After making my way to the downtown flagship store, I discovered that Nordstrom’s suit selection did not fit my build and ended up at Suitsupply, where the in-store experience won me over. Suitsupply had a variety of ‘European’ fitting styles with on-the-fly alterations, allowing me to walk out of their store wearing my new suit.
Nordstrom’s mission statement is, “to provide outstanding service every day, one customer at a time.” But after my experience, I found myself asking, “What is outstanding service and how can a department store like Nordstrom deliver it in today’s retail environment?”
Below are four key strategies Nordstrom should take to heart, in order to be known as the outstanding customer service leader, one with a customer experience that shoppers will yearn for.
Open the door to new business models
Over the past decade, new retail business concepts such as single-brand e-commerce, subscription services, showroom ecommerce stores, and even Amazon, have further redefined the definition of outstanding retail service. These companies offer experiences for customers that shake up normalcy: free shipping and returns, click and collect and customized marketing, for example.
E-commerce has also given birth to new distribution and engagement models. Most retailers have chosen one of two options: either become an all-in-one destination, or offer a highly focused, high-quality differentiated experience to consumers. Whichever they choose, department store retailers like Nordstrom need to urgently reinvent their role in the distribution value chain.
Expand beyond traditional online sales
By investing in its best-in-class mobile app and buying Trunk Club, Nordstrom has adapted to online transformations better than most of its peers. However, Nordstrom underestimates the limits of its time-honored sales model and remains locked in a traditional retail mindset.
In early 2016, Nordstrom CFO justified reducing online inventory as a means to cut increased costs. Choice is a key component of customer satisfaction but for Nordstrom, owning the full breadth of inventory customers seemed too expensive. Nordstrom prides itself on outstanding service but in order to do so in today’s retail world, they and others must provide the endless aisle shoppers have come to expect in e-commerce.
Change the approach to digital floor space
Department store buyers have always acted as curators, but now more than ever, they must loosen their reigns on curation to not restrict customers’ choices. For example, while Nordstrom’s merchandisers must retain the role of curator for in-store products, they must adopt the role of conductor for online products, quickly getting new and innovative products into their customers’ hands.
Digital floor space is virtually unlimited, but owning inventory is not a scalable option. Some retailers have begun to incorporate dropship, but must look further at more scalable, cost-effective options such as online marketplaces.
Adopt a platform model
In their prime, department stores were destinations where customers went not simply to buy goods, but also to experience products and receive advice. But in the digital era where the customer is in control, these stores cannot solely provide the myriad of products and services that today’s customers expect. This can only happen through online partnerships with trendsetter brands and service providers. By becoming an online platform for all actors of fashion connect, department stores can fulfill these expectations without major investments.
With a platform model, instead of being constrained by scalability issues, Nordstrom realizes their ‘assisted commerce’ goals at scale. This model allows them to crowd source recommendations and sourcing of products, collect valuable data on its customers, and inform buyers and private line development.
In 2014, Erik Nordstrom, president of Nordstrom Direct, stated that through the Trunk Club acquisition, the company wanted to “… evolve with customers by finding more ways to deliver a great shopping experience.” Nordstrom and other department store retailers can still do this. By redefining customer expectations, opening the door to new business models, expanding beyond traditional online sale and changing the approach to digital floor space using a platform model, these stores can provide a great shopping experience across channels and remain relevant now and for future generations.
Adrien Nussenbaum, U.S. CEO and co-founder, Mirakl.
Commentary: Is a Target, Walmart Price War About to Break Out?
In light of Target shares dropping 15% after their latest earnings announcement, Target CEO Brian Cornell said executives would be detailing moves for greater pricing aggressiveness and increased merchandise differentiation, both tactics that Target has been known for historically. Cornell’s pricing reference led to speculation about a price war with Walmart, which many experts surmise Target simply can’t win. Speculation aside, is a price war poised to erupt between these two mega-retailers?
To start, let’s review why Target would need to become more price competitive to keep up with Walmart, which has been enjoying a recent run of strong revenue reports and stock performance. Their success can be largely attributed to two major developments in their omnichannel growth strategy: the acquisition of Jet.com and an uptick in online grocery performance.
The acquisition of Jet, and more recently, Modcloth, has given Walmart a tremendous boost in its ability to reach online customers and ramp up its assortment to establish an essentially endless shelf. By doing so, they can compete very aggressively in certain areas on price, reinforcing the perception of price leadership, while also enhancing their reputation as a one-stop shopping destination.
Walmart’s dedication to growing their grocery business – online and in-store – has also been integral to their success, with the company now generating over 50% of all U.S. sales from this one category. To win more grocery shoppers and drive repeat store traffic, it’s reported that Walmart has gone back to their suppliers once again seeking deeper cost cuts to keep retail prices low. While grocery margins are typically thin, Walmart knows these same shoppers, once in the store, are more likely to buy higher-margin goods from other departments boosting basket sized and overall profitability.
In general, Walmart’s grocery strategy appears to be aimed at the likes of global discount supermarket chains like Aldi and not more traditional competitors like Target. However, the effect on Target’s business is evident. Target’s grocery foray has been lackluster to date with this category contributing only roughly 20% of revenue. So to compete more closely with Walmart, as well as Aldi and now Amazon, pundits are speculating whether Target should go all-in on lower prices.
Unfortunately, engaging Walmart in a pricing war would be a losing battle for Target. The retailer should return to their legacy ability to compete with exclusive and affordable 'fresh' product offerings coupled with engaging shopping experiences.
What many commentators have missed is the key second part of Cornell’s statement, about differentiated assortments, because that’s already such a key part of Target’s strategy. But it’s one that works – and it keeps Target from engaging in an all-out race to the bottom in pricing and fits their brand persona of slightly higher-tier retail than Walmart.
Retail is facing a tipping point where the divide between the “haves” and “have-nots” is growing wider. Retailers know they won’t be able to match Walmart or Amazon dollar for dollar on every product. What they can do, and must do, instead is find and reinforce their identities as providers of the goods and experiences that differentiate them from the competition. Target is well positioned to take a leadership position in this area, and we’re looking forward to seeing how they balance price and assortment to regain their competitive edge.
Jenn Markey is VP marketing of 360 pi, providing market development expertise to support the company’s focus on enterprise retailers and brands.
Another win for retailers from Supreme Court
Retailers may soon have a voice when it comes to disclosing surcharges related to card payments.
The U.S. Supreme Court ruled on Wednesday, March 29, that First Amendment free speech rights should be considered when determining how merchants disclose to their shoppers that credit card swipe fees can drive up the price of merchandise.
A long-standing law in New York state — as well as those in nine other states — implied that retailers may not advertise or disclose that credit or debit card purchases were subject to a 2% to 3% surcharge.
Justices concluded that this “surcharge ban” — which was often support-ed by the credit card industry — violates “free speech” and retailers’ First Amendment rights.
“Today’s ruling is a clear stand in favor of the free speech protections of the First Amendment,” the National Retail Federation’s senior VP and General Counsel Mallory Duncan said. “The nation’s highest court has recognized that whether a merchant chooses to communicate credit card fees through a surcharge or through a cash discount is a matter of speech.”
Based on the decision, retailers now can better convey how these fees drive up the price of merchandise by billions of dollars a year, according to the NRF.
“Most retailers have no desire to surcharge their customers for using cred-it cards,” Duncan said. “That would be the opposite of our industry’s goal of bringing credit card swipe fees under control. But merchants do want to be able to show customers the cost of using a credit card without running afoul of the law.”