A new strategy outlined by management of Nordstrom JWN is both encouraging and realistic. Taking 2019 sales and earnings as a base (when sales were $15.1 Billion and net income was $496 Million), the company aims to have a +12.5% sales increase and hit total revenues of $17 Billion in fiscal 2021.
Many initiatives are part of the drive for higher revenues and higher customer loyalty. Chief among them is a drive to focus on the digital customer who expects personalization through better service. 50% of the revenues are anticipated from customers making digital purchases. That is a powerful commitment, and management expects those sales will be from both Nordstrom store and Nordstrom Rack store customers. One can assume that management sees customer ongoing reluctance to shop in stores during the coming year and has realistically planned a strong digital presence in response.
The Rack store assortment and price points will be broadened so that The Rack can capture a broader range of customers. That is important since The Rack has not been competitive with off-price companies like T.J.Maxx, Burlington Stores, or Ross Stores ROST . Yet, management has indicated that they expect The Rack to contribute $2 Billion in incremental dollars over the long term. I can see The Rack becoming a dominant digital off-price retailer. Many of those other off-price retailers have shied away from becoming a dominant factor on-line so this is can be a real competitive advantage for Nordstrom.
In order to focus on its mission, The Rack’s management is closing HauteLook. It had originally acquired HauteLook to bring the concept of flash sales to Rack stores. Limited assortments of clothing and accessories sold quickly (if the deal was hot). HauteLook was acquired in 2011 for about $270 Million. It was the blueprint for others to follow and suffer. A notable copycat was Saks Fifth Avenue. It purchased the Gilt Groupe in 2016 only to close the business in 2019.
Erik Nordstrom, CEO, said “at the heart of our business transformation is the recognition that the unique combination of the Nordstrom and the Nordstrom Rack brands, along with our combined physical and digital expertise, create a powerful opportunity to get closer to the customer than ever before.”
MORE FROM FORBES ADVISORMaybe it is the other way around, Mr. Erik. I think that the customer can get closer to Nordstrom fashion and accessories (and, of course, shoes) by Nordstrom making its product lines more accessible. Nordstrom management recognizes what the customer wants and how she wants to shop. The emphasis is on the Nordstrom brand; after all, it has a powerful recognition and trust, and I think the customers will respond.
A new market approach has been evolving since the New York flagship store was opened in late 2019. The market here has two Local stores and several Rack stores to support the Nordstrom brand. The stores work together, and on-line and off-line operations do not compete with each other but rather support each other in the customer’s favor. The idea of such a blended approach seen in New York City has now been replicated in 10 markets. Those additional markets include San Francisco, Dallas, Chicago, Washington D.C./Baltimore, Philadelphia, Boston, and Toronto. In 2021, the company will add 10 more markets including Portland, San Diego, Minneapolis, Denver, Houston, Austin, Miami, West Palm Beach, Atlanta, and Detroit. Surprisingly, Seattle, Wash. is not in the list even though it is the home of the company. Maybe next year.
The 10 cities now operating under the new market approach concept account for about 50% of total revenues. The 10 store markets that will be added this year are expected to add another 25% of revenues.
I think Nordstrom’s approach will reach more people. Through digital or direct selling, the company will reach new customers and achieve planned growth. I hope there will be no further disruptions by the pandemic caused by COVID-19. The customer has always been first for Nordstrom’s management and I think will remain loyal as these changes are taking place.