The Wall Street Journal has a story about how Nordstrom, seeking to avoid the mistakes of its department store brethren, “invested heavily in e-commerce, didn’t open too many cavernous stores and has been quick to experiment with new types of shopping formats, including stores that don’t carry any clothes.” And, it continues to be the gold standard in terms of customer service.
But it hasn’t seemed to matter: Nordstrom is “suffering the same fate as department stores that innovated less, with year-over-year sales and profits expected to fall for the second consecutive quarter when it reports results on Wednesday.”
The story notes that Amazon’s moves have appeared to be savvy. An excerpt:
“Although slow to jump into e-commerce—only about 6% of its sales were digital a decade ago, according to a former employee—Nordstrom moved aggressively.
“It bought the flash-sale website HauteLook in 2011, and Trunk Club, an online clothing subscription service, in 2014. It rolled out new services that melded e-commerce and physical stores, such as same-day shipping for online orders that pulled items from local stores in select markets. And it changed its compensation to reward employees not just for sales they make at a store, but also for online sales in the surrounding market.
“In 2013, before many retailers fully understood the threat of Amazon.com Inc. and other digital newcomers, Nordstrom posted signs in its corporate offices that urged employees to think like a startup. It poached dozens of employees from Amazon, whose Seattle headquarters is six blocks away from Nordstrom’s. Today, e-commerce accounts for nearly a third of the company’s $15.9 billion in annual sales, far higher than most of its rivals.”
But … “the investments haven’t always paid off. In 2016, Nordstrom wrote down the value of Trunk Club by more than half of the $350 million purchase price.”
The Journal writes that there seems to be a growing feeling that Nordstrom may need to find an outside CEO who can look at the business with fresh eyes. Nordstrom has only had one outside CEO in its history, and currently is “run jointly by Pete and Erik Nordstrom, who share the title of co-president. A third brother, Blake, who was also a co-president, died unexpectedly in January, after disclosing he had been diagnosed with cancer.”
This form of consensus management, the story suggests, “may not be ideal in a world that is changing rapidly.”
But it hasn’t seemed to matter: Nordstrom is “suffering the same fate as department stores that innovated less, with year-over-year sales and profits expected to fall for the second consecutive quarter when it reports results on Wednesday.”
The story notes that Amazon’s moves have appeared to be savvy. An excerpt:
“Although slow to jump into e-commerce—only about 6% of its sales were digital a decade ago, according to a former employee—Nordstrom moved aggressively.
“It bought the flash-sale website HauteLook in 2011, and Trunk Club, an online clothing subscription service, in 2014. It rolled out new services that melded e-commerce and physical stores, such as same-day shipping for online orders that pulled items from local stores in select markets. And it changed its compensation to reward employees not just for sales they make at a store, but also for online sales in the surrounding market.
“In 2013, before many retailers fully understood the threat of Amazon.com Inc. and other digital newcomers, Nordstrom posted signs in its corporate offices that urged employees to think like a startup. It poached dozens of employees from Amazon, whose Seattle headquarters is six blocks away from Nordstrom’s. Today, e-commerce accounts for nearly a third of the company’s $15.9 billion in annual sales, far higher than most of its rivals.”
But … “the investments haven’t always paid off. In 2016, Nordstrom wrote down the value of Trunk Club by more than half of the $350 million purchase price.”
The Journal writes that there seems to be a growing feeling that Nordstrom may need to find an outside CEO who can look at the business with fresh eyes. Nordstrom has only had one outside CEO in its history, and currently is “run jointly by Pete and Erik Nordstrom, who share the title of co-president. A third brother, Blake, who was also a co-president, died unexpectedly in January, after disclosing he had been diagnosed with cancer.”
This form of consensus management, the story suggests, “may not be ideal in a world that is changing rapidly.”
- KC's View:
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There is a new Nordstrom being built in a new mall going up in Norwalk, Connecticut, not far from where I live. And I always have had this sense of foreboding when I pass it … a sense that while it probably will have a strong opening, it may not take long to turn into a mausoleum. I suspect that Nordstrom might’ve been better off opening a Nordstrom Local store in Greenwich and/or Westport.
It also is worth pointing out that Nordstrom, while being judicious about its store openings, also has chosen this point in time to open an enormous outpost in New York City, a place it has avoided until now. It could work … but it is a big risk.
Look, sometimes you can do all the right things and it doesn’t work out because market forces simply are against you. Those may indeed be the times when you look for a fresh perspective.
That’s what LL Bean did when it hired Steve Smith to be the first outsider to serve as CEO. And it seems to have worked out well, as he’s been able to guide the company through a time of transformation. That may be the kind of move Nordstrom needs to consider.
