With online sales accounting for more than 20% of its business, Nordstrom Inc. is investing heavily in technology to drive revenue across all channels.
Nordstrom, No. 18 in the Internet Retailer 2016 Top 500 Guide, reported combined online sales across Nordstrom.com, NordstromRack.com and HauteLook of $661 million in the first quarter of 2016, up 10.7% from $597 million last year. Online sales account for 20.7% of the upscale retail chain’s Q1 sales, compared to 19.2% in the same quarter last year.
Fueling that growth was a sharp spike in web business for Nordstrom Rack and HauteLook, both of which make up the retail chain’s off-price business. Nordstrom reported combined online sales for those brands of $166 million, up 41.9% from $117 million last year. Nordstrom posted a 4.6% year-over-year comparable sales gain in its off-price business including in-store and online, a figure that isn’t going unnoticed by senior management.
“Nordstrom Rack represents an important channel for us to serve more customers and increase cross-shopping,” co-president Blake Nordstrom told analysts on Nordstrom’s earnings call, according to a transcript from Seeking Alpha. “Last year, 5 million new customers shopped at the Rack. This is meaningful because over one-third of our Rack customers will over time also shop in our full-price business.”
While off-price sales grew sharply online, sales through its full-price e-commerce site, Nordstrom.com were more subdued. Nordstrom reported sales through Nordstrom.com of $495 million, up 3.1% from $480 million last year.
Co-president Erik Nordstrom told analysts that the conversion rate on the site is up year over year, but he declined to specify how much. He blames aggressive discounting by online competitors for the modest year-over-year sales growth at Nordstrom.com.
“Where we’re seeing a big miss is in our clearance and promotional business,” he said. “What we take away from that is the clearance and promotional environment is really noisy. There’s a lot of excess product out in the marketplace. There’s some heavy, heavy discounting going on and we’re seeing that effect in our business.”
Blake Nordstrom told analysts the retailer is dedicating two-thirds of its technology spending in 2016 to improving its technology platform and better synchronizing how the retailer serves consumers as they shop both online and offline.
“The e-commerce element continues to grow at a good pace and the impact of technology in digital on the customer experience continues to accelerate,” chief financial officer Michael Koppel told analysts. “That would imply our commitment to technology and fulfillment and the things that continue to support that business is going to be something we’re going to stay very strong on.”
As part of its omnichannel push, Nordstrom recently expanded its curbside pickup program, which it began testing in 20 stores a year ago and has since expanded to all its 118 full-line Nordstrom stores, rolling out the service throughout the past year.
“We’re making big improvements in things like the buy online, pick up in store experience, things that we’re doing online that flow into the store and vice versa,” executive vice president James Nordstrom said.
- Net sales of $3.192 billion, up 2.5% from $3.115 billion last year.
- A comparable sales decline, including online and bricks and mortar, of 1.7% year-over-year.
- Net earnings of $46 million, down 64.1% from $128 million last year.