Consumers like shopping at Nordstrom online and picking up their orders in stores. Online order pickup accounted for more than half of full-price digital sales growth in the fourth quarter, Nordstrom reported this week during its fiscal Q4 and full-year earnings ended Feb. 1.
The retail chain, No. 18 in the 2019 Digital Commerce 360 Top 500, says digital sales grew 9% and represented 35% of sales in the quarter. For the 2019 fiscal year ended Feb. 1, digital sales grew 7% and represented 33% of sales.
Total sales for the fourth quarter ended Feb. 1 reached $4.439 billion, up 1.3% from $4.383 billion a year earlier. That means digital sales for Q4 totaled $1.55 billion. For the full fiscal year, total sales reached $15.132 billion, down 2.2% from $15.480 billion. That means digital sales totaled $5.0 billion for the year.
Digital investments pay off at Nordstorm
Digital sales are online sales and digitally assisted store sales, which include online order pickup, ship to store and style board, a digital selling tool where personal stylists in stores create a style board for a shopper filled with handpicked recommendations and send it to her mobile phone.
“Our established and growing digital business now makes up one-third of sales,” said CEO Erik Nordstrom, according to an earnings call transcript obtained from Seeking Alpha. “Roughly 30% of our customers are shopping across more than one of these touch points. And as a result of this engagement, we know these customers spend four to 11 times more on average.”
In the fourth quarter, order pickup sales grew more than 100%, Nordstrom said. “We get a lot of customer engagement in our stores from online customers, particularly with returns,” Erik Nordstrom added. “We like the convenience [of consumers being able to] bring returns into stores.”
During the quarter, Nordstrom also launched a dedicated ecommerce site in Canada to help facilitate more integrated shopping across stores and online.
Nordstrom shutters Trunk Club stores
The department store also said that it is folding Trunk Club into Nordstrom full-line stores and Nordstrom.com to “create a cohesive styling offering across Nordstrom and to gain efficiencies.”
Nordstrom bought the men’s fashion try-on service for $350 million in 2014. With the integration into Nordstrom, Trunk Club’s six stores are closing.
“With Trunk Club folding into Nordstrom, there’s an opportunity for the brand to bring Trunk Club services in-store, making it even easier for existing Nordy Club members to get personalized styling—which originally required a trip to a Trunk Club location or an online consultation,” says Tom Caporaso CEO of Clarus Commerce, a vendor that helps retailers design and launch loyalty programs. Nordy Club is Nordstrom’s loyalty program. “While thousands of shoppers have already enrolled in Nordstrom’s loyalty program for exclusive workshops and curbside pickup, in-store consultations could be a huge differentiator from subscription boxes and online services, especially for customers who prefer seeing apparel in person.”
While Nordstrom’s loyalty program provides free enrollment for immediate rewards, the retailer could use styling services to introduce a premium tier to the program, providing more personalized clothing options for a comparable cost of Trunk Club’s monthly memberships, he says.
22% of shoppers are willing to pay for premium services like Trunk Club as an exclusive in-store experience, according to data from Clarus Commerce. “This could be a silver lining for Nordstrom as it continues to fight in the uphill department store battle,” Caporaso says.
However, according to Digital Commerce 360 data, there still seems to be a market for subscription apparel retailers. Among the Top 1000, collective growth for all apparel retailers was 17.2% in 2018, while collective growth for the eight pure apparel subscription retailers ranked in the Top 1000 was 24.0%.
Erik Nordstrom also mentioned the new coronavirus, COVID-19, and its potential impact on Nordstrom’s supply chain on the retailer’s earnings call.
“We’re monitoring this flu situation closely, with the well-being of our customers and employees as the top priority,” he said. “We have a team focused on monitoring, planning for, and responding to any potential impacts the virus may cause to our business. Our private label business makes up around 10% of sales, with less than 30% sourced from China. We are communicating with our vendors and brand partners as it relates to merchandise deliveries. We’re looking at this on a case-by-case basis and planning accordingly.”
Nordstrom also reported:
- Net income of $193 million for fiscal Q4, down 22.2% compared with $248 million during the same period in fiscal 2018.
- Net income of $496 million for fiscal 2019, down 12.1% compared with $564 million for fiscal 2018.
- For its full-price business, net sales increased 1.0% year over year in fiscal Q4. In off-price, including Nordstrom Rack and Last Chance clearance stores, net sales increased 1.8%.
- For its full-price business, net sales fell 3.5% year over year in fiscal 2019. In off-price, including Nordstrom Rack and Last Chance clearance stores, net sales increased 0.2%.
- Half of store sales involve an online interaction at some point during the shopping journey.