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While a number of retailers have struggled to make off-price retail work online, Nordstrom is breaking the mold. The company’s digital sales increased 6.2% YoY in Q2, and CEO Erik Nordstrom is attributing some of the gains to its off-price banner, Nordstrom Rack.
“The Rack banner’s digital business is a differentiator in off-price retail, enabling our customers to shop when and how they want,” Nordstrom told analysts in an earnings call on Tuesday. “We’ve built and refined industry-leading digital capabilities at NordstromRack.com, which delivered strong results in Q2.”
The difficulties of moving an off-price business online were apparent last week with the announcement of H&M’s decision to discontinue its digital fashion outlet, Afound, which sold marked-down items from major fashion brands.
Discounters HomeGoods and Burlington also shut down their online shops in recent years after determining they weren’t a good match for their business models. As Burlington CEO Michael O’Sullivan put it at the time, selling online wasn’t conducive to giving customers the “treasure hunt” experience they get from stores.
“There’s not many online off-price retailers out there,” Nordstrom said. “It works for us because it's part of our bigger ecosystem, and we see more opportunities there to leverage on the capabilities to engage with customers more and get a bigger share of their wallet.”
He pointed to “execution enhancements to search and discovery” as helping drive the boost in digital sales across both banners.
President Peter Nordstrom also mentioned that in Q2, the company invested in expanding its range of products to support Rack’s stores and digital channel. “Our increase in inventory exceeded our sales growth for the first time in several quarters,” he said.
“Our business is driven by newness,” Erik Nordstrom said. “Consistent inventory flow ensures we have the right product at the right time for our customers.”