Business model

Understanding Nordstrom’s New Mindset: Business Model Diversification

Pete Nordstrom, president and chief brand officer at Nordstrom, said the luxury retailer’s embrace of non-traditional types of retail partnerships, marked by collaborations with Asos and Fanatics, came in part to follow “the endless aisle” online, but also as part of a more open mindset around the terms of sale.

Mr Nordstrom, speaking during a session at the NRF Big Show, recalled when previous generations of his family wondered why the store was selling a ‘competitor’ like Brooks Brothers.

“The thing is, customers don’t see it that way,” Nordstrom said. “Customers look at it like, ‘I like this brand.'”

Business model diversification is a major growth driver for retail, including retailers forging partnerships with each other and wholesale brands opening stores,” commented Carol Spieckerman, president of Spieckerman Retail. RetailWire Last week.

Nordstrom cited Madewell, which started selling inside Nordstrom in 2015, as an example. “One of the common things we heard from customers who just signed off on the idea was, ‘Wow, now I can buy my favorite brand at my favorite store,’” he said.

The growth of e-commerce has also opened up opportunities for expansion. Customers can find a full range of a brand’s offerings online, but have minimal or no inventory in-store due to space constraints. At the start of 2021, Nordstrom predicted that its online assortments could potentially grow 20 times more than those offered in its stores, up from three currently, as it looks at drop-shipments, concessions and revenue-sharing deals. .

Such alternative arrangements must be “win-win” for both parties, according to Nordstrom.

Lots on the RetailWire BrainTrust saw the wisdom in this strategy when they discussed the moves in an online chat last week.

“As more (DTC) brands emerge, traditional retailers will benefit from developing partnerships,” wrote Patricia Vekich Waldron, CEO of Vision First. “It makes no sense not to expand offerings and give shoppers easy access to new, in-demand items, as long as they support the overall brand vision.”

“Smart retailers recognize that they can no longer win by being stand-alone brands,” wrote Melissa Minkow, director of retail strategy at CI&T. “Collaborative partnerships like this empower consumers to shop the way they want – it’s the present and the future of retail.”

In its online-only partnership with Nordstrom, Fanatics fulfills and ships all orders and owns the inventory to reduce risk to the department store retailer. In the Asos arrangement, the UK-based online retailer retains operational and creative control, but the two companies share ownership to ensure collaboration.

Nordstrom has many partnerships with DTC brands that also want to be complementary.

“The perfect scenario for us is to have a well-known, highly sought-after brand that you can’t find in a lot of places,” Nordstrom said. “I don’t think we’re good at publicizing an unknown brand. But we are good at making a known brand bigger and better.

Entering these partnerships with a clear idea of ​​the value the partner brand brings to customers was, for BrainTrust, what differentiated the strategy.

“I especially appreciate that Nordstrom doesn’t choose to partner with anyone, they work strategically with brands that fit perfectly with their own,” Ms. Minkow wrote. “As retailers move closer to a marketplace-like operation, consumers want and deserve a consistent experience regardless of the items they purchase. Taking a careful approach to choosing and working with partners will allow for this consistency. »

“Nordstrom will reap the benefits of brand partnerships outside of the traditional wholesaler/retailer relationship, as they constantly learn what their customers want,” wrote Liza Amlani, director at Retail Strategy Group. “Aligning with brands that have a point of difference is part of Nordstrom’s merchandising strategy and that’s what I’m here for.”

And a BrainTrust member noted that Nordstrom’s numerical positioning was another element making the strategy work.

“With over 50% of sales online, Nordstrom definitely has more options to play with in 2022 when it comes to wooing and retaining digital native brands and retailers,” wrote Brian Cluster, Director industrial strategy, CPG & retail at Stibo Systems. “With Nordstrom’s understanding of its customers and its ability to attract high-end/affluent customers, they have an edge over other retailers in attracting fashionable brands that want to explore new partnerships.”