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How Can Nordstrom Stand Out With Its Online Marketplace?
With a focus on curated offerings, expanded assortments, and personalized recommendations, Nordstrom launched a third-party online marketplace with the aim of being the “Spotify of Fashion.”
In a press release, Miguel Almeida, Nordstrom’s president of digital and customer experience, said Nordstrom’s marketplace utilizes an “unowned inventory model” that will enable the upscale retailer to accomplish three aims:
- Expand its existing assortment by offering the “full expression” of popular brands, including greater size inclusivity.
- Serve customers across a broader set of occasions, offering new and relevant brands.
- Accelerating the expansion of assortment to support young customers.
Nordstrom plans to expand its online assortment by two to three times over the next few years while maintaining an online focus on curation, customer-centricity, and service. Almeida said, “Our goal isn’t to be the everything store, but to offer customers more breadth, depth and newness in the categories that they come to us for, from some of the most coveted brands in the market.”
Nordstrom’s buying team selects the marketplace’s participants. Among the new brands participating at launch are AdoreMe, Cynthia Rowley, Derek Lam 10 Crosby, Dia & Co, Dippin’ Daisy’s, DXL, Maison de Sabre, Mulberry, Natori, and Tracksmith.
Nordstrom joins a number of other fashion retailers launching curated marketplaces, including Macy’s, Bloomingdale’s, Saks, Hudson’s Bay, and Urban Outfitters.
Under the marketplace model, retailers earn less money on each item purchased since products are listed, not owned, and sold on commission. The tradeoff is their websites are able to offer more products without the expense of holding additional inventory or markdown risk. CEO Erik Nordstrom said on the retailer’s recent fourth-quarter analyst call, “Expanding our assortment through unowned inventory has the potential to drive GMV growth in addition to providing compelling economics.”
Vendors manage the merchandise content, pricing, and shipping, while Nordstrom determines how products are presented on the site.
One difference compared to many other marketplaces is that Nordstrom handles customer care directly, including communications with customers. Marketplace buyers can also return items to stores, earn loyalty incentives, and access perks such as styling and alterations. Almeida said, “The trust of our customers and our legacy of service is what we stand for, and it is important that we maintain the same level of service.”
With the marketplace’s enlarged product pool, Nordstrom is aiming to create a more personalized digital experience, with past customer engagement driving brand recommendations and the delivery of relevant inspirational trend and styling content.
Almeida told WWD, “Our vision is to become the Spotify of fashion, and that means receiving signals from customers on what they want from us and showing them our expanding extended assortment in a way that is unique to them.”
Digital sales represented 36% of Nordstrom’s total sales in 2023.
Discussion Questions
How should Nordstrom be looking to differentiate and create buzz around its online marketplace?
What’s your overall take on the upsides and downsides of curated marketplaces from niche chains?
Poll
Loading …BrainTrust
Liza Amlani
Principal and Founder, Retail Strategy Group
Anil Patel
Founder & CEO, HotWax Commerce
A marketplace is a cost-effective way of expanding choice without too much expense, capital outlay, or inventory risk. That said, the whole world and his wife have jumped on the marketplace trend, and it is not that much of a differentiator anymore. What consumers really want is curated assortments that are meaningful to them. This is where Nordstrom’s marketplace could be different as it has indicated that it will be very careful in what brands it partners with. If it uses the marketplace to bring interesting new brands to the fore and really focused on things that are enticing to its customer base, then it could be a winning strategy.
Nordstrom appeals to a certain market that owns almost a unique spot in consumer-appeal. Nordstrom is not as premium priced as Nieman Marcus or Saks, but it’s on a more premium level than Macy’s, Dillard’s, Kohl’s, JCP, etc.
With that in mind, Nordstrom has exactly the right image for being a trusted, but mostly affordable, authority on style for the everyday person, but particularly a style and quality conscious upper middle income consumer. This is a position not taken lightly as it serves a tremendous advantage. If Nordstrom carries this brand it must be right for me.
If they truly live up to greater size inclusion, expanded assortment, and in-seasonality, the buzz for Nordstrom will occur quite efficiently from social media influence, targeted social ads, and word of mouth. Consumers like to talk about Nordstrom.
Overall, if Nordstrom carries out their intentions with full commitment this will be a winning strategy to expand their business model without changing their brand image, and that’s a good thing. – Db
While this is certainly something Nordstrom should do – if for no other reason than the (ominous) fact that so many others have already – I’m not brimming with enthusiasm: N was largely known for its service, and while the site will try to replicate that, it’s hard to do online; plus the obvious fact that online makes it quite easy to buy from those third party sites directly.
Nordstrom could differentiate its marketplace customer experience by integrating its in-store and online offerings through a buyback program. Here’s how it would work: Customers could return items they’ve bought and only worn once to a Nordstrom store in good condition, and receive a partial refund or store credit. This initiative would not only draw customers back into stores—where they might make additional purchases—but also allow Nordstrom to list these gently used items at a discount on their online marketplace. This strategy benefits Nordstrom by increasing in-store traffic and online inventory, while providing customers the assurance that they can invest in special occasion outfits without the long-term commitment, knowing they have the option to return them for credit.
As noted in the discussion, other retailers are opening marketplaces. Most that I have seen are brand-dilutive. Nordstrom seems to be taking this on as a brand enhancer. As we have seen over the years, many retailers are not good at appreciating and protecting their brands. In order to be successful with one’s customers, a company must mean something in the shoppers’ minds. Nordstrom seems to be on target.
If this was 2010, this might be a bigger story, and I’d be far more optimistic about the strategy’s success. In 2024, this feels more like a bit of a Hail Mary. Nothing in the strategy is particularly new or innovative; lots of companies and other e-tailers have already built marketplaces and channels for expanded assortments and new products. It feels like the differentiation here is the Nordstrom brand. I’m not sure the brand has enough capital in the digital space to really attract customers who aren’t already fans of Nordstrom.
To win at the marketplace model, Nordstrom has to set itself apart from other retailers with the same strategy. More supply will not equal more demand.
Curation will need to drive the merchandising strategy versus quantity and it will depend on what the Nordstrom customer wants. Insight and closing the customer feedback will be critical in the success of the marketplace.
Nordstrom is late to the marketplace model. To best differentiate, they should take a lesson from the earlier days of Henri Bendel where they dedicated a department to new and upcoming designers. Using a marketplace for pure merchandise expansion is not enough, Nordstrom needs to create a portfolio of less attainable brands that fit within the brand’s promise.
In my opinion, Nordstrom can differentiate its online marketplace by emphasizing exclusive collaborations with brands and offering unique, limited-edition products. Creating buzz through influencer partnerships and social media campaigns can also drive excitement. As for curated marketplaces from niche chains, the upside lies in offering a diverse range of products without the burden of inventory costs. However, there’s a risk of potential limitations in selection and competition with larger, more established marketplaces. Overall, curated marketplaces can provide opportunities for niche chains to expand their reach and cater to specific customer preferences, but they must carefully balance selection with demand.
Nordstrom has a reputation. My question is if the online experience will match what Nordstrom is known for, which is quality merchandise with a return policy that helped make Nordstrom one of the most consumer-friendly places to shop on the planet. The key will be for the third-party marketplace “partners” to honor the Nordstrom experience. From what’s indicated in the article, customers can take any merchandise bought through the marketplace and return it to Nordstrom as if it were a normal purchase from Nordstrom’s own inventory. That’s keeping with the Nordstrom reputation that its customers are used to.
For Nordstrom to remain relevant in the competitive retail world, it must continue to think bigger, wider, and innovatively. This is an example of how to do just that.
Nordstrom can set its online marketplace apart by curating exclusive brands, creating a sense of excitement with sought-after products not easily found elsewhere. Additionally, by leveraging data-driven personalization, Nordstrom can offer a tailored shopping experience, ensuring customers feel valued and understood. These strategies, combined with exceptional customer service, should generate buzz through word-of-mouth and encourage repeat business.
Curated marketplaces offers the opportunity to expand the assortment, cater to specific customer preferences, and differentiate itself in the market. However, managing inventory, maintaining quality control, and ensuring a seamless customer experience pose challenges.
Everyone is doing this or some form of a curated marketplace in order to compete online. At the end of the day, positioning itself as a unique online retailer, offering a unique online experience, really reflects which products are offered, and at which prices. None of this will be successful without meeting the online free freight, free returns, and easy drop-off locations to complete their customer’s online experience. Only time will tell how successful Nordstrom is going to be.
If Nordstrom finds a way to couple their storied customer service with a highly curated marketplace selection, there may be a greater impact than just another marketplace offering. Closing the loop beyond just a greater selection and better SEO will be the key to see if they can outperform their peers.
This is an exciting development for Nordstrom. Launching a marketplace is already helping them to create valuable buzz that’s differentiating them from their key competitors. With this, they’re expanding brand lines and carefully selecting pieces that align with their brand, which helps create more brand integrity and excites their existing consumer base.
To offer customers more breadth, depth and newness in the categories that they come to retailers for, from some of the most coveted brands in the market, Nordstrom will not only need to differentiate itself through the product catalog they curate, but also the overall shopping experience they provide. Their plans to handle all customer care directly and offer loyalty perks and incentives is a good start, but won’t help them cross into the realm of success.
To stand out with this new endeavor, Nordstrom will need to provide a quality, seamless shopping experience. Search personalization can really help here, delivering personalized results for brands, categories, styles, etc. that the customers already know they like. With an expanded product catalog and the risk of providing an endless aisle experience, Nordstrom will need to engage with next-gen, AI-first product discovery technology to ensure customers are receiving hyper-personalized search results that fit their needs, intent and historical purchasing habits.