NRF 2022: Nordstrom finds freedom in alternative wholesale pacts

Discussion
Nordstom’s collaborations with Fanatics and Asos - Photos: Nordstrom
Jan 20, 2022

Pete Nordstrom, president and chief brand officer at Nordstrom, said the luxury retailer’s adoption of non-traditional types of selling partnerships, marked by collaborations with Asos and Fanatics, came about partly to keep up with online’s “endless aisle,” but also as part of a more open mindset around selling arrangements. 

Mr. Nordstrom, speaking at a session at the NRF Big Show,  recalled the days when previous generations of his family would question why the store was selling a “competitor” like Brooks Brothers.

“The fact is, customers don’t look at it that way,” Mr. Nordstrom said. “Customers look at it like, ‘I like that brand.’”

He cited Madewell, which first began selling inside Nordstrom in 2015, as an example. “One of the common things we heard from customers that just validated the whole idea was, ‘Wow, now I can buy my favorite brand in my favorite store,’” he said.

E-commerce growth has also opened up expansion opportunities. Customers may find a full range of a brand’s offerings online, but minimal or no stocks in store due to space constraints. In early 2021, Nordstrom predicted its online assortments could potentially expand to 20 times that offered in its stores, up from three times currently, as it leans into drop shipments, concessions and revenue share deals.

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

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

Nordstrom has numerous partnerships with DTC brands likewise aimed to be complementary.

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

The retailer is also counting on personalization to deliver a curated experience to online browsers despite the broadening offerings. “It’s good to have lots of choice count, but it’s not good to have something overwhelming,” said Mr. Nordstrom.

DISCUSSION QUESTIONS: Do you see more benefits or risks to Nordstrom’s moves to secure brands through non-traditional wholesale arrangements? Do such flexible selling arrangements make much more sense today than 20 years ago?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Retailer partnerships with DTC brands is a model where I suspect we will see a lot of experimentation and subsequent success for all parties."
"As more (DTC) brands emerge traditional retailers will benefit by developing partnerships."
"Aligning with brands that have a point of difference is all part of the Nordstrom merchandising strategy and I am here for it."

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17 Comments on "NRF 2022: Nordstrom finds freedom in alternative wholesale pacts"


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Bob Phibbs
BrainTrust

He gave a great session and I appreciated his admonition. It used to be about how much they could sell, now it is how many units they can process. Their curation process is highly selective and I think this only shows the department store isn’t dead, it continues to do what it does best.

Melissa Minkow
BrainTrust

Smart retailers recognize that they can’t win by being standalone brands anymore. Collaborative partnerships like this allow consumers to shop the way they want to – this is the present and future of retail. I especially appreciate that Nordstrom isn’t choosing to just partner with anyone though, they are strategically working with brands that seamlessly fit in with theirs. As retailers get closer to operating like marketplaces, consumers want and deserve consistency of experience regardless of which items they’re buying. Taking a careful approach to choosing and working with partners will enable that consistency.

Carol Spieckerman
BrainTrust

Mr. Nordstrom’s honest assessment of Nordstrom’s brand-building strength is refreshing. Business model diversification is a top growth engine for retail, including retailers forging partnerships with one another and wholesale brands opening stores. At this point, there is nothing radical about Nordstrom’s alliances, yet its thoughtful approach to building out brand partnerships should pay off.

Liza Amlani
BrainTrust

Nordstrom will reap the benefits of brand partnerships outside the traditional wholesale/retailer relationship because they are constantly learning about what their customer wants.

Aligning with brands that have a point of difference is all part of the Nordstrom merchandising strategy and I am here for it.

Diversifying product assortment options and using data insights captured from partnerships/brands will also give Nordstrom a leg up in informing their own private label strategy. Fill in the gaps and delight the customer with product – this is what great retail is all about.

Jeff Sward
BrainTrust

The article says it — “win-win.” And I’ll add — “win.” Retailer, wholesaler and customer all win under this model. Nordstrom proves once again that it is highly customer-centric in its thinking. I don’t see “endless aisle” and “curation” as being part of the same thought process. I’m a huge fan of Nordstrom’s ability to curate and focus on what is important to customers today — now, not yesterday. And if that means adding new brands with new retail/wholesale models, so be it. Retailer partnerships with DTC brands is a model where I suspect we will see a lot of experimentation and subsequent success for all parties.

Neil Saunders
BrainTrust

For its full-price department store business, the biggest problem for Nordstrom right now is a messy assortment that lacks coherence and looks like someone has checked a load of stuff onto the shop floor. Part of this stems from supply chain issues and inventory arriving at the wrong time, but part of it is also because Nordstrom’s buying strategy has lost focus and discipline. There is nothing wrong with expanding wholesale partnerships, but the strategy of just adding more and more product isn’t necessarily a winning one.

Bob Amster
BrainTrust

This so-called non-traditional wholesale arrangement is an implementation of the endless aisle with the advantage that, as opposed to the “aisle” being a Nordstrom warehouse with fulfillment facilities, it is now the suppliers that holds the inventory until sold, and not Nordstrom (or any other department store).

David Spear
BrainTrust

Keep your friends close and your enemies closer is a well known phrase that we see surface in many industries, not just retail. What we thought of as non-traditional yesterday could be very much in vogue today, and Nordstrom is doing a great job of making this type of thinking come alive in their stores. In a way, this is the “Uberization” of a traditional retail store, where more of the inventory is held by partners and not the retailer itself. It will be interesting to see how deep and wide this model extends throughout Nordstrom and other similar retailers.

Andrew Blatherwick
BrainTrust

Way back in the 1990s, Barry J. Nalebuff and Adam M. Brandenburger coined the term coopetition. In their book of the same name, the two business school professors explain the benefits of working in a collaborative manner with your competitors for the good of everyone. It still makes sense today. In fact more so because with pure play online retailers wanting outlets for their products and traditional retailers looking to compete in the online channel, they can both benefit from coopetition. It really is a win-win-win, as the customer also gets the benefit of being able to have a sociable shopping experience while shopping for their favorite online brands alongside their favorite store brands.

Steve Dennis
BrainTrust

When consumers can get just about anything they want from just about anywhere they want just about anytime they want, it is paramount for multi-line retailers to offer products with exclusive (or near exclusive) products. Done with care, these partnerships can be a definite win/win. The retailer has another hook to win, grow and keep customers. The DTC brand gets greater awareness and the opportunity to acquire customers inexpensively.

David Slavick
BrainTrust

Don’t have something overwhelming? Now there is some clear direction to the head of merchandising planning and analysis. Go so far, just don’t mess up the brand. What does the brand stand for? At one point in time it was shoes, quality goods, uncluttered displays, outstanding customer service, high fashion especially in women’s dresses and so on. Now we see an attempt to draw traffic and maximize profit or revenue on a per square foot basis during these challenging times. Be careful Nordstrom — there is a brilliant history here, don’t mess it up.

Cynthia Holcomb
BrainTrust
The retailer is also counting on personalization to deliver a curated experience to online browsers despite the broadening offerings. “’It’s good to have lots of choice count, but it’s not good to have something overwhelming,’ said Mr. Nordstrom.” As someone who admires Nordstrom very much, I suggest Nordstrom have actual live customers test their personalization/recommendation engine online shopping experience. As a test, shop for a dress. Today there are 14,141 dress styles available on Nordstrom.com. Using specification filters customers must sift, sort, and filter, enduring a time-consuming and overwhelming process of filtering through 14,141 dress style offerings in a multitude of fits, shapes, fabrics, colors, just a few of the multidimensional aspects of an individual dress style. No wonder online conversion is stuck at 3% for decades. And apparel return rates range from 25%-40% or more. Three key facts to know: Humans operate on a cognitive, INVISIBLE system of individual human sensory preferences, controlling purchase behavior and product decisions. Human preference in apparel selection is completely and uniquely subjective to the individual’s sensory preferences of… Read more »
Lucille DeHart
BrainTrust

I understand why retailers are looking to partner brands to expand their base and product offerings, but it is a slippery slope. If more wholesalers and branded retailers look to other entities to define themselves they may become mini-malls that lack identity. I’d rather see department stores try to differentiate themselves with real service, personalization and exclusive products not to go the way of becoming defined by price. When the same products are offered across stores and channels and platforms, the consumer will look to lower prices as a means to convert.

Ricardo Belmar
BrainTrust

Shopper panel after shopper panel I have attended for many years now inevitably say Nordstrom is one of their favorite stores because they know they can find their favorite brands there. Isn’t that what a department store is supposed to be? And when those shopper panels are Gen Zers, Nordstrom tops their list even more for just this reason. Their curation of brands is what makes them special, and couple that to great customer service, it makes a winning recipe.

Are there risks to this strategy? Sure — if your customer is willing to go direct to each of those brands, then they aren’t as sticky, or loyal, as you’d hope. That’s where exceptional customer service comes in. Nordstrom’s needs to show customers why it’s to their advantage to shop with them across brands. There are opportunities for styling, for example, that you can only do cross-brand with apparel. That’s where being a department store can be an advantage if executed properly!

Patricia Vekich Waldron
Staff

As more (DTC) brands emerge traditional retailers will benefit by developing partnerships. It’s foolish not to expand ones offerings and offer shoppers easy access to new in-demand items, as long as they support the overall brand vision.

Brian Cluster
BrainTrust

With over 50% of sales online, Nordstrom’s definitely has more options to play with in 2022 when courting and curating brands and digitally native retailers. With Nordstrom’s understanding of their customers and ability to attract premium focused/affluent customers, they have an advantage over other retailers in attracting fashionable brands that want to explore new partnerships. One of the themes at NRF was collaboration and I would expect more of these in the coming years.

Anil Patel
BrainTrust

Nordstrom has grown into one of the strongest brands by setting new benchmarks of customer experiences. The modern customer knows what they want and should have and retailers need excellent domain expertise and assortments to fulfill their needs. Non-traditional partnerships can be a great opportunity for Nordstrom to expand the horizon of its customer knowledge, product assortment, and distribution.

Strategic partnerships for mutual benefits are not new. What makes them different today is the merchandising challenge. Customers come to your store with preconceived notions regarding brand experience and expect that experience in their brand interactions. And, I am confident that in the pursuit of better growth opportunities, Nordstrom will choose only those brand partners who are capable of preserving the genuine core of its brand.

wpDiscuz
Braintrust
"Retailer partnerships with DTC brands is a model where I suspect we will see a lot of experimentation and subsequent success for all parties."
"As more (DTC) brands emerge traditional retailers will benefit by developing partnerships."
"Aligning with brands that have a point of difference is all part of the Nordstrom merchandising strategy and I am here for it."

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