Nordstrom Department Store, Nordstrom Inc.’s full-line stores finished the year with their third straight quarter of shrinking sales, highlighting the deep change in shopper habits that may have even luxury retailers at a tipping point.
Sales at the company’s department stores dropped 3.3% in the fourth quarter. The result, which excludes newly opened or closed locations, followed declines of 4.2% in the third quarter and 0.7% in the second quarter. Nordstrom’s (JWN) bid to be the most tech-savvy department store is paying off-and helping to replace slipping brick-and-mortar sales.
The Seattle-based company was forced to cut prices more than it would have liked during the holidays and struggled to get shoppers through the doors. Sales in its full-line locations open more than a year slid 3.3 percent in the fourth quarter. The company’s slick Web store, however, saved the day, garnering a 30 percent boost in business from a year earlier. Ultimately, it was clicks that kept Nordstrom’s total revenue from slipping below year-earlier levels-albeit just barely.
The store’s cybersuccess has become remarkably reliable. While results on a whole swung wildly over the past two years, Nordstrom’s online business posted a string of quarterly increases of more than 20 percent.
And the scale of that e-commerce is getting sizable. Nordstrom doesn’t detail its Web sales, but it said in late 2012 that digital revenue had passed the $1 billion mark. Factoring in the latest 30 percent increase would suggest that the Internet is responsible for slightly more than one in every three dollars the company collects. Macy’s (M) has made big gains online, too, and it likewise stopped breaking out e-commerce results. But recent estimates show the Web accounts for only about 11 percent of Macy’s business.
In retail these days, of course, having a solid Web store is obligatory. Yet it’s a fraught path for department stores whose business model is based on offering a wide range of goods and brand names in one place. At Nordstrom, for example, a shopper can find a pair of ridiculously tight Adidas (ADS:GR) swim trunks ($42) and a “retro” hot-dog toaster ($34) without tromping all over town.
Digging up those disparate goods in far-flung corners of the Internet, however, doesn’t take much work, suggesting that a shopper on nordstrom.com is likely to be a lot less “sticky” than one in a physical store. According to Google’s (GOOG) Shopping tool, J. C. Penney (JCP) has a hot-dog toaster for 30 percent less.
The onus is on traditional retailers to make their Web stores more functional, better curated, and a little more valuable than the Internet at large. Macy’s Web store is a garish jumble of categories promising “limited-time savings” all the time. The company’s strategy lies in selling apparel that can’t be found elsewhere.
Nordstrom, in comparison, built a nice-looking site. It offers a bit of editorial content, suggesting entire outfits, highlighting emerging designers, and breaking inventory up into categories such as “essentials” and “top trends.” A loyalty program has also helped, as has a page from the Zappos (AMZN) playbook: “Free shipping. Free returns.” And no need to hunt for a parking space.