The move to digital has been detrimental to the brick and mortar retail world. Many stores that we used to frequent during the early 2000’s including Blockbuster, Circuit City, and Radio Shack have now disappeared. In spite of the on going threat from the shift to digital, I have found that Nordstrom has done a good job innovating to stay relevant. Nordstrom has committed to allocating a sizeable portion of annual capital spend (~35% in 2014) to technology indicating that it recognizes the need to shift focus in the “new retail” world.
In-store, the company has invested in new mobile POS systems for a more collaborative and easy checkout process. There has also been a rollout of tablets in dressing rooms to allow shoppers to conveniently peruse relevant items (other sizes, similar styles and colors).
Online, the company acquired Trunk Club in 2014 to create a Warby Parker/Rent the Runway type of shopping experience for men. Trunk Club is an online service that gives customers shopping advice and sends them premium clothes to try on and choose from. Additionally, Nordstrom has been investing heavily into its warehouses and fulfillment centers to deliver online orders faster and compete with the likes of Amazon.
Nordstrom’s has also invested in creating a user-friendly mobile app to engage customers on the go. It is easy to find personalized items on the app and locate the nearest store for purchase. Additionally, the app allows you to scan tags while in store to see online reviews on items. There is also the functionality to easily track and redeem loyalty points. The transparency helps encourage customer loyalty
Value creation: Nordstrom has always prided itself on putting the customer first. Its investment in digital has helped the company stay true to its mission. The company has used its shift to digital to provide customers with faster and more personalized service. For instance, the company has created a seamless transition from online to offline. Customers can now order items online and do a curbside pick-up at the closest Nordstrom store. This reduces delivery wait time and creates instant gratification. It also saves customers time scouring the sales racks in store.
Value capture: By using technology to engage with customers online and offline, Nordstrom has maintained customer loyalty despite fierce competition. For example, by using tablets in the dressing room, the company can deliver personalized recommendations and generate new sales. The company has been able to maintain its status as a high-end retailer, avoiding the need for frequent discounts that is currently straining the margins of some of its competitors.
Nordstrom has stood out to me as an example of a retailer who has successfully figure out the hybrid retail model combining brick and mortar with digital. Interestingly, we are starting to see online retailers, such as Rent the Runway, start to embrace this. Purely online retailers have started to recognize that allowing customers to try on and see items helps drive sales both online and offline. It will be interesting to see how this transition to digital in the retail space continues to evolve over the next few years.