Nordstrom Focusing on the Web
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Nordstrom (NYSE: JWN) announced last week that it is investing in 16.4 million USD in Bonobos, an exclusive brand of men´s clothes that sells pants and other clothes online. Nordstrom will also sell Bonobos products through its online store and through more than 100 brick and mortar stores. This move is another one of Nordstrom´s efforts to capitalize on the growth opportunities and innovation potential that the web provides, and reflects a smart decision from a dynamic management team.
Nordstrom is not the only retailer which ventured into the online world, Wal-Mart (NYSE: WMT) bought social media Startup Kosmix in February, which now is helping Wal Mart at developing its new web strategy and mobile applications. In March 2011 Walgreen (NYSE: WAG) acquired Drugstore.com in a move that not only increases online presence for Walgreen, but also eliminates a fast growing competitor.
Bonobos has been very successful at growing through the online only channel, customers can only try their popular pants at the company´s headquarters in New York, but this strategy was going to reach a saturation point sooner or later, since many men prefer to feel and try a pair of pants before deciding a purchase. Now that the brand has proven successful, increasing distribution channels and specially having more physical presence sounds like a good strategy to enter the next growth phase.
The products should blend well into Nordstrom´s high-end product line and, more importantly, it keeps pushing Nordstrom in the right direction when trying to adapt to the online revolution. It´s not only about sales channels and different products, Bonobos has developed a very particular and successful online marketing strategy, and Nordstrom could gain some important insights from this deal.
Bonobos communicates permanently with its clients and has made an extensive use of social networks and online tools to promote its brand. There is a new marketing world evolving in social networks, and Nordstrom could benefit materially from learning to adapt to this ever changing dynamic as best as possible. It looks like management is aware of these knowledge synergies, since we can read on the statement about the deal:
“Bonobos makes great-fitting product and customers are clearly responding to their energetic sense of style. They are a pioneer in leveraging the Internet to build great relationships with their customers, a common focus of both organizations. Our investment with Bonobos will enable Nordstrom to participate in the young company’s phenomenal growth, and we look forward to what we can learn from each other as we build the business together.”
Nordstrom has been devoting numerous resources to its online strategy lately, last year the company purchased private sales site HauteLook and also invested in Sole Society, a shoe membership site related to HauteLook. Nordstrom is also offering free shipping and returns in another effort to boost online sales, which grew 30% last year, much faster that the 13% increase the company saw on a total sales basis.
The relationship between technology and retail is not only operational and kwnoledge based, there are some important aspects related to brand association that need to be considered. Nordstrom has developed its own applications for iPhone and iPad, for example, which is a smart association with Apple (NASDAQ: AAPL) and its powerful brand. Both companies target the affluent consumer with a refined taste for design and high quality products, and creating a sense of belonging through an integral user experience is an important part of a complete online strategy.
These initiatives won´t probably have any immediate impact on the company´s financials, but over the middle and long term Nordstrom is moving in the right direction. Adapting to a changing environment requires efforts and resources, and management seems committed to make sure that Nordstrom capitalizes on the digital revolution.
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