Nordstrom Integrates Rack + HauteLook as E-Comm Continues to Drive Growth

Nordstrom is seeing "outsized" growth in its direct-to-consumer business as its online assortment has increased by 50 percent since last year. The retailer has seen e-commerce growth of at least 30 percent for two consecutive years and is on track to deliver similar results by the close of 2013.

"As we're seeing customers are using e-commerce and our website to find out what the new trend is and what's hot ... where they end up choosing to actually buy that item — whether it's on our website or on their phone or coming into our store — we want to make that as great an experience as possible," explained Jamie Nordstrom, president of Nordstrom Direct.

"So we don't really think about channel conflicts or channel shifts — we think about our customer and how they want to shop and how can we create a great environment for them," he added.

Nordstrom Rack, the company's off-price division, posted 16 percent sales growth and opened 11 new stores in the quarter, including two in new states. As its footprint expands, so, too, does Rack's service offerings, such as new mobile POS capabilities enabling associates to ship any merchandise from any Rack to a customer's address.

"In addition, we're enabling our Rack stores to accept HauteLook merchandise returns, which has added convenience for our customers while driving incremental traffic to our Racks and further integrating the customer experience across channels," said Nordstrom president Blake Nordstrom of the company's flash-sales business.  The company also is integrating the two businesses online, with HauteLook now featuring a consistent selection of Rack merchandise in addition to the regular limited-time sales.

Since Nordstrom expanded its rewards program to include Rack shoppers in early 2012, approximately half of all new account holders are from the off-price business and often younger than the average Nordstrom shopper. The program includes 3.7 million members, up 15 percent year over year.

Topshop in particular is proving to be a strategic investment for the retailer. The shop-in-shop initiative expanded from 14 doors at the beginning of the year to 41 doors by December and is helping to attract a new and younger type of customer, said Peter Nordstrom, president of merchandising.

Nordstrom's investments in women's apparel, a top-performing category, resulted in that area outperforming the company average on a year-to-date basis, CFO Michael Koppel explained. "We are encouraged with the initial results from our recent store investments in women's apparel, reflecting our efforts to cost effectively add selling floor flexibility to more strongly emphasize brands and to innovate with product," he said. "Our recent learnings are informing enhancements to our remodel strategy to touch more stores more frequently through a more targeted department focus."

This year's abbreviated holiday shopping season isn't causing any concern at Nordstrom. "We've looked at this over the years, and years where we've had more days and years where we've had less days — and we tend to see that the overall shopping bag is relatively the same," said Koppel.
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