Breadth and depth of online sales

In December I talked about Nordstrom’s clever investment in online retailing and how watching its December sales result in the New Year would be a real indication of just how successful it was in growing store sales and online sales together.

We knew by July that sales online were well up on the previous year. But late October, through Christmas, and into the New Year was always going to be the top of the curve for an exclusive department store selling luxury brands.

At first glance it was always a funny thing to see luxury retail items being successfully sold online. The impression is that the internet is all about, ‘Cheap. Best deal. On promotion’. However, in the case of Nordstrom and other high-end retailers, the online store is offering the same price as in a real store, but it can be ordered more easily, shipped to home, or collected from the store. It also allows luxury retailers to display a breadth and depth of stock that they perhaps wouldn’t normally display in a single store location.

Danielle Savin, vice president of multichannel retail and marketing consultancy FitForCommerce captures this philosophy well. She says: “Luxury retailers (websites) will never be about price, but having an eCommerce site allows them to create the ultimate show room of 100% of their merchandise, including exclusives”. We tend to forget about exclusive items or very expensive limited edition runs. By definition, they can’t be deeply stocked and if they are sold out at one store, the shopper cannot see that item in that store. The online store is always able to source the item and ship it from another store, direct to your home, and you never need to know it was out of stock in your local store.

Nordstrom believe this and go one step further. They have 115 ‘full line’ stores in their network, and 89 smaller ‘rack’ stores. The full line stores are just that. They stock in depth and breadth the full line of items sold by Nordstrom. Nordstrom say that when a shopper walks into a store there is always the chance that the item will not be in stock. The shopper wastes time and feels let down because they want their needs fulfilled immediately. It is a retailer’s worst nightmare, ‘to create the footfall and not take the dollar’. Nordstrom recognise that in 99.9% of cases, when a shopper shops online at Nordstrom they will always be able to find the item in one of the stores somewhere in the country. Their whole store network is one giant inventory. They can pick, pack and dispatch it from any store direct to the online shopper’s home, and the shopper doesn’t need to know there was ever an issue locally.

So with all this in mind, how did Nordstrom do in December? Well, according to a CNBC report in December 2010, they recorded an 8.4% increase in monthly revenue on same store sales. This figure doesn’t include stores that have opened or closed during the year so is a genuine reflection of their performance. But here’s the key number: the 8.4% overall is made up from a 6.4% increase for the month at Nordstrom full line stores, an increase of 7% in sales at its off-price Nordstrom Rack stores, and a huge 25.9% increase in online sales. In December they sold US$1.4 billion of luxury items – a nice result.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.