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Insights

The art of the possible: Nordstrom Local

In our first focus on businesses doing great things, we look at the huge strides being made by American department store giant Nordstrom, as it targets an online-favouring audience with its new Local retail concept.

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The art of the possible: Nordstrom Local

Omnichannel was far from a buzzword in 2018 – it’s a model that businesses are striving to implement, and for all the right reasons. However, most companies still have a major disconnect between online and physical stores, with little or no link between these sales channels.

In the US, one department store chain is taking huge, positive strides to break free from the trends that are hurting its rivals. While there may be impending bankruptcy for Sears, and as JCPenney continues to cut costs to remain competitive, Nordstrom is going from strength to strength on its mission to modernise, and unite its online and offline audiences.

The Seattle-based operator of over 350 stores across North America is already seeing the fruits of its labours, courtesy of a strategy that moves the brand away from the huge, monolithic units that department stores are forever associated with – the type of real estate that has spelled the end for so many companies before it.

To buck the negative trends in bricks-and-mortar retail, Nordstrom launched its Nordstrom Local retail store concept in 2017, in a move that seeks to revolutionise the retail store shopping experience. These pared-down locations aim to bring a smaller, more agile version of Nordstrom to its loyal customers, and it hopes to make relationships with a new breed of consumer along the way.

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What is Nordstrom Local all about?

To get a grasp on an increasingly online-focused customer, Nordstrom has created a space that acts as a natural extension of ecommerce, but on the high street – while also adopting a model which can gather data to further enhance the experience these customers demand. This resulted in Nordstrom Local, a concept store on Melrose Place, Los Angeles, just a stone’s throw from Hollywood and the Sunset Strip.

The crux of the idea came from the company’s understanding that its customers preferred to shop online but wanted to pick up their goods in person – to ensure they were just right for them. Alongside a boutique store experience, it offers a range of complementary and considered services, with a bottom line on convenience, personalisation, comfort and speed, regardless of the occasion or requirement:

  • A free personal stylist service, “with zero pressure”, giving a bespoke consultation and curating the right look for you.
  • On-site tailors make your chosen clothing even more bespoke, offering a wide range of changes to clothing bought in store or online for free (providing it was bought at full price). If you didn't buy something at Nordstrom but it needs adjusting, they’ll still help for a fee.
  • A click and collect service with a twist: You can pick up an order in store, or a member of staff can walk it out to your car with “Curbside Pickup”.
  • Same-day delivery of in-stock items, for a flat rate of $15 per order.
  • An incredibly deluxe returns policy: All Nordstrom return orders (online or store-bought) can be given back at Nordstrom Local, or exchanged; all other businesses offering online returns will also be shipped by Nordstrom Local for free (if that’s the other company’s policy), or a flat rate of $5. Nordstrom will even provide the box, then email a tracking number.
  • A nail bar, on an appointment or drop-in basis, whether you’re waiting for clothing alterations or simply looking for a new look.
  • Local beer, wine or juice if you’re looking to relax during your appointments.

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What are the benefits to Nordstrom’s customers – and the industry?

What must be underlined is that Nordstrom is not trying to reinvent the wheel. On every level, and with every product or service you get as soon as you walk through its doors (or get passed through your car window, if you’re getting Curbside Pickup), all of it is perfectly understandable at a common-sense level. Nordstrom looked at what it was good at, looked at what the internet was good at, and took some time to stitch the two together. As a result, it created an old-school approach that has all the hallmarks of a high street from the past, where you could get everything you needed in the space of a short walk.

The Nordstrom Local idea proves that by offering locally complementary services without diverting too far away from the core business – a sort of “kill more than one bird with one stone (minimum)” approach – it will attract more people into store. The services listed above are simple extensions of things people have come to expect: delivery options, click and collect, and styling that goes beyond the rack.

Yet it’s the access to human knowledge that Nordstrom is particularly pushing with this concept. The company knows it, or its competitors, can’t match face-to-face personalised expertise on an ecommerce platform. Online look-books and inspirational content may work to a degree, while dozens of companies are experimenting with heavily optimised customer data, but this can never be a match for free consultations, which also happen to make a consumer feel very special indeed.

And if you’re not the type of person comfortable with customised clothing picks, or shopping in store, you’ll at least be able to pick them up at Nordstrom Local and get customised tailoring to perfect your own chosen look. For free.

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There’s also a logical paradox for a standard customer seeing this Nordstrom Local for the first time. On first glance, many might be tempted to criticise it as a concept built with the LA customer in mind. Beverly Hills, one of the country’s most affluent cities, is just a few streets away. The store’s many options aren’t currently expected nor even demanded elsewhere; everything present at the Melrose Place unit is reflective of the culture and demands of the higher-end customer you’d expect to find in the Hollywood Hills.

Yet its services are free and are universally beneficial to the modern customer, who really has nothing to lose by dropping into Nordstrom Local – even an in-store upsell would be tailored to them (literally, if they want it).

Sure, the Nordstrom experience may still only work in certain places – like big cities with huge captive markets to provide the correct ROI to offset the services it offers for free – but as people come to experience this level of service, it could lead to a revolution in demand. Regional customisation may only need to be cosmetic, or a case of changing something more popular in LA than, say, Tulsa: swapping the pressed juice bar for a coffee shop, or putting a lower price on same-day delivery.

Ultimately, this focus on a customer’s value of time and money is a strategy that puts Nordstrom at the heart of urban or suburban community, offering an indispensable hub that slots into place whether locals are loyal to the brand or not. The key to long-term success is in the venture’s name: to paraphrase the League of Gentlemen, it’s a local shop for local people.

What’s next for Nordstrom?

Nordstrom’s profits, while taking a hit this year due to an aggressive expansion north of the border in Canada, continue to look positive. Its Columbus Circle, NYC venture – a sort of “Nordstrom Local XL” – reflects this business confidence. In another demonstration of forward thinking, this men’s fashion concept was described by GQ as “shopping online, only in real life”.

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While it may be a shock to many, this new store is Nordstrom’s first in New York City, despite getting one across the Hudson in New Jersey nearly 30 years ago. While it secured the space in 2012, it spent six years perfecting the format – and even now, it only caters to half of the city’s inhabitants (a women’s Nordstrom will follow in 2019).

But they say that good things come to those who wait. While Nordstrom might’ve sacrificed a few years’ worth of Big Apple bucks – and while its Local concept is yet to show longer-term success – its future plans look more sustainable and successful than any of its rivals, and it’s something we can’t help but applaud them for.

All it took was a constantly evolving test environment in LA to test the market to confirm its hunch: people love a seamless shopping experience.

Insights

Could Argos have dominated fashion in the UK?

It has the infrastructure, tools and high-street presence to pull off any new venture – and with its decision to sell the Tu clothing range, Argos had the opportunity to really shake up the fashion market.

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Could Argos have dominated fashion in the UK?

Sainsbury’s really stepped into the limelight during early 2018. Hot on the heels of the Tesco-Booker deal, its merger with Asda looked to create a partnership with a slice of the market greater than Tesco – Sainsbury’s and Asda shared 31.4% as of April 2018, compared to the 27.6% claimed by their big blue rival.

Although the move was somewhat overshadowed by Sainsbury’s chief executive Mike Coupe singing the wrong words to We’re in the Money ahead of an interview with ITV, it adds to a growing unease among competitors that Sainsbury’s could dominate the market in more ways than one – especially given the major inroads it’s making with a high-street favourite.

No laughing matter

Back on April Fool’s Day in 2016, the day’s main business story was far from a joke.

Sainsbury’s was given the all-clear to buy Argos in a deal worth £1.4 billion, signalling the end of Home Retail Group and the beginning of a “multi-product, multi-channel” era for this all-new partnership. Competitors sat up, listened and most likely grimaced: after all, this was the UK’s second-largest supermarket joining forces with a company known for its market-leading delivery service.

When the landmark purchase was finally completed five months later on September 2nd, chief executive of Sainsbury’s Argos, John Rogers, reiterated the business’ digital-first push by saying that “the way people shop is changing – customers expect choice, convenience, flexibility, fast delivery and to shop whenever and wherever they want”.

Of course, by looking at Argos’ model, it was a match made in heaven for shoppers:

  • Customers are able to return products free of charge for 30 days after purchase;
  • Delivery options from as little as four hours, alongside next-day and named-day; and
  • The chance to click and collect from Argos stores.

Fast-forward to March 2018, and Sainsbury’s finally confirmed that the Tu clothing line would be sold at Argos effective April 25th, with the potential to make huge waves in the fashion market – and forcing competitors to consider their own ability to match the rapidly evolving demand for quick delivery.

The team at SHIFT and I are huge fans of what Argos has to offer consumers. However, this move into clothing retail felt like a huge missed opportunity to grab the market by the throat.

Delivery options that don’t truly deliver

Immediately, the weirdest decision Sainsbury’s made was to exclude this new clothing range from its much-loved same-day home delivery. This could have been a truly market-changing offering. Instead, it simply offered its standard, next, and named-day delivery services – alongside click and collect from new Argos locations. Sainsbury’s was, in effect, expanding its range to Argos locations. It was hardly groundbreaking, especially given many new Argos shops are just store-in-store offerings inside Sainsbury’s.

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The shift only confuses loyal Argos customers. Rapid delivery is something we’ve all come to expect from Argos over the last few years – it still proudly, and rightly, makes a lot of noise about the many people it’s bailed out of a bad situation with last-minute, same-day delivery.

By stepping back from this core KSP – and one that has become emblematic of the brand – it left the door wide open for the competition, as Argos simply joined the ranks of many retailers who all offer next-day delivery on fashion products. Why would people limit themselves to a necessary trip to Argos to get a same-day click and collect order when a trip to any of its store locations would also showcase countless nearby stores, and ones where you can try the clothes on before buying them?

What’s more, most of Sainsbury’s competitors offered more than just one brand to sell.

It takes more than Tu to tango

While Tu has very much established itself as Sainsbury’s answer to George or F&F – a credible, good-value and decent-quality supermarket clothing range – why, with 18 months to plan, did Argos not consider adding other clothing brands to its own range to reflect its business model in other product lines?

Admittedly, Sainsbury’s sells products from Russell Athletic and Admiral, and it makes sense to push its own products from launch. However, Argos is known for its incredibly diverse and well-rounded product selection – it has the door-stopping catalogue to prove it – and even a small commitment to two or three brands from launch, or an announcement that more may be on the way, would have sent more positive signals to customers, as well as the promise of more variance in style and cost.

Instead, this tentative step into clothing retail leaves consumers feeling underwhelmed. While the Tu line-up is worth £1 billion annually to Sainsbury’s, consumers rarely – if ever – build their wardrobe from one source alone. Is Sainsbury’s missing a trick, and losing revenue potential, by only selling Tu products?

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Competitors are already innovating

Sainsbury’s failure to capitalise on a unique same-day delivery possibility is also undermined by other market leaders that look at ways to make their own brand stand out from the crowd. Online, one of the most head-turning of these is Asos’ “try now, pay later” model offered through its partnership with the Klarna platform.

The reason for this relationship is simple: Asos knows exactly who its customers are. As Essential Retail reported in 2017, its frequency of returns is so unpredictable that even data scientists can’t build a business model to predict its fortunes. But it knows that its popularity is down to this flexibility, so it has introduced the Klarna payment method, which only charges for the goods that are kept and not returned.

Meanwhile, bricks and mortar high-street fashion retailers are being ever-more daring. Zara’s “radical new store concept” at Westfield Stratford is a perfect example of this, combining shopper demands with their growing taste for technological wizardry. For starters, Zara’s new self-checkout area can automatically identify products, meaning shoppers only have to confirm what’s in their basket before paying for them.

However, it boasts a dedicated, automated click-and-collect area serviced by a pair of small warehouses. Using a simple QR or PIN code, customers who place orders online can have their order delivered to a secure mailbox while “[b]ehind the scenes, a robot moves through the warehouses, delivering packages to mailboxes”.

While Argos famously has a more human approach to order collection and distribution, it’s fundamentally unable to showcase its range like Zara can. Innovating with, say, interactive screens to “build” a look before buying the clothes could be a good way to combine technology and brand experience, while also twisting the arms of captive shoppers to buy more products in-store.

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Triple trouble

While we hold out hope that these issues are a product of anticipated teething problems, as it stands, Sainsbury’s cautious start with Argos doesn't live up to its full potential for three key reasons:

  1. It doesn’t offer its exclusive, market-leading same-day home delivery on clothing, therefore confusing its loyal customers used to its flexibility;
  2. There’s a sole focus on Tu, with no immediate intention to give Argos’ fans another diverse range of products they’ve come to expect and rely on; and
  3. Long-standing competitors are already innovating, and they’ll always look to beat – or at the very least match – their rivals.

Argos could have made serious waves. Whether it realises it or not, it’s sitting on a multi-channel format that could be a market leader for years to come, but it hasn’t fully committed to this, so it needs to move quickly to avoid competitors beating them at their own game.

After 18 months of planning, Argos didn't fully take note of the major reasons people like us love the company. It needs to truly analyse its customers – as Asos and Zara have – and play to its unique strengths. Should Argos have kept its powder dry before moving into clothing with an industry-dominating, multi-brand proposition? Only time will tell.