How Nordstrom Benefits Direct-to-Consumer Brands
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If you want to buy a pair of pants from the famous clothier Everlane, there are only two ways to do it – directly from the company (through its popular website or one of its six physical locations) or on Nordstrom (NYSE: JWN).
Direct to Consumer Selling, or DTC, has become a critical retail trend and a challenge for many mainstream retailers. But Nordstrom is meeting this challenge head-on by embracing the channel and creating partnerships to benefit from it.
Why DTC?
Many companies have started to focus on direct-to-consumer approach, which is beneficial for several reasons:
- Remove middlemen that reduce your profits
- Better connections with your customers, by learning from them in the process
- Quickly expand your mind and get your name known to the world
- Control your brand’s message and story
Many companies, such as Warby Parker and Everlane, started with DTC models, while others, such as Apple and Nike, move their businesses in this direction and take advantage of the transition.
Use an opposing trend
By design, DTC is the antithesis of the wholesale-retail relationship. A McKinsey report discussed the rise of direct-to-consumer sales as a retail trend and how traditional retailers may respond to the new environment. One recommendation is to “rethink product assortments and offerings”.
Nordstrom Co-Chairman Erik Nordstrom echoed this idea during the call for third quarter results when he said: “Our favorable stock position allows us to be opportunistic in the market and to have a good flow of new products for customers to discover. The company has focused on prudent inventory management, with revenue increasing for eight consecutive quarters and inventory levels down 2.7% year-over-year as the company entered. in the holiday shopping season.
In the third quarter, full-price revenue fell 4.1% year-over-year, while non-price revenue increased 1.2%. CFO Anne Bramman added, “As we rebalance our merchandise assortment, we are increasing the depth of key items at full cost. ”
Why DTC Brands Work With Nordstrom
Nordstrom had the innovative solution to entice some of the most popular DTC brands to sell through its powerful channels. Brands have more control over the customer experience with small in-store boutiques than they would in a typical wholesale and retail setup, combined with access to a larger customer base.
“It has been a true partnership as Nordstrom shares our passion for prioritizing community and brand values,” said Michelle Cordeiro Grant, Founder and CEO of LIVELY, a sportswear brand.
Erik Nordstrom explained how the company approaches these collaborations at a conference last April: “I will say that one of the most important things we do is to be the partner of choice, the retail partner of choice for these And often, even in our business, these brands are small businesses. They are growing rapidly. They come on the scene, and we can be a pretty important partner for them. So the way we react has to be really flexible. Now what are the needs of this brand? How can we have a win-win and continue to strengthen our reputation as a partner of choice? “
Other DTC brands that Nordstrom has partnered with include Glossier, Charlotte Tilbury, Sezane and Reformation.
Create the right platform
The person behind many of these partnerships is Nordstrom’s Vice President of Creative Projects, Olivia Kim, who “focuses on creating energy, excitement, a sense of discovery and a little bit of disruption through engaging and unique shopping experiences at Nordstrom, both in-store and online, ”according to the company’s website. In other words, it’s the opposite of business as usual, and it appeals to many of those companies that have defied the rules of retail since their inception.
One of his projects is a shop that changes its merchandise every month, often offering exclusives. Sometimes it works around a theme, and other times it gives customers a branded experience for a particular business.
Nordstrom, like other retailers, saw sales decline in 2019, and the company’s stock price fell 12% for the full year. However, it weathered the retail storm better than competitors such as Macy’s, who suffered even greater losses, close the shops, and saw its stock price lose almost half of its value last year.
Nordstrom continues to adapt in a rapidly changing retail environment, and this focus on the DTC retail trend is just a domain where the company gets up to meet the needs of modern consumers.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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