Nordstrom tweaks franchise relationships to boost e-commerce operations

Nordstrom’s discount sales model gives more control and responsibility to some of the brands on its shelves.

Under the franchise model, the brand is responsible for designing the store's merchandising areas, setting prices, selecting products, and, in the case of physical stores, hiring staff.

Nordstrom is also looking to leverage e-franchising, with brands responsible for website design and shipping costs. The retailer gets a commission on each sale, while the brand gets a big chunk of each transaction. In either case, Nordstrom doesn't have to worry about buying inventory.

“In today’s environment, retailers that are closely tied to their brands are at risk,” Ms. Speakman wrote. “Giving brands more control alleviates this problem by giving Nordstrom’s brand partners the ability to create compelling brand spaces and make product selections based on direct knowledge of customer preferences . ”

When Nordstrom becomes a platform store without the need for physical stores, it benefits brands. Changing inventory management and shifting shipments for some of these brands is a flexible model that gives Nordstrom the ability to do what it does best: create an awesome customer experience and an overall environment that perfectly showcases the brand.

The woman added : “Ultimately, this model achieves the most important differentiation — strengthening the Nordstrom brand.”

Nordstrom shares moved up and down in early February as the company announced plans to pull itself out of the doldrums, according to Bloomberg . Plans to improve e-commerce, expand price points at Nordstrom Rack, and improve stores and distribution in key markets didn’t seem enough to satisfy investors looking for a comprehensive turnaround plan. Nordstrom expects revenue growth of more than 25% this fiscal year, targeting revenue of $17 billion, compared to $15.9 billion in 2019 .

However, not all of RetailWire’s brain trust believes concessions are a path to profitability.

Dick Seesel, head of Focus in Focus, expressed concern about the plan: “ The concessions model that has blossomed in department stores in Europe and Asia has made the shopping experience more disjointed in the eyes of U.S. consumers , even as each brand has greater control over its destiny . In terms of customer service, this resembles the long-standing cosmetics model, in which a Lancome counter manager has no incentive or interest to help a customer with a competing brand. This is a particular risk for Nordstrom, whose private-label assets have always been as customer-centric as they are product-centric. ”

Cynthia Holcomb, CEO of Prefeye, said of Nordstrom : “Nordstrom is always looking at innovation. So we’re out there watching and seeing what happens.”

For Neil Saunders, managing director of GlobalData, there is still much more innovation to come from Nordstrom and other verticals.

Mr. Saunders said: “A lot will depend on the brands chosen and how those brands are differentiated from the rest of the retail channel . If the brands are the same old ones, it won’t be very attractive. If there is a mix of legacy brands and upcoming brands, it will be more interesting. I also think chains like Nordstrom and Macy’s need to develop more of their own branded products to make them exclusive. Unfortunately, they are not doing as much as they could.”

Nordstrom

Franchise

E-commerce operations