Nordstrom Inc. has launched a digital marketplace platform aiming to grow the offering on its website and app, increase revenues and provide sellers with a wider audience.
Digital growth is a top priority at Nordstrom. Last year, digital accounted for 36 percent, or about $5 billion, of Nordstrom’s total sales of $14.22 billion.
For now at least, Nordstrom is easing into its new marketplace format by not rushing to bring in a great many new brands right away. However, executives said they do expect to grow their online product assortment by two to three times in the next few years while keeping their online channels curated, customer-centric and service-oriented. The marketplace went live Monday.
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Among the key brands available on the marketplace and new to Nordstrom are Dippin’ Daisy’s, a fast-growing swimwear brand; Maison de Sabre luxury leather goods, and Tracksmith, the running brand.
Among other brands joining Nordstrom via the marketplace are Adore Me, Alala, Ana Luisa, Cynthia Rowley, Derek Lam 10 Crosby, Deux Par Deux, Dia & Co., DXL, La DoubleJ, Natori and Onia.
“The sellers and brands on our marketplace will have the exact same threshold of quality and relevance to our customers as any other brand we do business with. There’s a very high bar for the products we choose to present to our customer base. Nothing changes. We are not going to become ‘the everything store,'” Miguel Almeida, president of Nordstrom digital and customer experience, told WWD in an interview.
Amplifying Categories
“It’s about extending our ability to find incredible brands we believe our customers will love and introducing them to those brands at a bigger scale, without the cost of a wholesale model,” Almeida added. “The marketplace also allows us to offer the full expression of the top brands we already have.”
Asked what categories not currently sold by Nordstrom could be or are being introduced to the online marketplace, Almeida replied: “It’s not necessarily a category extension strategy. It’s more about amplifying the categories that we have and serving customers better in those categories.” Still, he did single out marketplace opportunities to “lean” into the gifting, home and outdoor categories; accelerate growth with brands targeting younger customers, and offer extended sizes and a wider range of prices.
“Our marketplace will feel very, very connected with what Nordstrom is known for. It just allows us more flexibility and agility,” Almeida said. “We can also be much more intentional about serving customers better in different locations.”
Nordstrom isn’t aggressively seeking out brands to introduce to its new digital marketplace. As Almeida said, “We want to make sure that everything goes right before we scale and expand too fast. It’s fully live, but the marketplace is not going to have all of that significant growth in Day One, to ensure that everything is fully buttoned up as we present this new offering to customers.”
Nordstrom has partnered with Mirakl and its platform which allows brands to set up their assortments on retailers’ websites. “We see Mirakl as the industry leading solution and they have given us the ability to eventually co-innovate with them in this space,” Almeida said.
He emphasized that with its marketplace, the Seattle-based Nordstrom will maintain its reputation for service. “We’ll handle customer care directly with the customer, which most marketplace models from other retailers don’t do,” Almeida said. “When there is customer care issue, they put the customer in contact with the seller directly, bypassing their own customer care team. But we are handling our own care with customers, and then we deal with the brands separately. The customer will continue interfacing with us and the people here they’ve known. We are honoring our legacy of service and trust, saying, ‘if you have any questions, let us know.'”
A customer seeking to return an item bought on the marketplace can return it to a Nordstrom store, and get the refund quicker rather than shipping it back to the seller and waiting days for the refund. “We will refund the customer directly and take the product just like it was any other product that we’re serving through wholesale,” said Almeida.
Marketplace to Brick-and-mortar
“There’s also a very deliberate connection between marketplace and our stores,” he added. “Our stylists have access to style boards and will be able to complement their styling consultations with broader assortments than what they have in the stores. We can also set up alterations for products bought on the marketplace. There’s a service integration.”
With the marketplace, Nordstrom can jump on emerging trends faster. “It’s a much easier process for brands to start selling with us,” compared to the traditional wholesale model, Almeida said, adding that with the marketplace model, it can take less than 30 days from identifying a trend to placing the relevant items on the site.
Some marketplace items could wind up being sold in Nordstrom stores as well. “The idea is to be agile in showing customers relevant products and brands that we believe they will love,” Almeida said. “As soon as we see that traction, our merchandising teams are informed in terms of what they would want to buy and put in stores. Absolutely, this is a way for some brands to show up in our stores.”
With the marketplace model, brands manage the merchandise content, pricing and shipping, while Nordstrom can affect the look of how products are presented. Nordstrom receives a commission when a listed item is sold on the marketplace. Commissions are generally standard, with minimal variation if at all, from brand to brand, Almeida said.
With the wholesale model, “We don’t have unlimited dollars. Our merchants have to make very hard choices around the breadth and depth of brands we sell to make the economics of our business work. Marketplace allows us to break free from those economics,” explained Almeida, who along with his team is responsible for Nordstrom.com, Nordstromrack.com and the customer experience strategy across both online and in stores. Prior to Nordstrom, he led Starbucks’s digital team and the design, product management and technology of the Starbucks mobile app. Earlier, he was the executive vice president of digital at Lululemon Athletica, and held leadership roles at Walgreens Boots Alliance, Apple, Dell and the Boston Consulting Group.
With the marketplace format, retailers do not own the merchandise or manage the shipping to customers, which is different from wholesaling where retailers own the merchandise bought by their merchants, hold it in their warehouses and stores, and deliver it to customers. It’s also different from drop shipping where a retailer would own the goods being sold online but they’re shipped by the supplier.
Risks and Reputation
Retailers make less money on each item purchased on a marketplace, since products are listed, not owned, and sold on commission. There is less financial risk and potentially, retailers could make up what they lose in margin by generating greater volume with the larger marketplace assortment. There are other kinds of risks, however. Brands sometimes find themselves near other brands of inferior quality, affecting perceptions. Brands also risk cannibalizing their sales on one marketplace from another. In addition, if a consumer orders from a marketplace and is disappointed by a poor shipping experience (it arrives late or the wrong product is delivered) the marketplace might be blamed and its reputation suffer, even though it could be the fault of the brand handling the shipping.
Giant digital marketplaces such as Amazon, eBay, Walmart, Alibaba, Farfetch and Shopify list a vast array of categories and items. Some are characterized as “generalists,” meaning they offer everything to everybody without having a sharp identity or clear image — something Nordstrom promises to avoid. In the last few years, a fast-growing subset of smaller retail marketplaces has emerged including Macy’s, Bloomingdale’s, Hudson’s Bay, Best Buy, Stadium Goods, Lands’ End, Crate & Barrel, and Urban Outfitters.
“Our vision is to become the Spotify of fashion, and that means receiving signals from customers on what they want from us and showing them our expanding extended assortment in a way that is unique to them,” Almeida said. “We’re putting significant effort on evolving the experience of our website and our mobile app. We’re going to infuse (both) with more inspirational content. We’re going to make that discovery experience a lot more exciting with a much broader assortment that comes to life through the marketplace.”
Asked if a marketplace could also be developed for the Nordstrom Rack off-price division, Almeida said, “We’re not launching with Rack but it could in the future apply to Rack.”
Along with digital growth, expanding Rack is a Nordstrom Inc. priority. Rack has 22 new stores planned for this year on top of the 19 opened in 2023. On April 18, Nordstrom Inc. confirmed that brothers Erik and Pete Nordstrom are looking to take the retailer private and that a special committee of the board of directors was formed to evaluate their proposal and any others that could arise. It’s a sign that the Nordstroms prefer to run their business for long-term success, rather than for the short-term gains demanded by Wall Street. The new marketplace is a long-term play.