Nordstrom Consolidates Merchant Team
● General and divisional merchandise managers are now responsible for all of Nordstrom’s channels in North America.
Nordstrom, due to the coronavirus and the urgency to reduce costs and increase efficiencies, has consolidated its merchandising team, WWD has learned.
The retailer has been consolidating across corporate and store levels, as well as within merchandising, resulting in thousands of layoffs, though a precise number or breakout across functions has not been revealed.
“The workforce reductions were made across all areas in merchandising,” Nordstrom Inc. said in a letter distributed to vendors in late June and obtained by WWD.
“Reducing our workforce means we are changing the way we operate to deliver what is most important to our customer, while efficiently leveraging our resources to be the best retail partner,” Nordstrom wrote.
General merchandise managers and divisional merchandise managers now have responsibility for all of Nordstrom’s channels — full-price department stores, off-price, digital and stores in the U. S. and Canada.
“This will help us focus even more on the customer and break down silos to better leverage our inventory investments and strengthen our brand partnerships,” Nordstrom said.
Depending on the category, buyers and planners may be responsible for full-price and off-price stores, including e-commerce. Other buyers would have responsibility for just full-price only, or offprice only. “Buying roles are broader and customer centric,” Nordstrom noted.
“Many planning roles will span across the organization and are not set up with a one-to-one relationship with the buyer. This enables us to effectively plan the way the customer shops with increased classification focus,” Nordstrom wrote.
One vendor source told WWD that now a single Nordstrom merchant would be buying the women’s and men’s collections from the brand. It’s unclear whether that genderless approach to shopping the market is being extended to all brands or just some.
The changes in merchandising underscore Nordstrom’s increasingly consumer-centric, holistic approach to running its business. It’s been the mantra of the Nordstrom family that consumers don’t shop by channel.
The changes also underscore the continual growth of Nordstrom’s Rack offprice chain as a percentage of the overall business, while Nordstrom’s full-line department stores shrink as a percentage of total sales, although they still represent a very significant portion.
This year the company began rigging Rack off-price units with several of the services and conveniences seen at the fullline stores, such as alterations, fulfilling orders, and providing pick-ups and returns of full-price orders. That’s leading to more cross-shopping across the channels.
“A little less than 40 percent of our business is in mall-based department stores. Clearly, it will be less than that in 2020,” Pete Nordstrom, president and chief brand officer, said in an interview with Dana Telsey of the Telsey Advisory Group on Tuesday. “Rack is not caught up in a lot of dynamics detrimental to malls. That business has been solid and strong, even during COVID-19. Rack has performed better than a mall store,” he said.
Rack units are typically situated in strip and outlet centers where currently shoppers feel more comfortable than in a mall because they’re easier to get in and out of, Pete Nordstrom noted.
Nordstrom’s off-price business generated $5.19 billion in sales last year, in stores and online, and was up 0.2 percent from the year before. The retailer’s full-price business generated $9.94 billion in sales last year, through the department stores and online, and was down 3.5 percent.
The company has been closing about three full-line department stores annually in recent years, though 16 will close this year, representing less than 3 percent of its total volume. The 16 closures will account for a major portion of the layoffs.
In June, sales at Nordstrom were down around 40 percent as stores reopened after being closed since mid-March due to the pandemic. Rack trended slightly above the 40 percent last month, while the fullline department stores were a bit below. “We are seeing Rack doing better than our full-line stores, but both are exceeding expectations,” said Anne Bramman, Nordstrom Inc.’s chief financial officer, during the interview with Telsey.
It’s not the first time Nordstrom has consolidated its merchandising team. Years ago it had regional buying teams across the country, which were ultimately centralized. Nordstrom’s latest consolidation has triggered a lot of buzz among designers and fashion vendors, who see upsides and downsides to the maneuver.
On the downside, there’s a significant loss of jobs. New relationships will have to be established in certain cases, and those remaining within the ranks of Nordstrom will have increased responsibilities and will be working harder.
“This means more work for fewer Nordstrom people,” said one vendor source. “More of the analytics could fall on us. The question is whether Nordstrom will be implementing new systems” as a result of the consolidation. “But it also means there will be one point of view, more synergy and a holistic approach” across channels.
For Nordstrom, the consolidations mean lower costs, fewer buying trips and buyers having “bigger pencils” writing orders. Theoretically, the company retains its best talent by giving them broader responsibilities. They’ll have a fuller understanding of product life cycles, the interplay between regular and off-price selling and consumer behaviors across channels, and they will have to adjust to the “opportunistic” style of buying that off-price retailing requires.
“All retailers are re-calibrating. That’s just what companies have to do now,” said the vendor source.
The Hudson’s Bay Co, with its Saks Fifth Avenue and Saks Off 5th divisions, takes a different approach from Nordstrom’s new way. Saks and Saks Off 5th maintain separate merchandising teams.
Last February, former Nordstrom executive Paige Thomas was named president of Saks Off 5th, signaling HBC’s efforts to become a “scrappier” player in off-price. She succeeded Marc Metrick, who for two years wore two hats at HBC, as president of Saks Fifth Avenue and president of Saks Off 5th. While involved in efforts to strengthen Saks Fifth Avenue’s luxury appeal, Metrick led efforts to stabilize the $1 billion Off 5th chain, pare down its store base and reshape its business model. Buyers were planning and ordering seasonally, for spring and fall, but from a customer perspective, there was a feeling that Off 5th lacked freshness. So the buying became more opportunistic, with buyers working the open-to-buy every week.
Thomas was Nordstrom’s executive vice president and general merchandise manager of men’s and kids. Earlier, she was executive vice president and general merchandise manager of Nordstrom’s off-price business. “Off-price is a fast-paced industry, whether that’s stores or online,” Thomas told WWD at the time of her appointment to Saks Off 5th. “How quickly you move is super important.”
One key to success with Off 5th is keeping it “liquid,” Thomas said, meaning having the flexibility to seize merchandise opportunities as soon as they arise. Another key is to offprice success is maintaining the proper proportion of clearance merchandise and merchandise bought specifically for the off-pricer. In 2019, Off 5th’s comps turned positive and ranged from 3.4 to 4.9 percent ahead in quarters one, two and three.