Racking Up Points
Nordstrom Rack uses digital as a big competitive advantage.
NORDSTROM RACK has come a long way from the basement of the company’s downtown Seattle flagship in 1973. Its brick-and-mortar fleet now counts 241 stores in the U.S., as well as seven in Canada. However, as the discount retailer looks toward the future, it is leaning heavily on omnichannel capabilities to reach more customers and introduce them to the Nordstrom experience.
“At Rack, we stand for having the very best prices, but where it all comes together is this access point,” said Rack president Geevy Thomas, who got his start with Nordstrom in 1983 as a salesperson in men’s. “We believe that by having that digital footprint with our mobile, optimized website and app, store locations and shared services, we’re able to bring all those things together for customers.”
This past year, prompted by the constraints of the pandemic, the Rack introduced a nextday buy online, pickup in-store service for transactions on its own website and on Nordstrom. com. And consumers are taking full advantage of it, according to Thomas. “During our Anniversary Sale — which the Rack is not a part of — nearly 40% of next-day pick-up orders for Nordstrom were picked up in a Rack store.”
The retailer also created a shared inventory that allows brick-and-mortar stores to fulfill online orders and it introduced a ship-to-store option. Additionally, the Rack has long accepted returns for any Nordstrom purchase. “But now you can get your Rack returns processed at Nordstrom, so we’re really making it seamless for customers,” he added.
This integration is all part of Nordstrom Inc.’s omnichannel
Market Strategy, which is aimed at bringing products closer to customers — and which will be crucial to accomplishing its stated goal of boosting Rack’s incremental revenues to $2 billion.
For the Nordstrom Rack brand, net sales increased 61% in Q2 compared with the same period in fiscal 2020, and decreased 8% compared with the same period in fiscal 2019. Like many in the industry, the discount chain has faced inventory challenges due to the supply chain slowdown, though Thomas expects to see improvement within the next month.
Farla Efros, president of HRC Retail Advisory, said the company is wise to take a digital-first approach, especially considering its head start online. “Nordstrom has always been so digitally focused and so advanced versus its competitors,” she said. “They have an incredible infrastructure and they know how to translate the experience [to the web].”
The off-pricer significantly boosted its digital capabilities this summer, when its website transitioned to the Nordstrom.com platform, increasing its processing power from five orders per second to at least 500 per second. “It’s a meaningful change in terms of the customer experience, especially with high volume flash events,” said Thomas.
Digital also can help the retailer make deeper in-roads with Gen Z and millennial customers, Efros added. “The whole point of Rack is, if I can get you in at some point, then I can get you up into the Nordstrom brand,” she said.
Indeed, the Rack continues to serve as an access point for new customers, who often graduate to the full-line store. That’s one reason the company continues to position the two banners in close physical proximity. And to entice even more customers, the chain has broadened its pricing “aperture” by adding more entry-level price points in some of its locations and more high-end offerings online, as seen with its Gucci flash sale last year.
Compared to others in the off-price channel, Nordstrom Rack has one of the smallest store counts, but Thomas believes that it has a unique advantage in how it can work with brands. “All of [our competitors] are great at what they do, but none of them have a full-price business,” he explained. “The majority of our buyers buy for both the full-price channel and the off-price channel. So when they’re talking to a designer in the showroom, they’re talking about how do we maximize this product in full price — and then how are we going to get another bite at the apple in off-price?”
And though digital is a vital ingredient, Thomas is bullish on stores too. “In my career, I’ve opened about a dozen full-line stores and about 170 Rack stores. And that gets me going,” he said. “What am I most proud of is all the people we promoted, all the new jobs we created and we have a very, very passionate fan base.”