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By Matt Pigott - February 3rd, 2016
The two retail giants are refocusing to target a more mobile-first, deal-conscious audience with personalized marketing.
The definition of ubiquity? According to the Oxford dictionary: present, appearing or found everywhere. It’s an apt way to describe Nordstrom Rack, the clothing and accessory retail company with aggressive expansion plans afoot—ones that pose a serious threat to the likes of Saks, Macy’s, Kohl's, JCPenny and others.
Set to almost double its current off-price offering by 2020, Nordstrom is focused on engaging the Millennial demographic with the expectation that these consumers will cross purchase in its full price stores as they grow older and become more affluent. One of the most interesting discoveries Nordstrom has made during its push for growth is that having its off-price outlets in close proximity to its full-price stores doesn’t dent profits. In short, it isn’t competing with itself. A move that went against the grain of conventional wisdom, it transpires, is now an integral part of business strategy, and other companies have taken note.
To boot, Nordstrom has a stronghold on digital sales and remains proudly ahead of the curve when it comes to integrating its offline and online experiences. Its acquisition of HauteLook, a flash-sales site, in 2011, gave it instant access to a four-million strong database of Millennials who, during the recession, were keen to buy designer clothes at knockdown prices.
Today, according to Retail Insider, online sales account for nearly 20% of Nordstrom’s business, with sales through Nordstrom Rack (online) and HauteLook combined up 46% in 2015. It also keeps separate social media accounts for Nordstrom and Rack, ensuring there’s no confusion on Facebook, Twitter, Instagram and other social platforms.
Recognizing Nordstrom’s dominance in the area of completed mobile transactions (sales made by customers on handheld devices), owner of Saks, The Hudson’s Bay Company (HBC) acquired flash-sales site Gilt in the pursuit of a consolidated all-channel model. Why is this so important? With direct access to Gilt’s infrastructure and data, Saks has a greater offering for its consumers, and the gap between Nordstrom and Saks looks set to narrow. Gilt has around nine-million customers. These customers are deeply digitally engaged, with around 50% of Gilt’s being initiated via a mobile device. In a clear case of build or buy, HBC’s buyout of Gilt was a smart timesaving initiative, and gives it immediate access to an audience already au fait with making purchases of clothing items and accessories on the move.
But the picture becomes more nuanced when taking account of the personalization element. With around 50% of online sales coming back as returns, Nordstrom has cleverly sealed the loop between the online and offline retail experiences, with the customer journey beginning in the digital space and often ending up in the face-to-face environment of a store. So, a return can be quickly turned into more sales by well-trained staff running well-appointed stores. The side benefit is that personalization and positive in-store experiences translate into trust, loyalty and further sales.
It may come as no surprise that Saks is following suit. Once the ink is dry on the Gilt acquisition, customers will be able to take any items purchased online at Gilt into Saks stores. In addition, Gilt concessions will feature in Saks’ stores giving customers a more diverse shopping experience and completing, once again, the all-important circle between online and offline.
Outside of outlet expansion, an ongoing strategy for Saks and Nordstrom, the most impressive growth for these companies is in their online sales. For both, last year saw a 40% uptick, while regular in-store sales (not counting decimals) didn’t manage to break double figures. Saks was up by 2.8% and Nordstrom by 8.4%. But Rack sales were up by 12%, highlighting the growing demand for off-price products. It’s these trends that led to Saks launching its own off-price online store (saksoff5th.com) in 2013.
With the once popular flash-sales business model losing traction once the recession was over, HBC’s, in acquiring Gilt, has given the retail outlet the leverage it needs in the digital sales arena and at the same time provided Gilt with fresh distribution channels.
Chief Executive Officer of HBC, Jerry Storch said: ‘Adding Gilt to our rapidly growing digital business is very exciting and we see tremendous potential to enhance our mobile and personalization strategies.’
Ultimately, as the boomer generation begins to reach a peak, clothing retail companies need to appeal increasingly to the generation behind them. Millennials constitute a high proportion of both the Gilt and HauteLook databases, which is what has made these flash-sales sites so attractive to growing retail brands. Today, HBC is focused on leveraging Gilt’s mobile and personalization attributes to drive Saks growth, as well as its other owned brands, and it will be interesting to see how the battle between Saks and Nordstrom for increased market share evolves over the next few years.
You can learn more about personalizing your marketing and appealing to new demographics at Incite Summit: West.
May 2016, San Francisco
The Incite Summit: West is the USA's best brand-focused marketing conference. Taking place in San Francisco on 18th and 19th of May, we will bring together Chief Marketing Officers from major brands to debate one key issue. How you can get a more granular picture of your customer and then engage in "one-to-one marketing". We'll focus on perception, precision and personalization.