Nordstrom Becomes First Physical Retailer to Surpass 50% Digital Earnings

Need to Know

• The retailer reported that 54% of its Q3 earnings came from digital channels, marking the first major retailer to push past the 50% mark.
• Nordstrom is using its stores as fulfillment centers, with 25% of online orders for the quarter picked up in-person at Nordstrom or Nordstrom Rack locations.
• The retailer benefitted from shiftings its anniversary sale from Q2 to Q3; the majority of those sales took place online.
• Digital sales accounted for $1.6 billion in the quarter ending on October 31.

Analysis

Nordstrom hit an unprecedented milestone on November 24, becoming the first brick-and-mortar retailer to report the majority of its earnings came from e-commerce for the most recent quarter.

Nordstrom reported that 54% of its earnings for Q3 came from online sales, with digital accounting for $1.6 billion of overall sales for the retailer in the quarter. The company shifted its annual anniversary sale from Q2 to Q3; 60% of sales during that time were made online, with 80% of those sales coming from Nordstrom loyalty program members, which helped benefit its digital bottom line.

The company’s CEO, Erik Nordstrom, said that digital sales for the same period last year accounted for 33% of sales, adding that, while the company is still facing Q4 with some uncertainty, “we’re in a much better position now than we were before.”

“We view this as a fundamental shift in shopping behavior, and we are well-positioned to support our customers across both Nordstrom, and Nordstrom Rack (outlet stores) with a scalable platform that has been built to support many years of growth,” Nordstrom said on the company’s earnings call. “But we also know that we must translate the heritage of service that defines us more effectively in this digitally connected world. It means delivering personalization at scale by creating greater linkages between the digital and the physical experience.”

One of these linkages has been the use of Nordstrom’s more than 350 physical stores as fulfillment centers for online orders, 25% of which were picked up by customers in-store at Nordstrom or Nordstrom Rack locations. Nordstrom began its focus on click-and-collect in March of this year, just prior to the pandemic hitting North America; even at that time, Order Pickup was the retailer’s most profitable transaction type.

During the earnings call, Nordstrom also revealed that, during Q4, “virtual styling accounted for roughly 30% of all styling appointments, and sales from personalized looks created by our salespeople tripled in volume from the second quarter.”

“Going forward, we see opportunities to further leverage these digital capabilities to increase the connection between our salespeople and customers,” he said. “At the heart of our value proposition is this principle of ‘closer to you,’ which is how our market strategy comes to life in helping customers feel good and look their best.”

It wasn’t all good news for Nordstrom over the quarter: net income fell to $53 million, from $126 million during the same time last year, while total revenue for the company was $3.09 billion, down from $3.67 billion a year ago.