CNBC reports that Nordstrom is compensating for muted projections for the coming year in part by launching “an online marketplace on Nordstrom’s website to expand its merchandise assortment with inventory that’s owned and sold by third-party vendors. Marketplaces tend to be more profitable for retailers, since the company does not take on the risk of buying inventory that customers may not like and get stuck with marking it down.”
KC’s View:
It’s interesting. If I am reading the CNBC story correctly, the point is made that while Nordstrom had a solid holiday quarter in 2023, it doesn’t seem real confident ab out 2024.
The story says that “similar to other retailers, Nordstrom has felt the squeeze from consumers becoming choosier and more price-conscious while dealing with inflation and higher interest rates. It has also struggled with company-specific problems, such as lagging sales at its off-price retailer, Nordstrom Rack, and too much of the wrong inventory, which led to higher levels of markdowns.”
That said, Nordstrom Rack seems to be the growth engine on which management is counting – it opened 19 of the format last year, and plans to open 22 more this year. No new Nordstrom mainstream stores are planned.
And then, there’s the new Marketplace. I know it seems like a low risk enterprise, since Nordstrom won’t actually own the inventory. And that seems like a pretty good idea if you’ve lately been stuck with “too much of the wrong inventory.”
But for me, the question is whether this dilutes the customer experience. I’m not sure Nordstrom should be a long-tail retailer. Rather, I think it should be a curator with a firm sense of its own taste and style.
Sure, that’s a gamble. Fashion always is.
But the next thin you know they’ll be launching a retail media network and proclaiming that advertising will be its next great source of revenue.
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