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Nordstrom digital sales down 16%, but retailer makes progress on inventory manag...

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Nordstrom digital sales down 16%, but retailer makes progress on inventory management and supply chain

By Stuart Lauchlan

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November 23, 2022

Dyslexia mode

Summary: Nordstrom put in the work early on supply chain efficiencies. That could end up serving the retailer well in a time of macro-economic uncertainty.

NOrdstrom

In what’s now established as a wider Vaccine Economy retail trend, Nordstrom has seen its total digital sales decline 16% year-on-year as customers reverted to pre-pandemic behaviors and ventured back into real world stores. That said, digital still made up over a third (34%) of total sales.

As per CEO Erik Nordstrom, the retailer’s omni-channel efforts of recent years are helping the firm to adjust to the channel shifting going on:

Our market capabilities help us engage with customers by delivering convenience, connection and greater access to product, no matter how they choose to shop. Customers clearly value our interconnected model with a strong store fleet, two unique banners and omni-channel capabilities linked at the market level. Order pick-up represented 12% of nordstrom.com demand this quarter, an increase of 200 basis points versus last year.

We are also leveraging our digital capabilities to extend our unmatched one-to-one store experience to a digital world. Our goal is to personalize the digital experience with discovery supported by a broad product assortment, convenience powered by our market strategy and connection via our people and experiences.

We are evolving digital discovery and driving higher engagement with enhanced content, a refreshed shopping experience that includes redesigned product pages and smarter product search capabilities. We are also improving the digital purchase journey with better imagery and product descriptions to help customers make more informed purchase decisions and minimize returns.

Supply chain

The firm is also being helped at present by its push to improve its supply chain efficiency. Chief Brand Officer Pete Nordstrom explains:

Last year, in response to our growing digital business and increasing inflationary cost pressure, we launched a series of work streams to drive efficiency and reduce supply chain costs while also elevating the customer experience. Improved inventory flow is a key component of this work and an integral part of our Closer-to-You strategy.

By optimizing our supply chain, we are able to provide our customers with greater selection and faster delivery speeds. We're reducing the number of product touch points through our network, which decreases our cost and gets the product in a sellable position faster, which improves our regular price sell-through. As part of our supply chain optimization efforts, we are also continuing to increase productivity in our distribution and fulfillment centers and improving the consistency of unit flow through our network. We are very pleased with the early results we're seeing from this work.

There’s also been a re-allocation of resources in the supply network, he adds. To that end, the firm has shuttered a smaller omni-channel fulfillment center in Los Angeles that is no longer needed as well as closing down the third-party technology tested in that center, while at the same time scaling up its West Coast Omni-channel Center to support the demand in that region.

Nordstrom (P)  points to click-to-deliver speed as being of particular relevance to customers:

This quarter, we improved click-to-deliver speed by 15%. As we improved unit flow through our network, we increased fulfillment center flow through by 28% versus last year and reduced our variable handling cost per unit by 3%. In fact, despite inflationary pressures this quarter, we decreased our variable supply chain cost as a percent of sales by approximately 100 basis points, compared to last year.

Overall, Nordstrom (E) concludes:

Though there is continued macro uncertainty, we are pleased with the actions we've taken to prepare for this environment and the progress we've made in improving our agility. The capabilities we built with our Closer-to-You strategy, digital assets assets and supply chain optimization prepare us to manage short-term pressures.

My take

There's certainly a lot of uncertainty out there. Macro-economic conditions and customer behavior is moving rapidly, and we feel really well prepared for that uncertainty.

There’s some validity in what Nordstrom (E) says as he notes:

We're not just starting right now of looking at kind of the volatile economic times out there and making adjustments. These adjustments were put in place at the end of last quarter.

Now, let’s see how the Holidays pan out.

Image credit - Nordstrom


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