News Feature | February 26, 2015

Nordstrom Plans To Spend $1.2 Billion On E-commerce, Stores in 2015

Source: Innovative Retail Technologies

By Brianna Ahearn, contributing writer

Nordstrom Ecommerce Store Investment

Luxury goods and fashion retailer Nordstrom has never shied away from technology, and one of its most recent moves was partnering with eBay to develop “smart fitting rooms” to bridge the gap between digital and in-store shopping. The smart fitting room was just one step in the expansive plan Nordstrom has to achieve domination in the fight for e-commerce dollars. On February 20, 2015, Fortune.com reported that the retailer had announced an aggressive increase of its capital spending. Nordstrom plans to spend $1.2 billion on e-commerce and stores in 2015, which is a large increase over the $750 million the retailer spent in 2014. Over the next five years, Nordstrom expects to invest $4.3 billion or 5% of their sales, with 35% spent on technology to integrate the in-store and online customer experience.

Nordstrom held its fourth-quarter earnings call on February 19, 2015 with President of Nordstrom, Blake Nordstrom, claiming 2014's results as a “watershed moment” in the retailer's history. During the call, he shared the retailer's plans for the year to come. Among the highlights is the news that three of Nordstrom's existing flagship stores will be remodeled in Seattle, Chicago and San Francisco and three new flagship stores will be established in Vancouver, Toronto and Manhattan. In addition, the retailer has planned to open 27 Nordstrom Rack stores in 2015, with the goal of 300 Nordstrom Rack stores total by 2020.

Nordstrom is currently building their East Coast fulfillment center outside Elizabethtown, Pennsylvania, with the center offering a reported 369 full-time jobs within the next three years. The fulfillment center is slated to open summer 2015 and features 672,000 square feet, plus a 470,000 square foot mezzanine. Once open, the center will fulfill orders made on Nordstrom.com, Nordstrom.com catalog orders, as well as orders made on the retailer's mobile app. In a press release from last January, the retailer cited e-commerce as the fastest growing area of their business and the need to help expedite orders quicker. The new center is designed to help cut down on delivery times for Nordstrom's East Coast customers. In the call, Erik Nordstrom, President of Nordstrom Direct, remarked, “almost half of our customers are within the two-day ground delivery of that Pennsylvania fulfillment center.” The transcript for the call reveals that free two-day shipping will be a focus for the retailer, however, there's no announcement for that feature at this time.

Erik Nordstrom revealed that one of their best strengths in e-commerce was allowing customers to return Nordstrom.com purchases in-store, with over 60% of their Nordstrom.com returns ending up in their full-line stores, and 70% of their HauteLook/Nordstromrack.com returns are in-store returns. Nordstrom purchased HauteLook, a flash sales site, in 2011 for a reported $180 million in Nordstrom stock, and a three-year earnout of up to $90 million. By allowing in-store returns from Nordstrom.com and HauteLook/Nordstromrack.com, the retailer increases their sales because customers returning goods still often make a purchase in-store. For 2015, they project a 20% sales increase of Nordstrom.com's business.

The retailer also views their loyalty program Nordstrom Rewards, as an “important way for us to deepen our engagement with customers and attract new customers,” according to Blake Nordstrom. He reported that the retailer saw over one million new members in 2014, representing a 14% increase from 2013. In 2015, Nordstrom will focus on improving the program by giving customers more choices, and said that their Rewards members compromise 40% of their sale volumes.