Nordstrom’s eight-year run with its Trunk Club subscription business is coming to an end as the luxury retailer says it’s taking its customer styling efforts in a different direction, with greater emphasis on in-store and online fashion advice.
In announcing plans to “sunset” the brand that it acquired for $350 million in 2014, the Seattle-based retailer said the move was a reflection of customer demand.
“Customers spend seven times more and report higher levels of satisfaction when engaging with a stylist, either in-store or online,” CEO Erik Nordstrom said on the company’s Q1 earnings call Tuesday (May 24), noting that in-store styling was still the top choice but that demand for digital advice was seeing rapid growth.
Nordstrom said the retailer’s styling program was a powerful engagement driver that brings both convenience and deeper customer connections to the brand, and said the strategic shift was simply a matter of redirecting resources to the services that customers value most.
“I want to be clear; this move reflects our belief and commitment to styling and we are dedicated to growing and investing in these services,” Nordstrom said, pointing to a range of services offered from low-touch online outfit inspirations to high-touch personalized relationships with a stylist.
An Integrated Transformation
The Trunk Club news comes alongside other moves being made to better integrate the operations of the 120-year-old brand, which today runs 100 flag stores and 247 Nordstrom Rack locations in the U.S. and Canada.
“Buy Online, Pickup In-Store also remains our most profitable customer journey and one of our highest satisfaction customer experiences,” said the 56-year-old CEO who began working at his grandfather’s company in 1978. “Our market strategy helps us engage with customers through better service and greater access to product, no matter how they choose to shop,” he added, noting the unprecedented level of omnichannel convenience customers now enjoyed via the store fleet and digital services.
With order pickup accounting for 10% of Nordstrom.com sales in Q1, the retailer said it planned to expand the next-day service in Q2 to over 60 Rack locations to capture this nascent and growing trend within its affluent customer base.
“Customers utilizing in-store pickup have higher engagement and spend three and a half times more than customers who don’t utilize the service,” the younger Nordstrom brother said.
At the same time, the company said that it will also begin selling Allbirds shoes and apparel June 1 in select stores with plans to ramp the brand partnership to its digital platform later this summer.
The Rebound
As much as investors applauded Tuesday’s surprise results with a double-digit jump in shares of Nordstrom, that bounce came on the heels of a volatile two-year slump that has nearly cut the stock in half over the past 12 months.
Even so, Nordstrom’s reported double-digit sales growth at both its labels and raised full year guidance stood in contrast to the struggles many of retail peers have been disclosing in recent weeks, as customers came back to stores ahead of what is projected to be a busy summer of special occasions and outings.
“We were excited to see customers shopping for events and updating their closets this quarter,” Nordstrom President and Chief Brand Officer Peter Nordstrom said on the call, noting that men’s apparel was the retailer’s strongest category in Q1, and that digital sales were flat as a result of the shift.
In addition to greater use of “pack and hold inventory” tactics to ensure the retailer’s shelves are stocked, the company said it was also deepening its use of data science and digital tools, such as virtual style boards for stylists.
While macroeconomics headwinds are a concern for Nordstrom and are impacting its labor and order fulfillment efforts, the retailer said they have not yet trickled down to the customer level.
“At this point, we have not seen inflationary cost pressures adversely impact customer spending, which we believe is due to the higher income profile and resiliency of our customer base,” CFO Anne Bramman said, pointing to increases in customer counts and spend-per-customer in Q1 versus the prior year.
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