Surging US online sales
Consumers are increasingly shopping online due to the convenience involved and better price offerings. According to the US Census Bureau, US online sales grew by 16.2% on a year-over-year, seasonally adjusted basis to $78.1 billion in the third quarter of 2014. Currently, online sales account for 6.6% of all US retail sales. Analysts expect this percentage to increase in the future.
Nordstrom’s online sales
Nordstrom’s online business has been registering about 30% growth annually for the past three years. The company acquired one million new customers in 2013. In fiscal 2013, Nordstrom.com generated about 13% of the company’s revenues. To attract more customers, Nordstrom expanded its merchandise by 50% in fiscal 2012 and by 30% in fiscal 2013.
Initiatives to boost online sales
Nordstrom is investing heavily to enhance customers’ online shopping experience. The company has upgraded its website, updated its mobile app, increased its delivery speed through fulfillment centers, and has expanded its product assortment.
In August 2014, Nordstrom partnered with Like2Buy. Like2Buy allows shoppers to purchase products directly through Nordstrom’s Instagram page.
Nordstrom’s recent partnership with Twilio has provided Nordstrom with a platform from which the company can send merchandise images to customers via text message. Twilio is a cloud communications company.
Inorganic growth strategy
Nordstrom is also expanding its online business via acquisitions. In 2011, Nordstrom bought HauteLook, an online retailer that offers flash sales of designer products. By the end of 2013, HauteLook’s membership had grown to 16 million, representing a 300% increase. In August 2014, Nordstrom purchased Trunk Club, a men’s online clothing and personal styling company.
Nordstrom’s upscale peer Neiman Marcus announced the acquisition of mytheresa.com, an online luxury business, in September 2014. Other peers like Macy’s (M), Dillard’s (DDS), and the TJX Companies (TJX) are also expanding their online businesses. In December 2012, TJX acquired Sierra Trading Post, an off-price Internet retailer.
The Consumer Discretionary Select Sector SPDR Fund (XLY) had 6.21% holdings in multiline retail companies like Nordstrom and 10.67% holdings in Internet and catalog retail as of February 11, 2015.
Nordstrom's operating margin declined from 11.5% in fiscal 2011 to 11.1% in fiscal 2012 and 10.8% in fiscal 2013.
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