"The significance of direct-to-consumer (DTC) labels" - Exploring Nordstrom's commitment to DTC brands

"The significance of direct-to-consumer (DTC) labels" - Exploring Nordstrom's commitment to DTC brands

Nordstrom Embraces Digital-First Brands to Stay Relevant and Attract Younger Shoppers

Department stores like Nordstrom are adapting to the changing retail landscape by partnering with digitally native brands. This strategy involves integrating these brands into both their physical stores and omnichannel platforms.

One such partnership is with Boy Smells, a brand that shares similar values of diversity and inclusion with Nordstrom. In 2021, Boy Smells partnered with Nordstrom to sell its Cologne de Parfum collection, featuring both masculine and feminine olfactive notes, exclusively from April 8, 2021 to September 2021.

Nordstrom has also forged partnerships with several hot DTC brands like Away, Thinx, Skims, Everlane, and Reformation. These partnerships often include exclusive products only sold through Nordstrom. For example, Ogee Beauty, a digitally native clean beauty brand, will bring its cult-favorite products into physical Nordstrom stores starting in 2025, marking Ogee’s shift from DTC to a hybrid model targeting prestige retail.

The partnership with Rent the Runway is another significant move. Rent the Runway announced in August 2021 that it's permanently closing its owned retail stores, making Nordstrom drop-off areas one of the few physical touchpoints the brand has with customers.

Nordstrom's strategy is not just about attracting younger, digitally savvy consumers but also about meeting their evolving preferences. The department store has partnered with environmentally sustainable and socially responsible brands like Everlane and Reformation to cater to Gen Z and millennial consumers who value authenticity, clean/organic products, and hybrid shopping options.

Technology plays a crucial role in Nordstrom's strategy. The retailer uses its “Customer Journey Analytics” platform to unify customer data across channels. This allows sales associates to access online browsing history and personalize in-store interactions, lifting cross-channel conversion rates by 23%.

During the pandemic, Nordstrom was particularly hard hit. Foot traffic to full-line stores plunged 98.3% and 93.3% year over year in April and May 2020, respectively. However, e-commerce represented the majority of sales during the all-important holiday quarter in 2020.

Nordstrom has also ventured into unique pop-up experiences. In late 2019, Glossier launched its perfume, Glossier You, at seven Nordstrom locations in pop-up style venues. Warby Parker launched four sunglass styles exclusively sold in Nordstrom during a month-long pop-up in six of its stores.

Casper, the DTC mattress brand, began selling its mattress and sleep accessories in 31 of Nordstrom’s full-line stores in November 2020, marking the brand's 23rd retail partnership. Exclusives generate interest among consumers and create a sense of scarcity for the brands' products, which can protect the brand from stepping on its own website traffic.

In 2012, Nordstrom made a $16.4 million minority investment into DTC menswear brand Bonobos. Bonobos was later sold on Nordstrom's website and 20 of its full-line stores, marking the first time Bonobos was sold in a physical setting outside its New York showroom-style store.

Nordstrom's strategy is to go with younger customers who value merchandise assortment and brand relevance more than fashion editors and designers. The primary customer of Nordstrom falls within the Gen X or baby boomer demographics, and the department store has created strategic partnerships to target and expand its consumer base.

As the vaccine becomes more widely available, finding ways to lure shoppers back into stores will become increasingly important to Nordstrom as it fights for consumer's dollars against things like experiences and eating out. Nordstrom aims to capture more market share and a better lifetime value by attracting younger customers who are adept at shopping online.

1. Nordstrom is forming partnerships with digitally native brands like Boy Smells and Ogee Beauty, incorporating them into both physical stores and omnichannel platforms.
2. The department store has ventured into unique pop-up experiences, hosting pop-ups for brands like Glossier and Warby Parker.
3. In their strategy, technology plays a significant role with Nordstrom using its "Customer Journey Analytics" platform to unify customer data across channels.
4. During the pandemic, e-commerce sales represented the majority of Nordstrom's sales, while foot traffic to full-line stores significantly decreased.
5. Nordstrom has invested in DTC brands and incorporated them into their stores; an example is the partnership with Bonobos, which was later sold on Nordstrom's website and in-store.
6. Partnerships with environmentally sustainable and socially responsible brands like Everlane and Reformation cater to younger consumers who value authenticity, clean/organic products, and hybrid shopping options.
7. As the vaccine becomes more widely available, Nordstrom aims to attract younger customers back into stores, battle for consumer's dollars against experiences and dining out.
8. The retailer is expanding its consumer base by targeting Gen Z and millennial consumers, shifting from being relevant to fashion editors and designers to focusing on merchandise assortment and brand relevance.
9. Exclusives generated by partnerships help create a sense of scarcity for the brands' products, protecting them from stepping on their own website traffic.

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