Analyst says Nordstrom has become a 'victim of its own success' as customers ditch stores to shop on its website
- Nordstrom's online business is thriving, but at least one analyst says it's happening at the expense of its physical stores.
- The online store has been driving growth for Nordstrom in recent years.
- Digital sales now represent 30% of the retailer's total sales.
Nordstrom's online business is thriving, but at least one analyst says it's happening at the expense of its physical stores.
The department-store chain reported third-quarter earnings after market close on Thursday.
And while its overall same-store sales numbers exceeded expectations - they were up 2.3% during the quarter - a closer look at the breakdown of these numbers reveals that the majority of Nordstrom's growth stemmed from its online platform and off-price channel.
Same-store sales at its full-price stores were up 0.4% during the quarter. Meanwhile, digital sales growth is up 20% year to date and represented 30% of sales across the business, which includes its off-price chain, Nordstrom Rack.
"In our view, one of the main issues is the cannibalization of store sales by the online operation. Nordstrom's full line .com business has traditionally performed well, however, a lot of the growth has come from existing consumers who, because they shop online, end up visiting stores less," Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients on Thursday.
He continued: "This reduces impulse buying and the exposure to new parts of the offer. In a sense, Nordstrom is a victim of its own success and needs to explore ways of driving more visits to stores."
The results on Thursday were certainly not an anomaly either. Nordstrom's online and off-price platforms have been leading its growth for some time.
Saunders writes that Nordstrom should focus on bringing customers back to the store by expanding its homeware selection and adding more lifestyle products, such as beauty styling.
Nordstrom has already been testing more experiential concepts in some of its newer stores like its menswear-only store, which opened in April and offers denim personalization bars, a restaurant, and shoe-shining service.
"This balancing out is important not only to counteract the rise of online but also to protect market and customer share as other department stores like Macy's improve their offers," he wrote.