Struggling Nordstrom is banking on exclusivity to compete with Amazon and overcome sales woes
- As Nordstrom opens up its Anniversary Sale to the public on July 19, the company is looking to rebound from a recent sales slump.
- Nordstrom traditionally allows Nordstrom card holders to access the deals first, an exclusivity move that a recent report by Avionos found may be advantageous to setting it apart from competitors like Amazon.
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Though the Nordstrom Anniversary Sale officially opened to the public on Friday, July 19, the bargain hunting had already been well underway for an exclusive group of people - Nordstrom card holders.
For several years, the department store has granted its most loyal shoppers special access to the annual sale, an effort to generate buzz and clout in a market saturated with major sale events, most notably Amazon Prime Day. As Nordstrom extends the sale to the non-cardholding public, marking the close of the member-only period that kicked off on July 12, analysts say its sales performance will be an important litmus test for the future of the struggling retailer.
In a call with investors in May, Nordstrom reported its revenue declined by 3.3% year-over-year and comparable sales dropped by 3.5% year-over-year in the first quarter of 2019. Shares of the company plunged 10% following the underwhelming earnings, hitting an eight-year low.
Analysts expressed concern over Nordstrom's lackluster results after the call, particularly regarding its discount business, Nordstrom Rack, which the company had recently invested heavily in, according to Reuters.
"While challenges to the full-line business are, at least in part, to be expected, the deterioration at the off-price division is more troubling," Neil Saunders, managing director of GlobalData Retail, said in a statement following the earnings report.
In a recent survey on shopper behavior conducted by e-commerce consultancy company Avionos, consumers named loyalty-based promotions as a top reason for making purchases from a brand like Nordstrom over Amazon. Additionally, the study found that 63% percent of online shoppers surveyed appreciate exclusive rewards from loyalty programs.
Still, even by currying favor with moves like providing early access to the anniversary sale, Nordstrom is still fighting an uphill battle against Amazon. The Avionos study found that when price and quality are equal, 40% of consumers say they're more likely to shop with Amazon due to familiarity and the volume of product reviews.
"Many of the variables online shoppers attribute to positive experiences are also the areas where digital leaders like Amazon have an upper hand," the report reads.
Ultimately, while the impact of the Anniversary Sale on earnings remains to be seen, Nordstrom is aware that it is vital to the business, and noted this in its annual report.
"Due to our Anniversary Sale in July and the holidays in the fourth quarter, our sales are typically higher in the second and fourth quarters than in the first and third quarters of the fiscal year," the report states. "Any factor that negatively impacts these selling seasons could have an adverse effect on our results of operations for the entire year."