Nordstrom's New Site No Shoo-In
The site will be the first offshoot of the Seattle company's August decision to spin off its Internet and $200 million catalog businesses into a separate Nordstrom.com Inc. entity. The aim is to accelerate its one-to-one retail business and become a leader in fashion and e-commerce clothing sales.
"Shoes is already one of our hottest selling items online," said Colleen Chapman, marketing director at Nordstrom.com. "This tells us that there is a significant demand and that customers want to buy shoes online."
Nordstromshoes.com will function as a sub-site at Nordstrom.com, with a navigation bar that allows visitors to move between the two. Nordstrom.com, which retails an array of apparel and accessories, currently stocks 200,000 pairs of shoes. Once the new site comes online, inventory will jump to 20 million pairs in anticipation of holiday sales.
The hundred-fold jump in shoe inventory is based on company conviction of strong consumer demand from its target audience of women, though men and children are also part of the focus.
Ninety-eight-year-old Nordstrom started by selling shoes. Last year, footwear accounted for 22 percent of Nordstrom's sales of nearly $5 billion from 100 stores in 23 states across the United States, catalogs and the Nordstrom.com site.
Though the company would not discuss Web sales, the online business garnered $1.3 million in anniversary sales in July, according to media reports quoting Dan Nordstrom, Nordstrom Inc. co-president and Nordstrom.com CEO.
"Shoes serve as a logical category to establish the company's larger Internet image," said Chapman. "The long-term plan is to replicate this effort in areas such as apparel, accessories, gifts and jewelry. In the same way the company was built, beginning as a shoe store and moving into apparel, the plan is to achieve a substantial market share in footwear, and then leverage the customer relationships into a much wider range of merchandise."
But footwear is among the most difficult items to sell online, according to Forrester Research, Cambridge, MA.
"Nordstrom's background is showing in its early focus on footwear, but is this really the right first step in the online world?" asked Evie Black Dykema, senior analyst for consumer e-commerce at Forrester.
This year, online sales of athletic, casual and dress footwear is expected to touch $121 million. In comparison, jewelry and accessories will notch $438 million, and clothing emerges as the online apparel sales category winner with 1999 projections of $1.06 billion.
In 2003, Forrester estimates, clothing sales online will zoom to $16.7 billion, jewelry and accessories to $2.58 billion, and footwear to $902 million. In that year, the Internet will account for 9 percent of clothes sold both in terrestrial and online stores and 6 percent for jewelry. But only two out of every hundred consumers will buy shoes online.
"I was surprised that they opted to lead with a laggard category like online footwear," said Dykema. "We project that only 2 percent of footwear will be sold online by the year 2003 since few shoes fit the same way and consumers will want to try new sizes."
Shoes are not only hard to buy over the Internet or from a catalog, Forrester told clients in a May brief, but the only ones that sell are the brand names where people are confident in the size.
A Fit Wizard tool on the Nordstrom site aims to make shoe buying online easy. Consumers provide shoe size information, which Nordstrom then compares using technology to finally recommend a size.
"We've built in tools that guide the user in their shoe selections," Chapman said. "[And] returns are never a problem at Nordstrom.com. Each shipment includes a convenient return-addressed oversize envelope that can be easily dropped into a mailbox. Or the customer can return the shoes during their next shopping trip to a local Nordstrom."
The return envelope comes with shipping prepaid. Then Nordstom's deducts $3.95 from the customer's return credit to help cover the shipping expense.
The marketer has signed agreements with such footwear companies as Skechers, Cole Haan, Stride Rite, Dr. Martens, Kenneth Cole, Allen Edmonds and New Balance. It will also stock its own Nordstrom brands. More deals will be signed in the ensuing weeks.
Nordstrom's stores will throw their weight behind the launch through prominent Web site-related messages dotting the premises. Details weren't available at press time.
A $17 million ad spend will be spread between ad shop Fallon McElligott, Minneapolis, and Avenue A, Seattle. Fallon will handle traditional advertising on the Nordstrom account and Avenue A online.
The November through December humorous ad campaign, whose theme is under wraps, will break in national magazines, and on network and cable TV, billboard station platforms and online media like portals and Web sites.
Nordstrom.com will be backed by an initial investment of $26 million. San Francisco venture capitalist Benchmark Capital will inject $15 million for a 15 percent stake of Nordstrom.com and the Madrona Investment Group in Seattle will invest $1 million for a proportionate 1 percent share. Nordstrom will own the remaining 85 percent.
Such funding will be routed toward site development, software expenditures, acquiring customers and the bulk of it on the new ad campaign.
"We'll be investing in the business for several years," said Chapman. "Ultimately, profitability depends on the rate of Internet acceptance. Right now, we're focused on positioning ourselves on a level playing field with pure-play Internet companies."