Pete Nordstrom on Nordstrom Inc.’s Merchandising Philosophy

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It’s a mix of curiosity, openness to new types of vendor partnerships and expanding the assortment online that play a major part in Nordstrom Inc.’s merchandising strategy.

There’s also a pretty steady turnover of labels carried by the retailer that helps keep the assortments fresh and winnow out what becomes less relevant.

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“We have a turnover of 10 percent of vendors every year based on things that aren’t valid anymore and new things that come on,” said Pete Nordstrom, the company’s president and chief brand officer, who spoke Tuesday morning at the National Retail Federation’s annual “Big Show” convention at the Javits Center in Manhattan. A socially distanced Nordstrom appeared on screen from Seattle, where Nordstrom is based, rather than in person, during his conversation with Phil Wahba, a senior writer at Fortune Magazine.

“There is always this evolution of brands that is one of the great things about being a department store. It’s important to consider being open to things we haven’t been open to before.”

Pete Nordstrom - Credit: Grant Hindsley
Pete Nordstrom - Credit: Grant Hindsley

Grant Hindsley

Nordstrom said the company is striving to become more important to brands, particularly those most coveted by Nordstrom shoppers, by extending the offer to more than what’s just put in the stores, meaning merchandising more on

“Burberry, for example, sells a lot of good things,” said Nordstrom. “They have stuff for pets, for kids. They have all kinds of things and our customers want to buy them. We want to be the best place in North America for Burberry. We have to figure out a way to offer the breadth of what they do.”

Nordstrom, he said, has been widening “the aperture” of what the company offers to shoppers, especially in the home and sports apparel areas.

“We were never in the home business in a very big way,” said Nordstrom. “As online became a bigger part of our business, we realized, gosh, we could have a big online offer that could be supported in a physical environment as well. That really opened up the aperture for us to do more.”

In February 2021, Nordstrom Inc. said it intended to broaden its digital assortment from 300,000 items to potentially 1.5 million over the next three to five years.

Last year Nordstrom opened a two-level home area at its 57th Street women’s flagship in Manhattan. It’s filled with lots of novelty and gift items, and unique things including coffee table books, stylish kitchen wares, throws and pillows.

“Home is such a broad-based business with a lot of competition,” said Nordstrom. But in New York City, there was “an eye to doing things that were unique to New York.…A big part of what makes a department like that work is the spontaneity of it: ‘I didn’t come in looking for that, but that’s cool so I want to buy it.’ That’s the fun part of retailing for us and I think it’s something that we’re good at, and then we have to make sure we have the stuff people would expect to us and make sure we are in stock on that. You think about the home business in the city and how different it is in suburban America.”

With its three-month-old partnership with Fanatics, “We were able to get into business with them in a way where we really didn’t have ownership of the product and really serve as more of a platform to offer it up to our customers online and see where that takes us. It’s really reflective of where we can go and how things have evolved,” from the traditional ways of working with vendors and brands.

Nordstrom is seeking to capture a greater share of wallet from current customers and a new audience of sports fans and for the first time is offering thousands of licensed sports products through Fanatics. “Clearly, our customers buy that stuff, too. When you get into those sports apparel things and you want to represent all the teams and all the communities we serve, that’s a lot of SKUs,” said Nordstrom. “The place to start is to offer things broadly and over time focus on where customers might be interested. They [Fanatics] have different things they do with different partners. It’s early days for us to be prescriptive about that. We are really in much more of a learning mode. They’ve been great partners. They have a lot of capability. They’ve got a lot of data and information about customers. So it’s early days. With something like this, the curation, I’m not sure that is as important,” at least initially. “It’s really not so much of a concern, particularly with something like this.”

Speaking generally about Nordstrom’s intent to grow its online assortment, he said: “It’s good to have new choice count. It’s good to have lots of choice count and it’s not good to have something overwhelming. I don’t think our goal is to be the aggregator of everything. We want to have a point of view. Our point of view is really broad. We want to be about quality.”

He said it’s important “how we paginate and work the website so it feels complimentary to the broad base of the things we do. We want the brand to show up in a great elevated way online, too.

“I don’t have a crystal ball about how this all works, particularly how it works together with our physical stores. Every day we are learning, growing and evolving. Hopefully, it’s in a way that makes customers happy,” Nordstrom said.

Last July Nordstrom acquired a minority interest in the Topshop, Topman, Miss Selfridge and HIIT brands owned by Asos, the London-based fashion website. It’s an unusual type of partnership, considering Nordstrom has not been in the business of investing in market brands it sells at stores and online. The deal is designed to help grow and ensure the future of the four British brands, in particular the trendy and affordable Topshop women’s and Topman men’s labels and reflects Nordstrom’s efforts to bolster its appeal to younger shoppers.

“Asos came about because of our relationship with Topshop. It was a really big business for us and still is. Topshop was being sold, Asos ended up buying it. There was a reason for us to get together.” With the Asos partnership, “We are still in that stage of getting that going,” said Nordstrom. “How we do business together is really different” than how Nordstrom traditionally does business with brands. “They have never sold to anybody else,” Nordstrom said, adding his company in this case is operating more like a platform to offer the full breadth of what Asos offers. “We are working through all the infrastructure parts of it.”

With Nordstrom’s broadening online assortment, the search function, personalization and data become even more important, so the experience for shoppers isn’t overwhelming.

During the pandemic, Nordstrom’s e-commerce represented about 50 percent of its total sales. It’s since settled back in the 40 percent range. “We don’t get particularly hung up on how much business we need to do in this or that channel. It’s going to find its natural level,” based on how the customer wants to shop. “We just want to be capable and ready to evolve that way in real time.”

Nordstrom does have a track record of attracting direct-to-consumer brands, and Nordstrom explained why. “What we offer is that we have a lot of customers, high-quality customers, and for them to be able to get in front of them in way that doesn’t involve having to market to everybody and the expense of acquiring new customers.”

In addition, “We are interested and willing to work with new brands and have that sense of flexibility to do what we can to partner together and it’s been great. The perfect scenario for us is to have a well-known, highly sought brand that you can’t find in a lot of places. I don’t think we are great at making an unknown brand known. But we are good at making a known brand bigger and better….We welcome those chances to work with new brands like that. It’s really a fun part of the job.

“You don’t have to be in wholesale to be at Nordstrom. There are other ways to do business together. It doesn’t mean it’s easy to do all that stuff but there is a willingness and desire to try to find a fit.”

Discussing the supply chain bottleneck, Nordstrom said: “At a certain point, there is only so much product you can get through your system. So it is a limiting factor for us how many units can we get through.” Nordstrom, who joined his family’s company as a stock boy, said when he came a buyer: “We really didn’t talk about how many units as much as we talked about dollars as we were looking at open-to-buys and inventory levels.” But that’s changed.

“Ultimately, you want the inventory you to get into an available-to-sell to customers position as quickly as possible. That requires a lot of expertise and capability behind the scenes. We have invested in that, but we would be the first to say we have a long way to go, too. It’s different from how it used to be. There is critical customer stuff that goes into the supply chain that never really came up 20 years ago.”

Nordstrom also spoke about the company’s Rack off-price business, which had a tough 2021 and dragged down Nordstrom Inc. results. He spoke of its evolution, initially as a clearance vehicle for the full-line department stores, then subsequently buying into the assortment with brands, and then adding

“There is a skill set and whole way of doing business in off-price that is a little bit different than in the full price banner,” Nordstrom said. “For us to maximize our opportunity in off-price, we have to find a hybrid and home in further on :some of the specific skill sets that enable our business to work better. That’s always been true to a degree but we have grown to a point where it’s important that we are more intentional about that. There is a big opportunity for us to do better in the Rack business and we are excited about it.”

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