If you've spent some time in the Instagram fashion bubble recently, you probably know that Nordstrom Inc. is organizing a mass promotional event that will go up in style Friday. It's called Anniversary Sale, and it's a week of price reductions on new goods that the retailer has done considerable work to make the fashion influencer set to hype. (2)
This time, the offer bonanza is a particularly important test for the department store. Some have to do with the times. Wall Street sentiment has taken root in this chain over the past few months. In fact, Nordstrom is the title with the worst performances of the S & P 500 index from the beginning of the year. (The heavyweights of the Macy's department store Inc. and Kohl's Corp., should be noted, they are not far behind.)
A particularly pronounced decline in the share price came after his report on first-quarter earnings, which correctly triggered alarm bells for investors. Sales fell 3.5% compared to a year earlier in that period following a series of missteps: it changed the way it distributed prizes to loyalty program members and that didn't go well; it was sold out on key beauty items; and did not have the right mix of entry-level and higher-priced items in the womenswear sector.
That price issue could be a particular concern. UBS retail analyst Jay Sole wrote in a July research note that, in his recent customer survey, 5% more buyers said that Nordstrom has become more expensive than stated. 39; last year. Of course, Nordstrom does not aim to be a discount retailer; weakening the perception of prices would be a worse result for, for example, that of Kohl. But this still represents a risk that Nordstrom is alienating former devotees and may not be able to attract younger buyers.
The Anniversary Sale, with its abundance of offerings, is a good opportunity to throw away that perception. But I'll look more at price tags. It will be important to see if Nordstrom is able to remain in stock on those entry-price items, as well as those that are particularly trendy, in the first days of the sale. I will also have a look for any website errors that could frustrate online shoppers. During the event last year, the company had to apologize for the problems of the website; the site also had problems the previous year among the increase in visits. Nordstrom must demonstrate that it has learned from those errors and has invested technological resources appropriately to overcome them.
Big sales events can sometimes seem insignificant these days, when artists like Gap Inc. and Macy's seem to have a promotion almost every day of the week. And another flashy business event – Amazon.com Inc.'s next Prime Day – seems to be absorbing quite a bit of oxygen in the retail industry.
But the anniversary sale is really important for Nordstrom. The company indicated as much in its annual report:
"Because of our Anniversary Sale in July and the holidays in the fourth quarter, our sales are generally higher in the second and fourth quarters than in the first and third quarters of the fiscal year. Any factor that negatively affects these sales seasons could have a negative effect on our results of operations for the entire year. "
I still believe that Nordstrom has many advantages over its peers in the clothing industry, including its fleet of non-inflated stores, its strong customer service and its potentially powerful idea for small local service centers. But for now, Nordstrom needs a victory in the second quarter. The strong execution of this bidding event will help determine if you get one.
(1) Loyal members who are top-level spenders have had access to the sale before, but Friday is kick-off for the masses, when a Nordstrom cardholder can start making purchases.
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This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Opinion artist who covers the consumer and retail industries. Previously she was a retail reporter for the Washington Post.
© 2019 Bloomberg L.P.
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