Nordstrom Inc. doesn’t acquire much and, when it does, those acquisitions take time to marinate.
The department store chain ventured outside its four-wall comfort zone in February 2011 by purchasing flash-sale pioneer HauteLook for $270 million, and some financial analysts have concluded that it spent too much to do so. But Nordstrom and HauteLook assert the mind meld between retail’s odd couple — one, a 111-year-old risk-adverse, personal service-driven company trying to sort out its digital role, and the other, a nimble Web outfit that carved out a California-casual niche when the recession thrust online fashion deals center stage — has just begun to bear fruit.
“It’s interesting and similar to buying a house. You literally go visit something three or four times, and then you make this big purchase. Then you move in it, and you kind of start to understand how the light hits the house, how things move in the house and where you want things,” said Adam Bernhard, chief executive officer and founder of HauteLook.
Moving from analogy to reality, he continued, “It took about six to nine months before we really started to see where the synergies existed. Nothing came out of the gate, but now — I think [more than] 12 months later — we’re really starting to see the two companies understand where the integration is going to be possible.” RELATED STORY: Nordstrom Touts Online Potential >>
Like most traditional department store giants, Nordstrom feels it has to get younger and digitally shrewd. The acquisition of HauteLook, whose members average 30 years in age with an annual household income of more than $75,000, and early integration efforts are an attempt at both.
“We may have done a good job over the years with the Baby Boomer generation, but we have also got to figure out how to be relevant to the Millennial customer, and HauteLook has built a business on figuring that out,” said Nordstrom Direct president Jamie Nordstrom.
Marketing initiatives have been geared toward getting the HauteLook shopper to go to Nordstrom stores and getting Nordstrom shoppers to join HauteLook. Many of those initiatives have concentrated on HauteLook and Nordstrom Rack, the off-price division that is expected by yearend to have 119 units and to exceed full-price Nordstrom’s 117 stores. For example, HauteLook prompted customers on April 19 to enter a contest via Facebook to win Nordstrom Rack shopping sprees and received 20,000 entrants in four days. Later that month, from April 27 to 29, HauteLook put 175,000 inserts in bags at 40 Nordstrom Rack stores in California, Washington and Oregon offering discounts to Rack customers who signed up for HauteLook.
Nordstrom said, “They talk to customers who are rabid fashion fans on a daily basis. Our ability to get Nordstrom into that conversation has driven some meaningful results.”
Put more simply, Bernhard declared, “We are doing a very good job of moving our customers to Nordstrom.”
In addition to customer integration, HauteLook has been integrated into Nordstrom’s buying apparatus and supply chain. Bernhard noted that Nordstrom Rack buyers have been placed in HauteLook’s offices in Los Angeles and New York, where it has 300 and 25 employees, respectively, providing “us exposure to a lot more product.”
“We have the opportunity to participate in purchases that they’re doing,” he said. Whatever doesn’t sell on HauteLook often winds up at Nordstrom Rack stores.
HauteLook has also become Nordstrom’s new-brand testing ground. Last September, for example, the site teamed with makeup brand Lorac for two exclusive eye shadow palettes and sold thousands of the palettes in a day. The sales convinced Nordstrom, otherwise unlikely to take a chance on a small, unproven vendor, that Lorac would work in Nordstrom Rack. This September, HauteLook will offer another exclusive palette for $14 that will be made available in all Nordstrom Rack doors for a limited period.
“When you are able to introduce a new brand to customers through the flash-sale channel, they are much more likely to go buy that brand at regular price in a different channel. Certainly, brands that we work with understand that,” said Nordstrom.
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