Nordstrom's sales drop after cutting Direct Mail
Erik B. Nordstrom, Co-President of Nordstrom, cut his forecast for sales and profit after they had a weaker than expected Q1. In a May 21, 2019 Earnings Call, Erik Nordstrom noted “While we believe our customer strategy and business model position us for long-term success, our first quarter top line results were well below our expectations.”
Nordstrom noted “During the first quarter, we had some executional misses with the customer experience that had an impact on sales across Full-Price and Off-Price both in stores and online.” He continued “Beginning with loyalty. We have a well-established program with nearly 12 million active customers contributing more than 60% of sales in the first quarter. Last fall, we evolved the program with The Nordy Club, which allows customers to earn reward notes faster and provides early access to product and events.
However, the execution of our rollout was not as successful as we had planned. As part of our decision to move to a digital-first program, we eliminated paper notes but later discovered that a segment of our customer base relies on receiving these notes by mail.
As a result, we saw a reduction in traffic across Full-Price and Off-Price.
He concluded: “In closing, we own our result, and we’re focused on getting our sales back on track. As always, the customer is at the center of everything we do, and through that lens, we’re committed to better serving them on their terms”.
Let’s think about what he said: Nordstrom stopped mailing notes to its loyalty customers as they tried to launch the program online and reach customers faster. But what really happened? Nordstrom saw a reduction in traffic to their stores as customers relied on receiving the rewards by mail. Clearly Nordstrom executives were not anticipating this reaction.
What is the takeaway? Consumers still rely upon direct mail.