August 14, 2008

Those Wonderful Nordstrom Multichannel Customers

The pundits love to talk-up the merits of a healthy, happy base of multichannel shoppers.

So why don't we dissect some information from today's Nordstrom 2nd Quarter Conference Call.

Think about these metrics for a moment:
  • Comp Store sales decreased 6% vs. last year.
  • Profit at the low range of expectations and sub-par vs. last year.
  • Nordstrom Direct had a 15% increase in sales vs. last year.
  • Multichannel Customers, those precious customers the pundits tell us we have to have, increased by 7% vs. last year, and now account for 32% of the total sales volume, vs. 28% of the total sales volume last year.
Ok folks, what does this tell you? Multichannel customers up, direct sales up, retail sales down, total sales down, total profit down, stock price down. Hmmmmm.

Nordstrom, by all accounts, achieved the lofty objective that the pundits demand of us. And yet, SALES AND PROFIT DECREASED!!!!

In other words, sales from infrequent and single-channel customers might be in the negative double-digit range, if there were significant increases in the number of and percentage of volume from multichannel customers.

I'm not saying it is wrong to be "mutlichannel". It is right. But I want for you to think about something.

What happens if you dive head-first into this goofy multichannel thing, doing everything possible to make the experience great for multichannel customers, or for your best customers --- but in the process, you alienate a bunch of single channel, infrequent shoppers, driving down comp store sales in the process? And don't give me that pap about the economy being lousy, if it is so lousy, Zappos should be in the tank, right? Or Amazon? Or Costco? Or Wal-Mart? Or Aeropostale? Or Abercrombie & Fitch? Or Urban Outfitters, up 30% this year? I mean, didn't the government throw freshly printed silly money at customers in the 2nd quarter? How could that hurt comp store sales?

We need to talk about serving ALL customers, not best customers, not multichannel customers. This is a great lesson --- treating best customers the best, while the rest fail to pay the freight, resulting in poor results.

Think about your own family. Say you have four children. One child earns grades of "A" in school, while the others earn "C"s. Would you focus all of your energy around the child earning an "A", hoping the C students would aspire to be like the A student, or would you do everything possible to make sure that all four children had the opportunity to succeed, based on the unique gifts each child possess?

This multichannel thing, if not executed properly, has the potential to send us down a rathole. We have an opportunity to please all of our customers. Sure, it is good to focus on customers we believe are best. We also need to focus on every customer. No sale is unimportant!

This isn't a criticism of Nordstrom. This is a direct criticism of all of us --- those of us who listened to the message, and those of us who published research reports or sold software, hardware or consulting services. We all drank the kool-aid without thinking whether it might rot our teeth.

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