Strategies That Boost Online Sales for Department Stores



Growing online sales

Online businesses for department stores have seen impressive growth in recent years. To a certain extent, online businesses have mitigated the weaknesses in traditional brick-and-mortar stores. In the first quarter of fiscal 2015 ending May 2, 2015, net sales for Nordstrom’s (JWN) full-line website, Nordstrom.com, grew 20.0% from the comparable quarter the previous year. Sales at Nordstrom.com and HauteLook increased 50.0% in 1Q15 from the corresponding quarter of the previous year.

Article continues below advertisement

The above graph indicates the impressive year-over-year growth in Nordstrom’s online sales. In fiscal 2014 ending January 31, 2015, sales of Nordstrom.com increased by 23.1% to $2.0 billion. Sales of Nordstromrack.com and HauteLook increased 22.0% to $360 million. Overall, online sales accounted for ~18.0% of the company’s net sales.

Nordstrom makes up ~0.4% and 0.1% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares Core S&P 500 ETF (IVV), respectively.

As we’ve already seen, Macy’s (M) and Kohl’s (KSS) no longer report their online sales growth separately. The last time Macy’s separately mentioned its online sales growth was in its fiscal 2012 annual report. The company stated in the report that its online sales in fiscal 2012 ending February 2, 2013, increased 41.0% on a comparable basis.

Article continues below advertisement

Strategies that drive online sales

Some common strategies that boost online sales for department stores include buying online and picking up at a store, enhancing the online merchandise assortment, and ensuring faster delivery from fulfillment centers as well as stores. The buy-online-pick-up-from-store option helps move inventory faster and increase store traffic for department stores. Department stores have also invested in enhancing their websites’ speed and visual display.

Another interesting strategy department stores are adopting to increase store traffic is to allow customers to return their online purchases to the brick-and-mortar stores. In fiscal 2014, Nordstrom Rack had more than a million store visits from customers who returned the online purchases they made on Nordstromrack.com and the HauteLook flash sale site.

We’ll look at some other online strategies in the next part of this series.


More From Market Realist