In the retail battle for digital growth and reimagination, department stores are turning up the volume.
New investments in digital expansion by Neiman Marcus, Nordstrom and Saks show that large format retailers have made a commitment to evolving at a crucial time when shoppers are flush with cash but have changing expectations for what their online and in-store shopping experiences should be.
Neiman Marcus said today it will spend over $500 million in the next three years to support its “integrated luxury retail strategy.” As part of that investment, the company will buy Stylyze Inc., a platform that suggests products for customers based on past browsing history and purchases. The purchase price was not disclosed.
“By acquiring Stylyze, we will be able to advance our strategy of integrated luxury, building long-term relationships with our luxury customers that create emotional value and high lifetime value potential. This allows us to deepen our relationship with our customers through the use of technology,” said Geoffroy van Raemdonck, CEO of Neiman Marcus Group, in a statement.
The company, which emerged from bankruptcy last September, said it will explore further acquisitions and partnerships as well as plans to build out digital capabilities internally and said it has available liquidity of about $850 million.
Earlier this week, Saks said James Harden, an NBA All-Star and entrepreneur, became an independent member of its board and that he signed on as a minority investor.
And in March, Saks Fifth Avenue’s parent company, Hudson’s Bay Co., split off the retailer’s website into a separate business from its stores following a $500 million infusion from a venture capital firm.
The partnership is with Insight Partners, which made a minority equity investment in Saks — the name of the new standalone e-commerce entity. The chain’s brick-and-mortar fleet of 40 stores will operate separately, be referred to as SFA, and remain wholly owned by HBC.
Earlier this year, Nordstrom, which has a revenue goal set at $17 billion, said it plans to focus on a new business strategy it calls Closer to You that uses key learnings from COVID-19 to improve its digital and its off-price businesses.
The company said it will focus on extending the rollout of its market strategy to its 20 top markets that represent 75% of sales as well as integrate Nordstrom Rack assets; broaden the reach of Nordstrom Rack by expanding its price range and better connecting physical and digital inventory to help to boost incremental revenues to $2 billion over the long-term; and increase the “digital velocity” of Nordstrom Inc.’s overall business.
A recent survey by BDO Digital found that 61% of retailers plan to increase spending on digital investments in the next year and the majority of executives surveyed expect those investments to boost revenues.
“Digital is no longer optional, despite a hard economic year in 2020,” BDO Digital said in a report outlining a recent survey of 100 C-level retail executives at companies with annual revenues of $100 million to $3 billion hailing from department stores and specialty and big box retailers, among others.
Saks will lead marketing and merchandising across both businesses, while the stores will fulfill the physical functions of Saks, such as buy online, pick-up in store, as well as exchanges, returns and alterations. Saks will retain ownership and control of Saks Fifth Avenue’s intellectual property.
BDO said investments in technologies to improve the customer experience, such as real-time order tracking, connected inventory management systems and in-aisle re-stocking, and warehouse management system applications, should be top-of-mind for retail executives.
“To propel business forward, retailers need to double-down on investments that integrate their digital and physical shopping experiences. While the physical store is not going away, the future of retail calls for a reimagining of physical space to seamlessly integrate with digital platforms,” the BDO Digital report said. “With digital and physical channels strategically integrated, retailers can develop new revenue streams, decrease customer friction, improve customer retention and gain access to better data to drive business decisions.”