The wave of price promotions that has washed over fashion — drowning profit margins and demotivating consumers — just might have crested.
At least, that’s according to Michael Koppel, Nordstrom Inc.’s chief financial officer and executive vice president, who updated investors at Goldman, Sachs & Co.’s 22nd Annual Global Retailing Conference in New York Wednesday.
“Everybody knows [during] the last, I think, 12 months to 18 months, there has been an increase in promotional activity,” Koppel said.
Nordstrom reacts to competitors’ promotions by reducing prices, but the cfo said: “We don’t like to do that and I don’t think a lot of our vendors like to do that, because that’s not how we do business and it also takes away from your integrity with the customers.”
Related Articles
But the dynamic seems to have shifted.
You May Also Like
“We’re seeing that whole momentum slow down a little bit, not only I think with other retailers but also brands,” he said. “Brands that want to be regular price, don’t want to distract from their offering by having it promoted. We’re seeing a little bit more resistance there and we think that’s a positive.”
Koppel said Nordstrom has cut the number of days that its goods are on clearance by about 20 percent from two years ago.
“Our goal is next year to reduce those clearance phases by about another 25 percent,” he said.
The department store is generally seen as a leader, both in terms of the service it provides in store and how it has pushed to evolve digitally. In the second quarter, its profits jumped 15.3 percent to $211 million as sales rose 9.2 percent.
At the conference, Koppel also touted both the company’s in-store and online business to investors, nothing that all of the company’s are profitable.
When asked about how he saw the e-commerce business over the long run — as a profit margin benefit, a headwind or primarily as a sales play — Koppel seemed content to let the business find its own place.
“We view e-commerce as a place we need to be,” he said. “It is the new channel to engage with customers. We, like everybody else, are still trying to understand where this economic model is going to find its natural course….To view e-commerce as, is it a margin play, honestly, we don’t have that great answer yet. What we do know is that, we’re attracting a lot of customers, we’re growing, we’re staying very relevant with customers — with that customer base and it’s the place to be, and I think we need to figure it out over time.”
Nordstrom is also opening its flagship in Vancouver next week and Koppel said the effort could help shape how the company approaches Manhattan.
“We’re going to learn over the next three years or four years starting with Vancouver, because while we have stores in cities like San Francisco and Chicago, they’re not markets like Vancouver where you get a big international presence,” he said. “Between Vancouver, Toronto and then moving to Manhattan, we believe that as an organization, that’s going to help us grow and understand how to serve that customer and to be a world-class store.”