Will Nordstrom lead retail into the age of mass customization?

Nordstrom continues to make technology investments as a means to set itself apart from the competition. In the most recent example, the chain has joined a consortium of investors led by BlueSky Venture Capital that have put $15.5 million into an Australian startup, Shoes of Prey, which produces shoes on demand.

Shoes of Prey operates shops in six Nordstrom locations as well as on Nordstrom.com. U.S. consumers may also shop on the Shoes of Prey site where they use its 3D Designer to created customized shoes. The site boasts that the company can make and ship shoes anywhere in the world in around three weeks. Shipping to the U.S. is free.

In interviews, Shoes of Prey co-founder Jodie Fox said that Nordstrom’s investment was important because of the chain’s heritage in footwear. She also believes the investment represents a breakthrough for mass customization, which she thinks has applications beyond shoes. Shoes of Prey, which claims to have designed five million pairs of shoes since it launched in 2009, is looking at possibly producing handbags, as well.

While Ms. Fox indicated that Nordstrom had made a significant investment, she declined to say how much of the $15.5 million in funding came from the chain. Including this most recent round of funding, Shoes of Prey has raised $24.6 million to date.

[Image: Shoes of Prey]

In a statement emailed to news outlets, executive vice president Scott Meden explained why Nordstrom made the investment. "With personalization becoming more important to how the customer views good service, it’s important for us to find opportunities to stay increasingly relevant. Shoes of Prey offers us a way to enhance and deliver a great customer service experience that aligns well with our strategic vision and long-term goals as a company."

Nordstrom’s investment in Shoes of Prey is one in a series that it has made in recent years, including the acquisitions of Hautelook and Trunk Club.

While Nordstrom has not been as hard hit as some others, the chain has not avoided the headwinds that many department stores faced going into the holiday season. Last month, the chain reported same-store sales for its most recent quarter were up just 0.9 percent while its earnings of 57 cents per share fell well below the consensus estimate of 72 cents.

BrainTrust

"This is a terrific move on Nordstrom’s part and will elevate the already very good shoe buying experience in their stores or online."

Jeff Hall

President, Second To None


"The smart investment by Nordstrom in Shoes of Prey will extend the concept that Nike pioneered (as scale) with NikeID. So while it’s not completely new, it’s a perfect fit for a brand and retailer with shoes so core to its business."

Phil Rubin

Founder, Grey Space Matters


Discussion Questions

What will Nordstrom’s investment in Shoes of Prey mean for each company? Do you see mass customization as a market that is ready to take off? Are there particular categories you can identify that you think offer opportunities to employ mass customization?

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Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

Insanity is doing the same things over and over again but expecting different results. Kudos to Nordstrom for thinking outside of the normal shoe box! Smart strategy to invest in a partner in order to “dip a toe in the water” to test the concepts, execution and consumer acceptance of mass customization.

I have no idea whether Shoes of Prey will be successful in the U.S. I would point to the success of Nike enabling consumers to customize shoes both in-store and online. Nike’s success is testament to the power of the personalization; both the shoe and the experience, and the fact that consumers will pay handsomely for it.

For Shoes of Prey to be successful, Nordstrom will need to transcend the traditional retail mindset of “build it and they will come.” Success will be as much about marketing the customization experience/uniqueness as it will be about the shoes themselves.

And yes, customers will wait three weeks for shoes if they can say: “You can’t find these shoes anywhere else, I designed them.”

Max Goldberg
Max Goldberg
8 years ago

Smart move by Nordstrom. The retailer is known for its shoe department, and consumers love personalized products. It’s a win-win.

Cathy Hotka
Cathy Hotka
8 years ago

This is bound to generate buzz, and the Nordstrom shopper probably doesn’t mind the added cost that customization will bring. Finally the Nordstrom shopper will be able to brag about having something unique and difficult to obtain, much as the people who wait online outside Nike stores have.

Naomi K. Shapiro
Naomi K. Shapiro
8 years ago

Nordstrom is very smart, very innovative and hopefully very successful among its peers. Nordstrom has always been an early leader into new disruptive technologies, marketing, merchandising, pricing, customer service, delivery, etc., and this Shoes of Prey investment will be no exception, i.e. a win-win situation. I understand from the articles that Shoes of Prey is already featured in several Nordstrom stores, so this is a logical extension.

Mass customization (an oxymoron?) is a market that’s taking off. Isn’t it called “bespoke” things? Witness how well this woman (Fox) tells her story of the need and demand and how she solved it. Nike’s “mass customization” is another hot example. And it’s a dream for inventory, supply chain, etc., management and timing.

Jeff Hall
Jeff Hall
8 years ago

This is a terrific move on Nordstrom’s part and will elevate the already very good shoe buying experience in their stores or online. As they’ve done with Hautelook and Trunk Club, the company is taking a leadership position around innovation and continually looking for ways to enhance the customer experience in a way that is true to their brand promise.

Kim Garretson
Kim Garretson
8 years ago

This story reminds me the mysterious Brooklyn company profiled in Fast Company in an article titled The Amazon Whisperer.

An excerpt:

“Each buyer has a specialty beach products, cellular accessories, and so on. Their job is to scour the web to learn all the features people wish a product had, and hire a manufacturer, often in China, to make the desired version. Pikarski lets each buyer create their own Hipe-style brand name, and order anywhere from a dozen to a truckload of units. If they sell well, the product is renewed. Otherwise, it’s junked.”

Dave Wendland
Dave Wendland
8 years ago

Hats off to Nordstrom for recognizing the future and jumping in with both feet (pun intended). There are certainly other categories that may follow the lead into mass customization — imagine aspects of home furnishings “built on demand” or even automobiles (BMW has been doing this for years and Tesla is in the mix).

Phil Rubin
Phil Rubin
8 years ago

The smart investment by Nordstrom in Shoes of Prey will extend the concept that Nike pioneered (as scale) with NikeID. So while it’s not completely new, it’s a perfect fit for a brand and retailer with shoes so core to its business.

At the same time, categories like men’s shirts and tailored clothing are likely to see deeper and broader penetrations of similar concepts, which exist in many areas (Brooks Brothers, Sid Washburn) but are not generally merchandised or prices for “masses.”

It’s been over 20 years since Don Peppers and Martha Rogers seminal book, “The 1-to-1 Future” came out, so this is long overdue and a case of technology catching up with people’s ideas.

Craig Sundstrom
Craig Sundstrom
8 years ago

In the Commonwealth countries, this is known as “bespoke” clothing, and is quite commonplace (at least judging by the flyers and inserts often cluttering my Financial Times). So I’m rather surprised this wasn’t already offered by Nordstrom — and implicitly, other high-end retailers — and a little reluctant to give praise for something that seems like it should have been done ages ago (props for the name, though).

As for mass customization in general, I’m still dubious tailored clothing can be done effectively without hand fitting, and since this seems to be a web-based service, I’m not sure.

Lee Peterson
Lee Peterson
8 years ago

Whether it works or not isn’t the point; the point is, they’re obviously trying very hard to keep things that are core to their brand (shoes, exceptional service, near perfect merchandising, etc.) relevant and potentially exclusive to them in the future. If someone figures out how to customize shoes (core item) on the spot, they want in on it. Good move IMO.

It also happens to be another thing, along with their exceptional service, that would make them much different than their department store competitors. And while Macy’s continues to struggle and close stores, that’s an imperative.

Shep Hyken
Shep Hyken
8 years ago

Nordstrom has the reputation of an excellent shoe department. This is an addition that will enhance the interactive Nordstrom experience. I am not a woman, but I live with one and have two daughters in their 20s. For a somewhat reasonable price, they can own the shoes they want, the way they want them to look and when they get compliments (and girls always compliment each other about their shoes), then they can brag that they designed them themselves. At first it will be about fun. Then it will be about function — getting exactly what they want.

Both companies will benefit. Shoes of Prey will have the backing of Nordstrom and Nordstrom will have another “line” that will bring them new and returning customers.

Customization isn’t new to Nordstrom or many other retailers. Customized shirts, suits, sport jackets, etc. have been around for years. However, customized shoes (not Nike sports shoes) will be new and exciting for the Nordstrom customer.

Kai Clarke
Kai Clarke
8 years ago

This is such a specialized area of growth, the customized shoes market, that it rapidly questions the company mission as a mass retailer, with a customized, specialized shoe provider set up as a store within the store. Mass customization are 2 terms that defy each other in the same retail setting.

Mark Burr
Mark Burr
8 years ago

First, Nordstrom began as a shoe retailer and that heritage is essential to their brand. Before all else, they are shoes.

Investment in the core of your brand is critical to the retention of your brand.

“Begin with shoes and the eyes travel up.” -an observation from John T. Molloy, Dressing for Success. This is Nordstrom’s beginning. Just follow the observation and compliment throughout the entire outward appearance from outfitting to accessorizing.

Shoes. It starts there.

Kenneth Leung
Kenneth Leung
8 years ago

Smart move. Nordstrom’s brand is based on customer service and support, and mass customization could be a niche it can fill for the upscale clientele. There is plenty of room between completely bespoke and mass production, and companies like IndoChino are proving out the model.

Jonathan Hinz
Jonathan Hinz
8 years ago

This is sound investment in creating a unique environment within a retail store. Although we’re typically social creatures and tend to buy in mass flocks, it’s clear that a new wave of consumers is coming and they want it/need it personalized. Look at mobile phones…they used to come in one color, black. Now you can go onto motorola.com and (almost) completely customize your phone.

I don’t see this approach being used by a lot of retailers, but for the top 5 (or so) I would expect them to try out new approaches to instant personalization. Otherwise, lose out on sales and interest to the specialized companies that will offer such services