Nordstrom Inks Deal to Acquire Hautelook
As acquisitions go, Nordstrom’s agreement to buy the flash
sale site Hautelook is not a biggie from a dollars and cents ($270 million)
standpoint. That said, it has the potential to be a game changer because it
represents the first time a mainstream chain has purchased a major player in
one of the fastest growing segments in retailing.
"While our focus on providing a superior in-store shopping experience
is our roots, continuing to find ways to use technology to serve customers
the way they want to be served is critical. This partnership gives Nordstrom
and HauteLook shared growth opportunities as online shopping evolves," said
Blake Nordstrom, president, Nordstrom.
Mr. Nordstrom said Hautelook would continue
to operate under CEO Adam Bernhard and the company’s management team. A report
on the Women’s Wear Daily (WWD)
website pegged Hautelook’s annual revenues at $100 million.
"Our established
membership base of well over four million shoppers is closely aligned with
the Nordstrom customer," said Mr. Bernhard. "We feel fortunate
to partner with a company that shares our commitment to providing customers
with great brands and an exciting shopping experience."
Hautelook’s model
involves partnering with brands for limited time sales. Designers choose the
merchandise and determine pricing. The retailer, which rarely pays for merchandise
up front, handles order fulfillment from warehouses on the coasts.
Ken Stumphauzer,
a retail analyst with Sterne Agee, told The Seattle Times that
the growth of flash sale sites is "mind-boggling."
"It’s in Nordstrom’s
interest to preemptively join that crowd," he
added.
The WWD article questioned whether Hautelook might face future
supply issues as the economy improves and brands are not faced with excess
inventory. Gilt Group, according to the report, has begun placing orders for
manufacturers to make product after facing supply issues.
Discussion Questions
Discussion Question: What will Nordstrom’s acquisition of Hautelook mean for it and its retail competitors?
I feel it’s a smart move for Nordstrom but not necessarily because I think flash-sale sites will maintain their current popularity–maybe they will, maybe they won’t. I say it more because I think it demonstrates Nordstrom’s openness to experimentation which I view as simply essential in our rapidly changing retail environment.
Companies have to be willing to jump into new models with both feet if they plan to evolve. The days of waiting on the sidelines for the other guy to fail before you jump in are over. Fast following is no longer a viable strategy.
This is such a smart move. Nordstrom’s management understands that their customer wants access to fashion in a variety of ways and they accommodate that desire thoroughly and elegantly. Not only is this a great way to satisfy their current customer’s need for access diversity, it’s also a great way to introduce their brand to new customers. Young fashionistas often think the only way they can own luxury goods is through online sales of overstocks but if done well, the link to Nordstrom from HauteLook will be easy and a whole new and affordable world of fashion will unfold. The moral of the story is: If you can’t beat ’em buy ’em and make it enhance, not hurt what you’re known for.
The gross margin of a retailer of Nordstrom’s scale erodes more than $1 billion every year, largely through clearance markdowns. Nordstrom doesn’t do a whole lot of price promotion or progressive markdowns. That means their twice-a-year liquidation strategy is really costly.
As consumers shop us out of this recession, HauteLook’s supply chain may be stretched. This affords Nordstrom a great opportunity to post some of the slower selling in season items on HauteLook at less than distress prices. If they can eat away at margin erosion that would normally occur with current liquidation strategies, this deal is a killer!
I like it a lot. As a matter of fact I just finished being interviewed for a story on it. What a great way to benefit from flash sales without impacting the Nordstrom brand.
I think the real key is that they already share a lot of the same customers, and this gives them another way to reach them.
I also know the Nordstrom executive team will add value to Hautelook where appropriate, and will stay out of the way the rest of the time.
This is another game-changer for bricks and mortar and online sales, and certainly for “fast fashion” which is doing so well at several lower-end retailers, only here with (hopefully) better margins. This puts Nordstrom in play with the young fashion crowd, something they have been struggling to attract and keep in recent years. We will be seeing more of these mergers in the coming months (not years). Exciting times at retail!
If a department store company is going to grow, there is only one way that makes sense today and Nordstrom took that way. Horizontal acquisitions which have long been the favorite of department stores are notorious for failing to add to stockholder value and providing the 1+1+3.
This makes ultimate sense and predictably it will be the first of many ventures into online for this well run retailer. Consider, which is going to give them better ROI and new customers? Building another store, buying another chain or moving into online in a big way? There is no question what the answer is. Nordstrom is doing what retailers do not typically do and it makes ultimate strategic sense.
Smart and shrewd move. Nordstrom acquires intellectual capital that it would never be able to acquire via traditional hiring. Now Nordstrom has the vision and talent to plan in ways that will continue to differentiate the brand. Nordstrom must empower those folks to act and leadership must clear the path for new ventures.
This will be fun to watch, as we like to say, “retail ain’t for sissies.”
So if I’m reading this correctly, they’ve acquired an e-outlet store (?) I suppose there’s nothing much to criticize, except perhaps the price, and I’m certainly not familiar enough with Hautelook’s financials to be able to comment intelligently (suffice it to say, when dealing with web sites, anything not priced in the $10BB’s looks like a stocking stuffer). I wish them well.