Will acquiring tech startups help Nordstrom boost its digital ops?

Discussion
Source: BevyUp
Mar 12, 2018
Matthew Stern

Nordstrom is the latest retailer trying to fill in its digital gaps by acquiring the right startups. The department store chain last week announced the acquisition of two tech startup companies, BevyUp and MessageYes.

BevyUp is a digital selling platform that Nordstrom intends to integrate into a new app for its employees later this year.

MessageYes is a conversational commerce platform that allows shoppers to interact with a retailer via text message and receive AI-generated personalized recommendations. Nordstrom expects to increase its facility with engineering, data science and machine learning through that acquisition.

BevyUp does not appear to be a complete unknown for Nordstrom. A page on the site dated January 2017 indicates that Nordstrom has been using Style Boards powered by BevyUp since at least that time. The Style Board feature allows a personal in-store stylist to create a Style Board featuring handpicked recommendations and send it to a customer’s smartphone.

Bolstering its omnichannel offerings may be critical to the long-term success of Nordstrom. While last quarter demonstrated improved online success, year-over-year physical sales were flagging.

Nordstrom’s Q4 earnings report indicated lower-than-expected earnings, according to CNBC. While sales were up, that fact was largely attributed to e-commerce. Comp online sales were up 12.4 percent at the main Nordstrom website and 23.7 percent at HauteLook and NordstromRack.com. Meanwhile, sales were slightly down at both the main brand department stores and Nordstrom Rack locations. The chain chalked up its earnings miss (despite strong online sales) to expenses associated with opening its New York flagship and more Nordstrom Rack stores.

Having to satisfy Wall Street each quarter is a burden the family that owns Nordstrom wants out from under. Last year, the family began discussing its desire to take the company private again, but has experienced a series of setbacks. Last week, the company’s board rejected an $8 billion buyout offer as too low, according to The Wall Street Journal.

DISCUSSION QUESTIONS: Will owning BevyUp and MessageYes give Nordstrom the right tools improve its omnichannel efforts? Do you see either of the two acquisitions having a bigger impact on Nordstrom’s business than the other?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"These are great innovations now, but without the market pressures and insights of a large group of customers, will these solutions continue to evolve?"
"Nordstrom’s seems as though they are trying to either buy a development team or take the product off the market as a competitive edge."
"My problem with this is these are finite technologies that were better off being partners. "

Join the Discussion!

28 Comments on "Will acquiring tech startups help Nordstrom boost its digital ops?"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

It makes sense for Nordstrom to acquire tools and technology that they don’t have today and to build up their own internal capabilities via acquisition. It’s difficult to say if either one of these will be effective or have a bigger impact than the other, but the important point is that Nordstrom is making moves to leverage technology to improve their ability to service customers.

Lyle Bunn (Ph.D. Hon)
Guest

Owning rather than licensing makes good sense when the product or service is right for use today and has the foundation to grow as needed. Nordstrom has always shown itself to be very savvy in finding and assessing enabling technologies. These acquisitions will allow the firm to be more nimble in technology use, to bring this capability to its trusted suppliers and keep the competitive advantage of this capability out of the hands of competitors. Good move Nordstrom.

Nikki Baird
BrainTrust

I always hesitate when I hear about retailers buying their way into the tech space. These are great innovations now, but without the market pressures and insights of a large group of customers, will these solutions continue to evolve? Or did Nordstrom just buy, in effect, a new development team, which will now fall prey to all of the challenges of an internal development team, which forced Nordstrom into buying an outside tech startup in the first place?

Retailers need to be careful — with the speed of tech developments out there, even if you think it’s strategic today, is it really worth owning it outright? Or is there more value — especially in today’s SaaS and API-driven architectures — in banding together with a lot of other retailers to get on an accelerated innovation cycle? Count me a skeptic as to whether Nordstrom really gets all of the value promised in these acquisitions.

Cynthia Holcomb
BrainTrust

Nikki, per your comment: “Or did Nordstrom just buy, in effect, a new development team, which will now fall prey to all of the challenges of an internal development team, which forced Nordstrom into buying an outside tech startup in the first place?” — Great job summing up the reality at Nordstrom and other retailers …

Brandon Rael
BrainTrust

Excellent points Nikki. On the surface, these acquisitions seem to make some sense and follow the Walmart roadmap, however, anything of this magnitude will have an organizational impact. Retailers have to take a very cautious approach, especially as it pertains to introducing new organizational structures, complexities and in this case two new digital development teams to the mix.

Max Goldberg
Guest

Successful e-commerce operations require constant innovation and fine tuning. Nordstrom is demonstrating both through these acquisitions. Making it easier for sales associates to curate products for consumers and for consumers to communicate with sales associates should drive sales.

Brandon Rael
BrainTrust

Nordstrom’s strategy is a solid one, as the company seems to have the same digital-first mindset as Walmart has with their jet.com and Bonobos acquisitions. It’s far too premature to determine if the BevyUp or MessageYes solutions will have the biggest impact for Nordstrom. However, both acquisitions will help enhance Nordstrom’s capabilities to provide a deeply personalized customer experience, drive a culture of data insights and enable the brand to extend well beyond the brick-and-mortar channels.

In turn, both of the acquisitions will help drive a more seamless omnichannel process and experience for their customers.

Phil Chang
BrainTrust

I’m not a big fan of either of these transactions. I applaud Nordstrom’s efforts to stay current and to use new technology to reach its consumers and be more relevant. My problem with this is these are finite technologies that were better off being partners. If BevyUp and MessageYes were independents partnering with Nordstrom, they would be required to keep up with the industry and continue innovating. That means Nordstrom benefits from forward-looking companies that will keep them up-to-date.

By buying these, did Nordstrom just become a technology company? If the answer is no, then both of these platforms immediately start aging. It’s not an easy path to figure out what’s the right thing to buy and what’s not … but that’s why it’s critical to know your “why.”

Vahe Katros
Guest
Vahe Katros
11 months 6 days ago

Nordstrom has decades of knowhow in the clienteling domain. BevyUp is mobile and while there are mobile clienteling apps, why would Nordstrom want to spread nuances of their competitive advantage to third parties? Preserving their process knowledge is perhaps more valuable than paying a little extra to make tweaks to a mobile applications (and yes, we can get really deep into the tech chops necessary but I don’t think anything more than two pizzas on a weekend – at least for now.)

MessageYes’s tech process model might not defuse quickly into retail – I can see it sitting on-top of SalesForce or Splunk, but how many retailers are ready for that? So they have time to work that opportunity as well.

Paula Rosenblum
BrainTrust

It makes sense to buy products that the company believes will make a big difference, since it also takes those products off the market. I think BevyUp is a good idea if the store associates will actually use whatever the final app is (I am not sure they will).

I am not a fan of unrequested conversational commerce — that is to say, if I decide to talk to Alexa or Siri or Google, that’s fine, but if I want to talk to a human, that’s really what I want. So I’m not keen about MessageYes. Especially for the Nordstrom customer.

Having said all of that, the way to drive people back into the store is not with technology as much as with events and content that promote a sense of community. I would think the company would do better with trunk shows of unique stuff, rather than more tech.

And I’m a tech person!

Cathy Hotka
BrainTrust

After under-investing in technology, retailers have been acquiring startups all over — Walmart buying Spatialand, Amazon buying Shoefitr, Target acquiring Grand Junction. Nikki raises some good points, but I’ll bet on this trend continuing as retailers attempt to further differentiate themselves.

David Katz
BrainTrust

SOS: Beware of “Shiny Object Syndrome” — It’s all about the three Ds of consumer experience: discovery, differentiation and delight. (Discounts seem to work, too … ).

Take a look at Target. Brian Cornell stated, “just because we can build the store of the future, doesn’t mean we should build it.” Instead, the company focused on local, smaller, easier-to-shop stores with lots of value-built private branded product.

HauteLook and Trunk Club have been of questionable value to Nordstrom. That said, Nordstrom has been leverage omnichannel shared inventory, the Rack, and other assets in some powerful combinations. Further, these new acquisitions bring potential benefits to Nordstrom customers.

Time will tell.

Peter Luff
BrainTrust

I take this as a positive sign of intent by Nordstrom. Only in the fullness of time will we truly be able to assess the impact of each individual solution. This is the start of a journey — various elements within the two tools may prove more successful than the whole and morph into a final offering along the way.

As the saying goes, “you have to kiss plenty of frogs to find your prince/ess.” It’s no different with tech startups. Great to see them being brave.

David Weinand
BrainTrust

I’m fan of any initiative that better enables the associate to service the customer, so if I had to choose a smarter acquisition, it’d be BevyUp. It’s also in line with the long heritage of Nordstrom’s customer service mission. Nikki brings up excellent points and it’s a tough call on partner vs. acquire. It comes down to one thing — culture. If Nordstrom is committed to developing a culture of continuous innovation, moves like this will continue to benefit the business. If this is a “point in time” because it’s in vogue to acquire tech companies to move the needle … well, we know how this will go.

Mohamed Amer
BrainTrust
Nordstrom is an amazing company that in many ways established and raised the bar on what it means to deliver exceptional customer shopping experience – in stores and online. In M&A circles, successful acquisitions are ones that pertain to the core business. They serve to defend the core or grow the edge into adjacent lines and businesses. Technology is an interesting area that now permeates every company and industry. Each company has to decide how to spend their resources (no one has unlimited resources) and where they focus the business. In areas that change quickly, such as technology, each company needs to be committed to long-term investments and the ability to integrate these technologies into the end-to-end customer processes and supporting systems. In addition to the massive pace of change in technology, the trend to more packaged software and the rapid move to the cloud make “ownership” a bit more problematic. Mega players such as Walmart and Amazon have sufficiently deep pockets to have their own innovation technology labs and can even blur the line… Read more »
Ryan Mathews
BrainTrust

The Nordstrom tech acquisitions present a paradox. On the one hand, retailers need to invest in tech to stay even with, let alone get ahead of, the competition. On the other hand, tech acquisitions can lead to proprietary technology infrastructures that end up hurting a company, ala Kmart. So what’s the right balance? It’s difficult to say with any sense of certitude. That, only time will tell.

The real question ought to be, are they solving the right problem? Are sales down from a cause that AI-driven suggestions will help, or is there something more basic and fundamentally flawed at work?

Answer that question first and you might be in better position to answer whether or not technology will help, and which specific technologies the company ought to be looking at.

Camille P. Schuster, PhD.
BrainTrust

Are consumers not purchasing because they are not receiving recommendations from a personal shopper digitally? If not, BevyUp is not likely to be helpful. Are employees at Nordstrom currently listening and replying to consumers on Instagram or Facebook now? If not, why is MessageYes going to help since its advantage is interaction with the retailer? Is Nordstrom picking technologies to just have them, or are these solutions really part of a well thought out, integrative strategy?

Cynthia Holcomb
BrainTrust

Good to see Nordstrom expanding beyond its own internal tech team’s “innovations.” MessageYes will only be as useful to an individual shopper as the AI recommendations it generates. BevyUp offers a Pinterest-type interaction between sales associate and customer, fun for those with time and the interest to spend. Both acquisitions are merchandising plays with customers, window dressing to the underlying technological challenge. Understanding the unique and subjective preferences of each and every individual shopper is the glue needed for a true emotional connection.

Dave Bruno
BrainTrust

This is an interesting discussion topic, as evidenced by the widely varied responses. While I do think expanding the way tech impacts the journey at Nordstrom (particularly tech that makes the store more relevant) is a good idea, as several have commented, acquiring niche solution companies adds a great deal of complexity to Nordstrom’s operating model. For 100 years they have grown their domain expertise running retail operations, not running tech companies. If they are investing in the right infrastructure and leadership to grow their expertise in tech ops then perhaps this could be successful. Only time will tell.

Bob Phibbs
BrainTrust

Apps aren’t the answer; people are. Nordstrom prided itself on outstanding customer service. Now their employees are little more than robots asking if they can help you find something. How digital styleboards are going to be used when talking to their shoppers — the very start of an interaction — is missing makes me doubt that this technology will help. I think it distracts from the bigger problems.

William Hogben
BrainTrust

For a big retailer acquiring a startup has many advantages over trying to put together an equivalently powerful internal team. For one thing, the startup comes as a full package WITH a mature product, while an internal team can take over a year to get well staffed and then they’re going to be starting from nearly scratch. All told the value in Nordstrom acquiring startups is the years they save on getting their digital initiatives going, along with the customization and control they have over the outcomes.

I would imagine it’s very important not to try and force acquired development teams to adopt a retail operations and planning approach – the disciplines and pressures are too different, and it would risk spoiling the advantage they’re trying to buy anyway.

James Tenser
BrainTrust

Setting aside the excellent commentary here about Nordstrom’s technology strategy, I’d prefer to pursue the question, “What will each of these innovations do for Nordstrom shoppers?”

BevyUp, the tech-enhanced tool for creating “style boards,” seems like a natural upgrade to the traditional little black books kept by Nordstrom sales associates to help them communicate with relevance with customers. The tech adds value because it provides perfect memory of interactions along with enticing visuals. Great for maintaining contact with shoppers who make personal style a priority.

MessageYes, the “conversational commerce platform,” seems oriented toward mobile-first shoppers who don’t want to interact with people very much. Embedding an intelligent agent within the app to help shoppers zero in on preferred items more easily is a good objective for all digital retail platforms, however. Nobody really enjoys scrolling randomly through hundreds of garments on a tiny screen.

Controlling the I.P. for these solutions may let Nordstrom box out competitors on these service experiences for a short while.

Ken Morris
BrainTrust

It is great to see Nordstrom take a proactive approach to improving its technology to enhance associate tools and the customer experience. To buy, build or acquire the technology is a strategic decision.

Historically, most retailers, except the largest ones that have huge IT budgets, have opted to buy/license technology from best of breed technology vendors. This approach allows retailers to focus on what they do best – curate, display and sell merchandise. Owning the development and innovation of new technology gives retailers ultimate direction and control over new feature design. However, this also has the potential of costing more than buying/licensing technology it could take some executive focus away from their core responsibility of increasing sales and enhancing the customer experience. You can still be a technology focused retailer without owning the product.

It will be interesting to see how this plays out. Will Nordstrom derive great value from these technologies or will they absorb the intellectual capital and spin them off?

Ricardo Belmar
BrainTrust

While clearly, Nordstrom is showing a digital-first strategy here, it’s hard to say if these two acquisitions were right or not. As many have pointed out here, these are point solutions. Nordstrom’s seems as though they are trying to either buy a development team or take the product off the market as a competitive edge. In at least one of them, they were already a customer of the product. From a solution perspective, these acquisitions make sense to allow them to continue to put customer service first in their store experience, via multiple channels.

Hopefully, the newly acquired developers will be able to continue working to improve the solution without falling into the trap of being an in-house developer with “other” priorities.

Ed Rosenbaum
BrainTrust

I don’t think any of us can say with much accuracy if this will work for Nordstrom. A lot of it depends on the typical Nordstrom customer and their acceptance of AI. That being said, Nordstrom, at least, is doing something to bring them into this era of smart shoppers and the tools they use to make the cash register ring.

Vahe Katros
Guest
Vahe Katros
11 months 6 days ago

Congratulations to Nordstrom. I don’t see these events as acquihire’s; I see them as a strategic decision to not spread the wealth on tech they helped evolved, built around next generation real time/AI friendly environments. I see this eventually as being a huge validator to the shift from old enterprise architectures to new. The value in this is in the back end, not the front end, from a tech point of view.

Mike Osorio
BrainTrust

Having closely watched one organization attempt to build digital capabilities internally vs. others who, like Nordstrom, Walmart and others, are building digital capabilities through acquisitions, my strong belief is the acquisition model is by far more effective and accretive to current and future capabilities. Acquisitions that bring well vetted market-edge/market-leading capabilities in-house, combined with robust leveraging of SaaS based platforms, is the correct strategy in my view.

Nordstrom continues, despite some recent hiccups, to be a retailer defined by its laser-focus on exceeding their customers’ needs while assuring high staff engagement. I give them credit to have used this cultural bias to have determined the ability of these two particular acquisitions to further engage their staff and customers, vs. other retailers who lack their customer centric vision.

I believe Nordstrom will ultimately succeed in taking the company private and then I think we’ll see a significant leap forward in investments that leverage acquisitions such as these to propel Nordstrom to lead in the future of omnichannel retailing.

Tim Tang
Guest
11 months 5 days ago
With regards to which of the acquisitions will have a bigger impact: in the near-term, I expect the BevyUp acquisition to have a greater business impact with it’s focus on the existing customer base. Longer term, I bet MessageYes will drive a disproportionate share of the business with the upcoming customer base. Some points to consider: “PUSH vs. PULL” — With the traffic challenges facing many malls, the BevyUp acquisition enables the store associate to proactively reach out to their customer base to cultivate the personal, high-touch relationships required to draw the customer into the store. “80/20” — If one were to assume the future Nordstrom customer will do 80 percent of their shopping online and 20 percent in-store, then the MessageYes acquisition will eventually play a dominant role in the buyer’s journey. “Nordstrom Local” — Both of these acquisitions meaningfully contribute to Nordstrom’s push into a smaller, no-inventory format. With the rapid evolution of retail and customer expectation, this blended approach of empowering the associate now, while preparing for an increasingly digitally-dominant consumer appears… Read more »
wpDiscuz
Braintrust
"These are great innovations now, but without the market pressures and insights of a large group of customers, will these solutions continue to evolve?"
"Nordstrom’s seems as though they are trying to either buy a development team or take the product off the market as a competitive edge."
"My problem with this is these are finite technologies that were better off being partners. "

Take Our Instant Poll

How likely are the acquisitions of BevyUp and MessageYes to positively affect Nordstrom’s omnichannel efforts?

View Results

Loading ... Loading ...