Will Nordstrom celebrate or regret its decision to give brands a lot more control?
Nordstrom is giving more control and responsibility to some of the brands on its shelves through a concessions-based selling model.
The retailer announced plans to expand its partner concession relationships from five percent of its business to 30 percent at the chain’s most recent investor day, Glossy reports.
The concessions model makes brands responsible for designing the section of the store in which their products are laid out as well as defining the pricing, selecting product and, in brick-and-mortar stores, hiring the staff. In e-concessions, which Nordstrom also intends to leverage, brands handle website design as well as shipping costs. The retailer earns a commission on each sale while the brand receives most of each transaction. In neither case does Nordstrom have to concern itself with buying inventory.
Granting brands greater control of their products, pricing and presentation within stores and on e-commerce websites was a model that was gaining popularity in other areas before the novel coronavirus pandemic.
Concessions relationships have been historically more popular in Europe and Asia, only catching on in the U.S. very recently.
The “retail-as-a-service” startup b8ta launched in 2015, allowing online-only gadget brands to pay a subscription fee to have their products appear in the chain’s brick-and-mortar showcases. In 2019, b8ta opened up a store concept called Forum, which made use of the same model for fashion and apparel brands.
Nordstrom stock shares were up and down at the beginning of February as the chain announced its plans to pull itself out of a slump, according to Bloomberg. Plans to improve e-commerce, expand price points at Nordstrom Rack and improve stores and distribution in major markets did not appear to be enough to please investors looking for a comprehensive turnaround plan. Nordstrom expects more than 25 percent revenue growth in the current fiscal year and is targeting $17 billion in revenue compared to 2019’s $15.9 billion.
- Glossy 101: Why are e-concessions catching on among luxury brands and retailers? – Glossy
- Can b8ta do for fashion what it has done for consumer tech? – RetailWire
- Nordstrom Unveils Plan to Expand Rack Sales by $2 Billion – Bloomberg
DISCUSSION QUESTIONS: Do concession relationships make sense for Nordstrom and other retailers in and out of the department store channel? What upsides and downsides do you see to giving brands more control over their placement, pricing, etc., in stores and online?