Myer’s share price recently fell 16% following another lousy result, and is down 50% since reaching four dollars four years ago. In contrast, the share price of US retailer Nordstrom has doubled over the same period.
Nordstrom has 270 stores located in 36 states across the US under three brands, Nordstrom, Nordstrom Rack, and Jeffrey. Nordstrom generally sells high-end brand name and private label fashion to kids and adults, similar to Myer.
The companies have some other differences, but there’s no reason why Myer couldn’t move upscale if it wanted to so they are comparable. Management has preferred instead to leave David Jones as the more upscale rival.
Unlike Myer, however, whose sales have gone nowhere over the past four years, Nordstrom’s sales have increased nearly 50%. The question Myer shareholders should be asking is why are Nordstrom’s sales increasing so fast while Myer’s have stagnated, despite Australia’s economy being so strong.
One of the key reasons is that Nordstrom’s management has been prepared to think long-term by investing billions in technology so that customers can easily compare, buy, try and return goods utilising the company’s store and online network.
Over the past three years Nordstrom has reinvested 50-65% of its cashflow in the business. That’s over $2bn mostly aimed at allowing customers to use technology seamlessly in order to provide the best service possible.
Visit a Nordstrom store and you can apparently scan a little black dress or your new favourite pair of jeans with your mobile phone, paying for it without ever having to go near a checkout. There’s also free shipping if you don’t want to carry your latest fashion purchase around the mall.
Nordstrom also offers a widely acclaimed loyalty program, personal shopping assistants and you can return goods to any of Nordstrom’s three types of different stores. The company’s latest acquisition, Trunk Club, will also send men a trunk of items based on your personal profile. It’s like going door-to-door offering well-known customers appropriate merchandise without having to pay anyone to walk the streets.
There’s no guarantee that Nordstrom’s ecommerce strategy is going to work. Online sales may cannibalise in-store sales to the point where people ultimately end up spending less. Who doesn’t end up buying more than they planned when they shop in one of their favourite stores?
Or perhaps, regardless of the friendly online shopping experience, bricks and mortar stores will simply continue to get outmuscled by other competitors. Rivals will be looking at Nordstrom’s success to see how they can replicate it, as Myer should be.
One thing Nordstrom isn’t doing is sitting idly by while changes in the retail industry terminate obsolete concepts. It has been prepared to spend billions of dollars to adapt and survive another century in business.
That can’t be said of Myer. While it doesn’t have billions of dollars to spend, it hasn’t been a leader in technology or creating new shopping experiences to keep customers coming back.
Trying new things is expensive and it requires a lot of patience. I’m not sure how Nordstrom garnered the support of its shareholders to spend so much money over so many years, but shareholders will no doubt be happy with the results so far.
Perhaps it’s time that Myer had a frank discussion with its shareholders at the November annual meeting.