Nordstrom Gets Its Groupon

By Rick Aristotle Munarriz | More Articles
February 18, 2011 | Comments (1)

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Flash sale websites aren't just for dot-coms anymore.

Nordstrom (NYSE: JWN ) -- yes, that Nordstrom -- is buying HauteLook.

A department store chain tossing its hat into the growing frenzy of deal chasers may not make sense at first. Most of the big splashes in this space have come from new media darlings.

Amazon.com (Nasdaq: AMZN ) acquired Woot.com and made a $175 million investment in LivingSocial. Google (Nasdaq: GOOG ) failed in its attempt to land market leader Groupon.

Then again, HauteLook reaches out to 4 million bargain-seeking fashionistas. Even a Nordstrom chain that doesn't associate itself with steep apparel markdowns will be able to make the most of the situation to promote its brand while drumming a creative outlet to clear yesterday's unsold fashions. One can also argue that Nordstrom's buying team may be able to smoke out some great in-store deals out of this. The site could also open new opportunities for Nordstrom's suppliers.

At the very least, this gets Nordstrom's foot in the door.

HauteLook serves up 48-hour sales on fashions and accessories carrying markdowns of 50% to 75%. Like most social shopping sites, HauteLook is free to join.

This isn't just about closeout specialist Overstock.com (Nasdaq: OSTK ) losing ground in its apparel category. Upscale departments stores have been fretting about the growing popularity of niche leader Gilt, HauteLook, and GSI Commerce's (Nasdaq: GSIC ) Rue La La eating into their sales. Nordstrom may not have a solution, but at least now it will be able to cash in on the problem.

Nordstrom's $180 million deal should close next month. It could also shell out as much as $90 million in Nordstrom stock over the next three years based on HauteLook's performance and if its management team sticks around. The deal will naturally be dilute to earnings in the near term, but this obviously isn't about today's bottom line.

If there's any surprise here it's that Google didn't step up here. The world's leading search engine recently launched Boutiques.com. eBay (Nasdaq: EBAY ) also would be a logical player here, beefing up last year's launch of Fashion Vault.

Does this mean that Google and eBay now try to outbid one another in pursuit of Gilt? That would be quite the Gilt trip!

In the end, even Nordstrom knows that there's money to be made by staying close to thrifty fashionistas.

What do you think of flash sale websites? Are they disruptive or do they represent opportunities? Share your thoughts in the comment box below.

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Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Amazon.com and eBay are Motley Fool Stock Advisor recommendations. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz wonders if social coupons will be a passing craze or if thriftiness is forever. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On March 02, 2011, at 5:36 AM, jeff432 wrote:

Have you guys heard of the new Groupon like site?
It's the same thing as Groupon except when someone signs up through your referral link, if they or anyone they sign up ever buys a coupon from this site (which you get in a daily e-mail), you earn 5% commission of the coupon purchase price! You earn 5% commission up to 5 levels deep!
Also, if you sign up a business and they ever offer a coupon, you get 2% of all of their coupon sales!
About 1000 members are joining everyday now.
It is 100% free to join.
There are no coupons yet since the company is in pre-launch.
It is launching around March 2011 though!
Check it out:
http://newgroupon.thecustomeradvantage.com

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