Nordstrom Targets Tech-Savvy Shoppers for Growth

Nordstrom is one of a group of investors putting its money where Bonobos' mouth is.

Jul 9, 2014 at 6:15PM

If you think Bonobos sounds like a reference to an ape, in most cases you'd be right. The bonobo is a little chimp when we're talking about Africa. When we're talking about hipsterized America and the recent investment by Nordstrom (NYSE:JWN), Bonobos is a men's online retailer. Last week, Nordstrom joined a group of investors who put a collective $55 million into the up-and-coming brand.

Nordstrom has been working with U.K.-based Topshop for two years. Topshop is a younger, slightly edgier brand than Nordstrom normally presents, geared to bring in a new crowd. Nordstrom clearly hopes that Bonobos will draw a similarly young crowd. It's all part of the company's ongoing drive to make itself appealing to a larger audience -- and it's paying dividends.

Where the kids shop now
The new Nordstrom has been out in front of trends in a way that the Nordstrom of the mid-'90s, let's say, wasn't. It has embraced new brands and technology, becoming a leader in omnichannel sales, for instance. It has added technology to its stores that makes it easy for customers to spend money the way they want to. You can buy online and send to store, buy in-store and ship it out, or buy online and return in-store, for instance. The distinctions between channels are being broken down.

That's helping bring in tech-savvy shoppers, which is code for "young shoppers." Nordstrom has cemented this segment by bringing in brands like Topshop that appeal to a younger crowd. Bonobos is setting up physical stores to help bolster its online shop, which has lost money to this point. For its cash infusion, Nordstrom will be getting access to some of Bonobos' line.

This is actually the second investment in Bonobos from Nordstrom. It dropped $16.4 million back in 2012, when Bonobos was fresh out of the package. In that announcement, Nordstrom made it clear that it was looking for new ways to increase its bottom line, saying, "square-footage growth is not where that growth is coming from." 

Nordstrom setting itself apart
Competitors like Macy's (NYSE:M) have been shying away from younger sales, seeking to build up a strong base for the soon-to-be older crowd. In a presentation earlier this year, Macy's said of the millennial generation, "[That] large population is going to grow older and we are particularly suited when they do get into their 30s and 40s and ready for them at that time."

Nordstrom is trying to pick up the customers that other retailers are overlooking by appealing to the way that they shop and the brands that they look for. It's been a strong strategy for the business, and the stock has outpaced the S&P 500 year to date, though it's fallen behind over the last 12 months.

From an investment standpoint, I'm optimistic about Nordstrom's future, especially as it takes a proactive approach to growing its business. Instead of just doing what it's always done and hoping for better results, Nordstrom is doing something new. If it fails, so be it, but right now, all signs point to success.

Will this be tech-savvy shoppers' new favorite thing?
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Andrew Marder has no position in any stocks mentioned, and neither does The Motley Fool. 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. The Motley Fool has a disclosure policy.

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