Nordstrom's (NYSE:JWN) alternative retail store Local, which doesn't actually have any physical merchandise of its own to sell, will now begin accepting returns for online purchases -- and not just for items bought on Nordstrom's website, either. Customers who bought items at Macy's (NYSE:M), Kohl's (NYSE:KSS), and other rivals to its parent can now return them to the Local store.
The service is reminiscent of Kohl's program that allows customers to return items bought on Amazon.com, and it may indicate a growing retail trend to make a store the most convenient destination for customers.
Making a name for itself in convenience
Nordstrom has always been synonymous with great customer service, so it would seem a natural extension to make the returns process as easy as possible while also allowing the retailer to stand out from the competition.
The experiment seems to be working for Kohl's. It has expanded the concept from a handful of stores to around 100 locations, and then nationwide. Services that monitor store traffic say Kohl's partnership with Amazon has increased guest counts at stores with the service, and those guests have begun shopping its clothing racks more.
Whether the returns program will have the same impact for Nordstrom remains to be seen. It is opening its second Local store in New York later this month (it has three locations in Los Angeles) and plans to open a new flagship department store there next month. But the Local stores are different from the regular department stores.
Pursuing a halo effect
Local doesn't have any merchandise, though it offers the ability to order online and pick up in-store or even at curbside. You can also get alterations done on clothes, shoe repair, free styling advice, stroller cleaning -- and now product returns.
Making it easier for customers to return products is certainly an important consideration for retailers, as it is routinely considered one of the main pain points in getting customers to buy. Whether it's actually beneficial to make your competitor's returns process easier is still debatable, particularly when the Local store doesn't give the customer a chance to then browse what you have for sale.
At least Kohl's can make the argument that by bringing Amazon customers into its stores, they may then decide to see what the retailer has on its racks. Since Nordstrom Local only lets you surf the internet to shop, something customers can do on their mobile devices, it seems like a missed opportunity.
The retailer will undoubtedly argue that making the returns process easier regardless of where the purchase was made will provide a halo effect for its traditional department store -- that the warm fuzzies customers get from being able to bring a package into the Local store will then implant positive thoughts about how great it must be to shop at a regular Nordstrom.
Looking to reverse declining sales
Certainly there will be some of that, but customers could just bring their Macy's or Kohl's purchases to the retailer they bought them from, though the latter doesn't have a Manhattan store. Other online retailers also might not have a convenient physical presence or have one at all.
Still, getting that to translate into sales at Nordstrom seems difficult. It says it doesn't intend to gauge a store's success by sales per square foot, as is typically done in retail, but rather by market share gain.
Whether that's because sales are declining at Nordstrom is unknown. Last quarter, full-price store sales declined 6.5%, while off-price was down almost 2%. The second quarter results were the third consecutive quarter that full-price sales have fallen; off-price revenue has fallen for two quarters now.
A more global approach may be necessary
Nordstrom stock has lost about half its value over the past year, and last month had been down some 60% as it struggles to make a turnaround in sales.
Expanding the returns concept to the regular department stores might help more in that regard, and we may see Nordstrom ultimately take that step to recharge sales after it tests the waters at Local.