Eyeing e-commerce efficiencies, Nordstrom buys stake in software platform

Dive Brief:

Nordstrom has acquired a minority stake in supply-chain software company DS Co., a cloud-based platform that allows suppliers to drop-ship orders and handle returns for retail partners, the Wall Street Journal reports.
The move comes as the department store retailer is adjusting its e-commerce logistics to trim costs; earlier this year executives said that would include consolidating items, reining in supply chain costs and removing poorly selling merchandise.
DS Co., and its Dsco platform, solves one of the most confounding areas of retail: keeping track of inventory to facilitate orders and returns by leveraging data from both the manufacturers and the retailers.

Dive Insight:

Nordstrom, in keeping with its top-notch reputation for excellent customer service, has long offered free shipping and free returns on online orders, even for customers outside of its loyalty program. The company, like many retailers, is facing rising competition from Amazon and other e-commerce companies that have made fast and free shipping somewhat of a norm shoppers have grown to expect.

This has likely cut into Nordstrom's already razor-thin e-commerce margins, and, after several months of disappointing traffic and orders, the company is getting assertive about cost-cutting and efficiencies.

But Nordstrom has to be careful here — its customer service has emerged over the years as one of the most important elements of its brand. Investing in this software, which allows orders placed through Nordstrom to be shipped directly from the manufacturer, could tarnish that by leaving things up to suppliers that may not have the level of attention Nordstrom took years to build.

Still, something’s got to give when it comes to e-commerce and omni-channel. While sales online continue to grow, profits have been less easy to come by, in part because of the expense of fulfillment. Ken Worzel, Nordstrom executive vice president of strategy and development, told the Wall Street Journal that the move will enhance that reputation.

“Dsco is helping to improve [customers’] online experience by reducing complexity in our supply chain,” he told the Wall Street Journal, saying also that the company plans more investment in companies like Dsco.

Nordstrom said profit for the first quarter was $46 million, down 64% from $128 million, year over year, and it now forecasts a 2.5% to 4.5% increase in sales for its full year, down from its earlier estimate of a 3.5% to 5.5% increase.