Dive Brief:

• In a quest for profitability, Nordstrom’s Trunk Club service is now charging a $25 at-home try-on fee and shortening the return window, according to an update in its terms of service.

• The $25 try-on fee can be credited toward a purchase, and unwanted items must be returned within five days, rather than the previous 10, if customers want to enjoy free shipping and avoid purchase.

• In 2014, Nordstrom bought the e-commerce menswear company for $350 million and last year expanded it to include women’s clothing and accessories. 

Dive Insight:

For a while there, Nordstrom seem to be escaping the pitfalls facing U.S. department stores, which experts said was thanks to the retailer’s famous high level of customer service, design thinking, nimble response to market forces, early e-commerce efforts and its successful off-price Rack unit.

But recent quarters have shown that it has suffered sales and traffic decreases. Trunk Club is one unit that has not yet turned profitable for the retailer, a Nordstrom spokesperson told the Chicago Business Journal. That has left Nordstrom, which was one of the first brick-and-mortar retailers to offer free shipping on both online orders and returns, to get comparatively stingy with its Trunk Club customers. The stiffer requirements come on the heels of Nordstrom’s closure of Trunk Club’s large Chicago-based fulfillment center.

In response to a few shaky quarters, Nordstrom executives announced plans to tighten up e-commerce offerings to include only best-selling items and to improve its supply chain. Such efforts appear to have already paid off, as Nordstrom demonstrated a summertime rally that included second quarter same-store sales and earnings that beat analyst forecasts and revenue that barely missed expectations. 

Nordstrom's Q2 same-store sales fell 1.2%, handily beating a Retail Metrics consensus estimate of a 3.3% decrease, and quarterly earnings of 67 cents per share signaled another easy beat of Retail Metrics' estimate of 56 cents per share, though they were down from 93 cents a year ago. Q2 revenue was $3.65 billion, barely missing analysts’ expectations of $3.68 billion. 

The off-price Nordstrom Rack unit, which includes Rack stores, the Rack website and flash-sales site HauteLook, was even more impressive — logging an 11.2% net sales increase and same-store sales growth of 5.3%.