Trunk Club founder Spaly leaves Nordstrom weeks after $197M write-down

Dive Brief:

Nordstrom, Inc. announced Monday that Brian Spaly, CEO and founder of its Trunk Club online stylist unit, has chosen to depart the company.
Terry Boyle, president of NordstromRack.com/HauteLook, will also take on leadership of Trunk Club. Boyle's new title will be President, NordstromRack.com/HauteLook and Trunk Club, Nordstrom said.
Spaly's exit follows two months after Nordstrom took a $197 million write-down on Trunk Club — more than half of the $350 million Nordstrom paid to purchase the startup in 2014.

Dive Insight:

Nordstrom’s $10 million third-quarter net loss (in a period that otherwise saw same-store sales climb) can be squarely pinned on Trunk Club, which the retailer acquired two years ago from Bonobos co-founder Spaly. As with Bonobos, Spaly envisioned Trunk Club as a vehicle to leverage the internet to spare men the pain of shopping in stores, yet while e-commerce does continue to grow as a sales channel, even Bonobos is finding that men are more amenable to shopping in stores than its original philosophy would suggest. (Bonobos, in fact, is using its latest funding round to expand its brick-and-mortar footprint.)

In its own quest for growth, Nordstrom moved to evolve Trunk Club's identity to create a concierge service that would attract shoppers interested in fashion and style advice (and not just pain avoidance). The department store also opened Trunk Club’s membership to women in 2015. But so far, profits have been elusive and costs have been high: Because the Trunk Club model entails sending clothes back and forth (the company curates a trunk of possibilities in apparel, shoes and accessories, and customers send back what they don’t want to buy), the unit racks up plenty of margin-hitting logistical expenses.

Nordstrom has already worked to stanch the bleeding, instituting a $25 at-home try-on fee and shortening its return window — policies that are in stark contrast to Nordstrom signatures like no-minimum free shipping and returns, and no time limits on returns or exchanges. Over the summer, Nordstrom also closed down Trunk Club’s large Chicago-based fulfillment center.

Despite the troubles getting to profitability, Nordstrom's purchase of Trunk Club, like its investment in customizable shoe startup Shoes of Prey, its acquisition of flash-sales site HauteLook, and other partnerships, demonstrates its willingness to experiment with ways to keep the department store relevant, says Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext.

"Nordstrom has really done a good job of trying to partner with some of these unexpected businesses," Kohan told Retail Dive. "They’re doing a lot of right things. Any time that you’re taking business model and merging it or purchasing it or adding it to your existing operations, things can be difficult. The most important thing is that they are making changes, that they are trying to make it a successful part of their business. Considering the customer recognition of Truck Club, from a visibility perspective and a top line growth perspective, it's worked. The biggest challenge is how do you turn that top line growth into profit. I applaud Nordstrom for trying to make it work."

In November, co-president Blake W. Nordstrom told analysts the retailer remains committed to the Trunk Club effort as part of its customer strategy. Now, however, it’s sending in tech startup veteran Boyle to take over. Boyle joined flash sales site HauteLook in 2008, three years before Nordstrom acquired that venture; he was later instrumental in HauteLook's integration into Nordstrom, and now oversees it. Boyle also led the design and launch of Nordstrom Rack’s off-price e-commerce operations, NordstromRack.com, in May 2014.

"We're moving into an exciting next phase of Trunk Club and we're excited to welcome a seasoned leader like Terry into this leadership role," co-president Erik Nordstrom said in a statement. "Terry comes into this role with a tremendous amount of knowledge about Trunk Club, having served on its advisory board since it was acquired by Nordstrom in 2014. His unique track record in taking startup businesses, building them to scale and supporting their growth, both in and outside of Nordstrom, will enable him to support Trunk Club and the leadership team there during this critical time for that business.”

In addition to Boyle, Trunk Club's leadership team now also includes Kevin Price, who has served as chief financial officer since Trunk Club's inception and is now taking on additional accountability as chief operating officer; Linda Bartman, who recently joined the company as chief marketing officer following leadership roles at CDK Global, AT&T, BP, GE and Cars.com; and Michael Barkin, also with Trunk Club since it was founded, who was recently promoted to senior vice president of sales.