Nordstrom's popular Anniversary Sale begins Friday and runs through Aug. 4, but like last year, early access has been granted to members of its Nordy Club loyalty program.
Most club members' early access began July 12, but "Icon" level members, who reach that status by invitation only, could shop the sale starting July 9. Those at the "Ambassador" level, who spend at least $5,000 at the retailer each year, could begin July 10. That has sparked some controversy on social media as some items have already run out, causing order cancellations.
Hi @Nordstrom so many items from my early access anniversary sale order are getting cancelled. What's the benefit of early access?!?— laura markofsky (@LauraElleM) July 12, 2019
Meanwhile, signs in stores trumpeted the fact that the sale had already started for some customers but not others. Shoppers took to Twitter and elsewhere to complain that "influencers" and others had an unfair advantage.
So if you go to @Nordstrom store today you cannot actually purchase anything unless you have a store card and spend a certain amount. The 80s called and they want their retail marketing ideas back. #shoponline pic.twitter.com/DoicltU4jV— Julekha Dash (@Julekha) July 10, 2019
In statements emailed to Retail Dive, the company was contrite. "We're sorry for any confusion around Early Access to shop the Nordstrom Anniversary Sale," a Nordstrom spokesperson said. "Early Access is intended to reward our most loyal customers, Nordy Club Cardmembers. There are five statuses in The Nordy Club, each of which have varying Early Access benefits."
The spokesperson also addressed the inventory issues that led to canceled online orders. "Certain products may be more popular and while our website reflects our full company inventory, sometimes orders can't be fulfilled if another order was received for the same item while inventory was updating," the spokesperson said. "We're sorry if an item wasn't available. We are constantly restocking many items and encourage customers to continue to check online or in their store."
It's not a good time for that kind of buzz. The Anniversary Sale is a major event for the department store, as revenue "rivals even our holiday period," executives said last year, according to a Seeking Alpha transcript published by Nasdaq. More broadly, Nordstrom is struggling to fetch full price at its mainline stores, prompting UBS analysts earlier this month to declare it a "no-growth retailer," citing poor execution of its loyalty program as a factor in its troubles.
Challenges of a loyalty program
Nordstrom debuted its new "Nordy Club" loyalty tiers last September, one of several retailers, including Macy's, DSW and Sephora, that have launched similar programs in order to more meaningfully reward their best customers.
As noted in this month's UBS note and by Nordstrom executives themselves during their first quarter conference call, execution of the new program hasn't been smooth. Nordstrom executives said that a move to digital marketing led them to scale back on paper mailings, which turned out to be a mistake that would be corrected.
But the early-access kerfuffle exposes other issues, according to Thomai Serdari, a professor of luxury marketing and branding at New York University's Stern School of Business. There are three other tiers besides Icon and Ambassador: "Members" who spend $0-$499 per year; "Insiders" who spend $500 or more; and "Influencers" who spend $2,000 or more. "Member" status doesn't change with a Nordstrom store card, but cardholders at other loyalty levels get extra perks. All cardholders, including Members, get early access to the sale starting July 12 at the latest.
"There is something off-balance on how the various tiers of loyalty membership have been structured," Serdari told Retail Dive in an email. A Member is "probably an occasional shopper who enjoys the brand association," and then "there is a considerable 'spend' difference between Insiders and Influencers (from $500/year to $2000/year) that truly differentiates regular beauty shoppers from apparel devotees," she noted.
But the privileges are muddy, she also said. There's no difference in "Influencer" and "Insider" priority access to the event, despite major differences in their Nordstrom spending. "Which begs the question: Is Nordstrom's anniversary sale considered a style event? Or is it a promotion similar to those we have seen at other retailers (brick & mortar and online)?" Serdari said. "In other words, if Influencers were given priority access to the anniversary sale and to all the hot brands, Insiders may have been left with nothing to shop considering that Influencers appear to have real purchasing power."
Ya-Bing Chu, vice president of product at loyalty platform Formation, agrees that Nordy Club is off-balance, although he said that exclusive early access is generally a good reward. "The whole concept of loyalty tiers is one of the bigger challenges because they're very static. Nordstrom probably worked on it for months to try to balance out these tiers and who gets what," he told Retail Dive in an interview. "You can't test those break points very easily and you can't change them very easily once you announce them. They have the right tools there, but the rigidity of these rules really causes problems."
The "influencers" moniker for one of the tiers also seemed to cause confusion, as some customers believed that social media influencers — who the New York Times this week said are "taking over the world" — were granted early access, too. "We do not have a program for influencers to shop our Anniversary Sale early," the Nordstrom spokesperson told Retail Dive. "[Q]ualified Icon or Ambassador Nordy Club cardmembers, which may include some influencers, were able to pre-shop July 9-11."
As confounding as that may be, it's the inventory issues that are more likely the heart of the problem, according to Chu, because without them there would probably be much less controversy. "You have an opportunity to improve that execution, but that opportunity only comes next year," he said. "I think the opportunity here is how do you engage people on a more frequent basis. Certainly people who spend $10,000 deserve perks."
Meeting the challenge
Programs like Nordy Club need to be more flexible, less set in stone and more personalized, with more frequent perks, according to Chu. Members could enjoy their own "anniversary sale," for example, marking the day or week that they joined. To help with inventory issues ahead of the actual annual sales event, Nordstrom could poll Nordy Club customers about what items they'll be looking for, and data could be employed to ascertain which categories members are most interested in.
"Predict the demand," Chu said. "That's where the frustration is, really, that all these people wanted to buy. And that's actually fantastic for Nordstrom."
Indeed, the department store enjoys almost cult status, including among younger customers, according to NYU's Serdari. "Nordstrom is far from a discount retailer," she said. "Its appeal to shoppers, and particularly the younger crowd, stems from the assortment of cool brands the retailer carries. These are not cheap but they are highly coveted by Millennials."
The blunders around its loyalty tiers and early access indicate that Nordstrom has some soul-searching to do around its annual event, according to Serdari.
"It all boils down to not clearly defining who the anniversary sale is for," she said. "Is it a sales opportunity for the masses? Then keep it that way and increase the base number of your Insiders tier. Is it for select customers who already spend top dollars at your store? Then promotions and language need to be refined and clarified. If not, Nordstrom seems to be targeting short-term gains (from top customers) as opposed to long-term loyalty relationships with existing and new members. And if so, the whole 'cultish' branding goes out the window."