Nordstrom Backroom
While all other retailers view the online channel as a way to remove human service, we discovered that the key to selling high-end designer fashion online was to use technology to enhance human service. Building a website for merchandise that’s sold almost exclusively through personal relationships can be tough. This is especially complicated when you’re contractually prevented from selling online by the makers of the merchandise, and buyers look down their noses because the web is thought of as mass-targeted and impersonal. These were the issues we were facing when we were hired by Nordstrom to help grow their high-end designer fashion business. It is a business where Chanel, Prada and Versace gowns are sold by sales people who have cultivated deep personal relationships with customers who rely upon them to get them access to the newest, most exclusive merchandise first. These high-rollers, some of whom spend up to $20,000 a month on fashion, can’t be bothered to shop thumbnails on a website. They want their salespeople to do the work of preselecting the best of that season for them. Even if they were interested in shopping online, Chanel, Prada and Versace are generally not into playing along. Designers like these are far too protective of their brand image to let themselves be displayed on any shopping site. Most of them don’t even sell on their sites.
Our Insight
Research among sales people started to give us a clue. We discovered that a couple of Nordstrom’s most enterprising salespeople were taking digital pictures of garments that had just been delivered to the store. They would email these photos to their best customers and sell items before they were even put onto the sales floor. This was a win win situation. Customers got early access to fashion, and salespeople got more frequent contact (and more frequent sales) with customers, many of whom travel constantly and don’t have as much time to come into the store .It was also an interesting use of technology, “online retailing” of a kind but with a key difference. And it helped us start to imagine a very different role for technology in retailing. Up until that point, technology had been seen as a replacement for human service. Retailers like Amazon.com are leading the way in trying to make their technology smarter and smarter so that you never have to speak to a person.
However, we realized that technology could instead be used to augment human service. To empower sales people rather than replace them. To extend, magnify and enhance the service that people deliver. That insight led to the creation of Nordstrom Backroom – a password-protected virtual dressing room, stocked with one-of-a kind items selected specifically for customers by their sales person.
There are two parts to the experience: a customer management tool for the sales people as well as the dressing room for the customer. The salesperson view allows them to quickly “stock” Backrooms for all of their customers. Instead of having to take their own pictures and choose only merchandise from their store, we photographed all new merchandise centrally as soon as it entered the Nordstrom system and made everything available to salespeople through a searchable/browsable database. Through iterative development cycles, we created an interface where salespeople could actually create Backrooms for customers in a matter of minutes, enabling them to make use of down time when no customers were on the sales floor and generate additional sales. Customers are presented with their own, private Backrooms. They can see alternate views of items if available, have them charged to their account and shipped or held at the store for pickup. They can also send messages back to their sales person with feedback. Additionally, they can attach pictures of items they are looking for, so that their sales person can locate it. The experience is unique in that it is completely human-powered. There is no “intelligence” in the system whatsoever and even payment is manual because the sales people have their customers’ credit cards on file. And because it’s private, we can sell any designer on it that we choose. It’s online retailing that gets past the restrictions on online retailing that the designers have placed upon us.
Backroom was launched through a 10 week pilot program in the depths of the “Great Recession.” 38 sales people were selected to evaluate the application and, intotal, they created Backrooms for 410 customers. About half of these customers were only shown items once. Nevertheless, 37% of the customers bought at least one item through their Backroom. While we’re not allowed to publish the actual sales figures, it’s safe to say sales through the Backroom were significant and more than paid back the development cost of the application (the average retail price of items sold was over $1000). In addition, many sales people reported additional sales that were inspired by Backroom but were completed outside of the system. However, beyond the sales success, Backroom also broke new ground for Nordstrom in several other ways:
1) It increased the productivity of salespeople by allowing them to sell during slow times on the sales floor.
2) It enabled sales people to sell additional merchandise from more designers, because they had access to everything in the system, not just what was in their store.
3) An analysis of sales showed that the best Backroom customers were not the best customers overall, so rather than cannibalizing sales from their best customers, it appears that Backroom generated additional sales from less loyal customers.
4) It extended the full retail price sales period for the merchandise – a key benefit in a category where over 90% of merchandise is bought on sale.
Most importantly, Backroom builds upon a core strength of the Nordstrom brand – its employees. It’s a shining example of how classic Nordstrom service can be translated into the 21st century.