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Nordstrom Forms Subsidiary -- Nordstrom.com -- to Accelerate Growth of Its Internet and Catalog
Editor in Chief
Topics: business finance
Nordstrom, Inc. today announced plans to establish a new subsidiary -- Nordstrom.com -- to promote rapid expansion of its one-to-one retailing, which includes both its Internet and catalog businesses.
The new subsidiary will carry out Nordstrom's strategic objective to become the leader in fashion-related e-commerce.
Nordstrom.com will be owned principally by Nordstrom, Inc., which will contribute to that subsidiary all of the assets and liabilities associated with both its present catalog and Internet businesses, as well as an additional $10 million in cash. Benchmark Capital and Madrona Investment Group will participate as minority owners, collectively investing $16 million. Benchmark is making one of its largest investments ever -- $15 million -- and will participate on Nordstrom.com's board of directors.
The subsidiary's first major effort will be focused on establishing the world's biggest shoe store, an Internet site to be named NORDSTROMshoes.com, which, by the 1999 holiday season, intends to offer 20 million pairs of shoes. NORDSTROMshoes.com is to be launched in the fall of 1999.
``For some time we have been developing core expertise in one-to-one retailing. Now we are accelerating our presence and offering, and believe we are the best positioned retailer to dominate fashion-related e-commerce,'' said John Whitacre, chairman and chief executive officer of Nordstrom, Inc. ``We will continue to look for ways to serve our customers wherever they want to be served.''
``The apparel market on the Internet is projected to total billions of dollars within three years, and we intend to capture a significant share of that market,'' said Dan Nordstrom, chief executive officer of Nordstrom.com and co-president of Nordstrom, Inc. ``Our experience in selling shoes on-line, combined with strong vendor partnerships, a well-established brand identity and our nearly 100-year heritage selling shoes, convince us this is the right initial focus. Ultimately, we plan to replicate this experience through expanded offerings in a variety of merchandise categories, including apparel, accessories, jewelry, gifts and others.''
NORDSTROMshoes.com currently has agreements with seven shoe vendors: Allen Edmonds, Cole Haan, Dr. Martens, Kenneth Cole, New Balance, Skechers and Stride Rite, in addition to Nordstrom Product Group (which provides shoes under several brand names and labels, including Callaway Golf Apparel by Nordstrom, Expert by Evergreen, Preview, 81st & Park, Baby N Collection, N-Kids, Norsport and Softwear). Through additional agreements, NORDSTROMshoes.com expects to offer approximately 20 million pairs of shoes by the 1999 holiday season. For comparison, Nordstrom's current Internet site offers approximately 200,000 pairs of shoes.
Nordstrom.com will have its own executive management team and board of directors. However, inter-company agreements will govern the movement of goods between Nordstrom.com and Nordstrom, Inc., as well as a variety of other inter-company relationships incidental to operation of the business and protection of the Nordstrom brand.
Initial investments by the partners in Nordstrom.com will fund site development, software expenditures and promotional activities, including a national advertising campaign for NORDSTROMshoes.com.
``Benchmark is extremely excited to be working with Nordstrom, a company whose brand and customer service reputation have stood the test of time,'' said Benchmark general partner Bill Gurley. ``We are committed to delivering the leading fashion experience on the Internet, and with ourselves, Nordstrom and, most importantly, the employees at Nordstrom.com, we have all the resources necessary to make it happen.''
Benchmark also has been involved with companies such as eBay, Ariba, Webvan, E-Loan, Red Hat and Scient.
Tom Alberg, principal of Madrona Investment Group, has provided strategic counsel to the venture and will continue to be responsible for the Madrona-Nordstrom relationship. Alberg has been a member of the board of directors of Amazon.com since its inception.