April 30, 2009, 12:00 AM

Nordstrom and Ace Hardware report good results from in-store pickup programs

Though quite different, the two retail chains, like many others, realized all of their revenue gains last year on the web. To further capitalize on the Internet channel, Nordstrom and Ace are each emphasizing multichannel retailing, with a special focus on in-store pickup of online orders.

If retail chains as diverse as high-end fashions merchant Nordstrom Inc. and retail cooperative Ace Hardware Corp. haven’t always recognized the value of the web as a selling channel, they surely did in 2008.

For both of these chains, like many others, the Internet provided their only revenue gains last year. And to help keep the web contributing to total revenue figures, they’re each emphasizing the importance of the online channel in a multichannel environment. A particularly strong point for each is supporting in-store pickup of online orders.

At Nordstrom, e-commerce sales increased by 8.4% to $686.2 million for the 2008 fiscal year ended Jan. 31, 2009, up from $633 million for the prior fiscal year ended Feb. 2, 2008, Nordstrom says.

Overall sales for Nordstrom declined by 6.2% to $8.27 billion from $8.82 billion while same-store sales declined by 9%. The web accounted for 8% of sales in 2008 compared with 7% in 2007. Nordstrom’s net earnings for the year also declined by 43.9% to $401 million from $715 million in 2007.

E-commerce sales for the fourth quarter increased by 4.7% to $204.4 million from $195.3 million in the fourth quarter of 2007. Total sales in the final quarter declined year over year by about 8.4% to $2.30 billion from $2.51 billon, as same-store sales decreased by 12.5%. The web and e-commerce represented 9% of total sales in the fourth quarter compared with 8% in the same period the prior year. Nordstrom’s Q4 net earnings declined by 67.5% to $68.9 million from $212 million in the fourth quarter of 2007.

Nordstrom continues to invest in the web and sees the Internet and its direct channel as a way to build tighter customer relationships in a tough economic environment, the retailer says. In 2008, Nordstrom integrated all of its e-commerce and store inventory systems and rolled out a buy online/pickup in-store program.

The option to shop online but arrange for a pickup at a convenient location helped Nordstrom build out its multichannel program and developed better customer service, especially during the Christmas shopping season, Nordstrom president Blake Nordstrom told analysts on the retailer’s year-end earnings call.

“The investments we’ve made in the last five years to enhance the one-on-one relationships our salespeople have with our customers are more important to our business than ever,” Nordstrom told analysts. “Capabilities like buy online/pickup in-store and the ability for salespeople to find inventory anywhere in the company help serve the needs of our customers better through all our channels.”

Ace Hardware hammered out a 37.2% increase in web sales to $11.8 million for the 2008 fiscal year ended Jan. 3, 2009, from $8.6 million in the prior year. Total sales in 2008 declined by 2.8% to $3.86 billion from $3.97 billion in the prior year. The company didn’t report comp store sales.

Although the retailer’s web channel accounts for only 0.3% of total sales, Ace still expects its web store to be a big driver of store sales. About 77% of all shoppers on AceHardware.com now use the site’s order online/pickup in-store program, says Ace e-commerce marketing supervisor Mark Lowe.

When they pick up an item ordered online, about one-third of shoppers also make additional store purchases, Lowe says. “We had a strong year on the web in 2008 and shoppers and Ace store owners like the order online/pickup in-store option,” he says. “The program drives customers to AceHardware.com and our network of stores and increases customer loyalty.”

Ace, a cooperative representing 4,600 independent hardware, home center and building materials retailers, uses GSI Commerce Inc. to manage its e-commerce platform. The web accounted for 0.3% of total sales in 2008 versus 0.2% in 2007. Net income for Ace declined year over year by 1.2% to $85.8 million from $86.9 million.

mark@verticalwebmedia.com

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