Sole Man
Dan Nordstrom aims to walk all over competing Internet shoe retailers. His arsenal: an inventory crammed with 30 million pairs.
By Mary Wagner
Internet shopping has come a long way in a short time—from a great place to order books to a vast marketplace where big-ticket goods like computers and even cars are sold. But anyone who’s spent a day imprisoned by a new pair of ill-fitting shoes has to wonder whether the Web is suited to selling footwear.
Shoes are among the trickiest items to fit, and naysayers can’t imagine consumers buying online what they can’t try on first. What these critics can imagine are piles of returned loafers, Oxfords and pumps from shoppers brave enough to try.
Daniel Nordstrom, whose family built a reputation selling shoes before expanding to department stores, isn’t swayed by the naysayers. Nordstrom Inc. of Seattle has wagered some $26 million in startup funds, the bulk from venture capital firms, to launch nordstromshoes.com.
The site, which opened for business in November as an adjunct to Nordstrom.com, is an attempt to leverage the parent company’s expertise in upscale bricks-and-mortar shoe retailing into similar leadership online. Behind the serious money is a serious inventory of 30 million pairs of shoes. “Our vision,” says Nordstrom, “is that one day this site will be the place where you can go to buy from the most comprehensive selection of quality footwear anywhere in the world.”
Even a year ago, Nordstrom would have had the market to himself. But the coming months will change all that. Armed with new technology that aims to crack the nut of remote sizing—and eager to cash in on consumers’ growing acceptance of Web shopping—more shoe retailers are stepping out on the Internet. Online shoe sales totaled an estimated $121 million in 1999, and Forrester Research of Cambridge, Mass. projects they’ll more than double to $290 million this year.
“Interest in the Internet shoe market is exploding,” says Cynthia Milaly, vice president of the National Shoe Retailers Association, a trade group of independently owned shoe retailers. “We get calls every week from people inquiring about selling shoes on the Web, and a lot of them aren’t even brick and mortar retailers. They’re Internet-only companies.”
Given a likely stampede of cyber stores, Nordstrom will need all the marketing savvy and technology it can muster. The company has put both into an aggressive e-commerce strategy that includes a $15 million advertising blitz and policies that attempt to assure customers of the seamless shopping experience for which the department store is known. Shoes bought on the Web can be returned to any Nordstrom store or mailed back in a postage-paid envelope sent with every order. And Nordstrom is matching its liberal return policy with technology aimed at helping customers make sensible shoe choices.
Time will validate the retailer’s strategy—or not—but industry observers already give the company high marks for making the attempt. “Kudos to Nordstrom for going after the Internet instead of being an ostrich,” says Matthew Cutler, cofounder of netGenesis, a Cambridge, Mass. e-business consultancy. “The fact that they’re putting some serious money behind it is good, because some companies think they can do it on the cheap and fail miserably. It’s a big gamble. But the Internet is all about big gambles.”
Shoes and more
Like other brick-and-mortar retailers that have invested heavily in the Internet, Nordstrom is aiming high, and its goals for the Web reach beyond shoes. Nordstrom CEO John Whitacre says he’ll settle for nothing less than “becoming the leader in fashion-related e-commerce.” The company plans to make the shoe site a model for expanded offerings in apparel, accessories, jewelry and other categories expected to total billions in overall Internet sales over the next three years.
By opening a shoes-only site, Nordstrom is playing its trump card first. The retailer and shoes go all the way back to founder J.W. Nordstrom’s first store, opened 99 years ago.Thanks to a strong selection, shoes accounted for 30% of Web sales soon after nordstrom.com launched in October 1998. “It was great to see that our online customers felt just as strongly about shoes as our in-store customers,” says Colleen Chapman, marketing manager of Nordstrom.com. “So we took that shoe category and blew it out, making it its own shoe store and allowing for a lot of bells and whistles to make that shopping experience unique.”
First mover, fast mover
Not only did Nordstrom need to find the latest technology to pump up the shoe site and capture market share, but it needed to do so quickly. That’s not always an easy task when a company is accountable to shareholders. Big spending can add up to big losses—a risk that has kept other retailers from investing in the Web.
Nordstrom made two important moves. First, it teamed up with a Web-savvy venture capital partner outside retailing. Then it rolled the Internet and its catalog business into one subsidiary, Nordstrom.com. Besides making both operations more nimble, the maneuvers gave the Internet business better access to fulfillment services, and a 250-person call center already in place at the catalog division.
Benchmark Capital of Menlo Park, Calif., put $15 million into Nordstrom.com, one of its largest investments so far, in exchange for a 15% stake and a seat on the board. Madrona Investments Group gave the subsidiary another $1 million for a 1% stake. Though his firm is better known for backing Internet startups such as eBay, Benchmark partner Bill Gurley sees a critical advantage in Nordstrom’s retail history. “Any large, established company has a big plus in going to the Web,” he says, “but only to the extent they’re willing to exploit it by moving fast.”
The big-company advantage: supplier relationships. “Toys R Us theoretically could have killed eToys because it had a SKU count that eToys didn’t have,” explains Gurley. “But over time, this advantage deteriorates. The number of supplier relationships eToys has today is probably 300 times what is was two years ago.”
Nordstrom can tap relation-ships with existing suppliers and manufacturers for an e-commerce offering few can match, Gurley contends. Like other retailers with dot-com subsidiaries, the setup allows Nordstrom to break through the bureaucracy that can inhibit companies from moving fast enough on the Web.
Nordstrom.com has its own board and executive team, along with the power to make decisions without the parent company’s say-so. On top of that, the compensation structure includes equity and other features typical of Web companies to attract top-notch talent.
Fitness training
As for what attracts customers, most make their shoe selections based on appearance and fit, two experiences difficult to create online. “Every shoe and every foot is different,” says Lori Arendt, who owns two designer-shoe outlets based in Chicago and also sells shoes online. “There are problems with sizing when people can’t actually try shoes on.” Arendt solved the problem on her Web site by selling only sandals and other open-toed footwear with more sizing flexibility.
Nordstrom, with 30 million pairs of shoes ranging from pumps to work boots, is setting no such limits. Along with a wide selection, Dan Nordstrom and his team wanted to boost the shoe site’s content and entertainment value—the key to drawing younger, fashion-conscious shoppers. So they worked with technology vendors to come up with Web applications designed to replicate the in-store experience.
A first step involved migrating Web operations to the Microsoft platform (the bricks-and-mortar side continues to work with IBM). “We were looking for the kind of technology that is really going to bring the store experience into play,” says Chris Dressler, Nordstrom.com’s senior program director. “The idea was that the customer experience should be just as good online as it is in the store. It shouldn’t be Nordstrom lite.”
Along with giving the site more scalability, the switch to Microsoft opened the door to developing applications to make online shoe-buying a friendlier experience. Some highlights:
— The Sole’s Desire Quiz acts as digital salesperson by generating customer-specific recommendations. A five-question quiz solicits information that classifies shoppers into one of several categories. Once it has pegged the shopper’s type, the site suggests additional merchandise.
— The Fit Advisor is an attempt at sizing shoes of various styles. Nordstrom has crunched data from suppliers that compares fits typical of various vendors. If a shopper wears a size 6 in a casual shoe from Nine West, for instance, her so-called true size is larger for a more narrowly built Ferragamo.
— The online Brannock replicates the metal gauge that shoe stores use to measure feet. If shoppers want to check their foot length and width, they can print out the Brannock surface from the site.
To pull these features together, a dedicated Internet team of Web developers, designers and merchandisers worked with Microsoft to develop many of the site’s new applications from scratch.
The stakes involved in pioneering virtual bells and whistles are high, and anything less than flawless execution can put customers off a site. Several Web shoppers reported mixed experience with Nordstrom shoes, including problems in accessing various features, slow loading, and inability to retrieve some images. Viewing the Brannock device required a cumbersome download of Adobe Acrobat reader, and some shoppers found the site confusing and difficult to browse.
“If Nordstrom does not simplify site navigation, consumers will conclude that buying shoes online is just as much of a hassle as they’d suspected,” says Evie Black Dykema, an analyst at Forrester Research. “Time to shape up-fast.”
Nordstrom himself views the shoe site as a work in progress: “We think we’ve made a good start, but we have a lot of ground to cover.” Adds Benchmark’s Gurley: “The learning here is incremental. Like any innovators we’ll listen to the customer base. If something doesn’t work, we’ll search for an alternative solution, but I’d still rather be the guy pushing the envelope.”
If setting the standard works both ways, every glitch represents an opportunity for competitors. In October, Zappos.com of Emeryville, Calif., launched an expanded online shoe store with 100 brands and several features missing at Nordstromshoes.com: free shipping, live chat customer service, and even free socks with every purchase. Zappos.com is only one of the retailers featured in Shoe Mall 2000, an online hub sponsored by ShoesontheNet.com. And Shoe Mall 2000 also is among several online shoe malls now vying for Internet shoppers’ attention.
Nordstrom.com won’t disclose sales to date or even projections for Nordstromshoes.com, so any official read on the site’s performance will have to wait until the close of the first quarter, when the company will release selected financials. Whatever the early results show, many observers say just creating the site moves the company in the right direction. “Nordstrom is known as a pretty conservative organization, but they took a non-conservative stance,” says Cutler. “Plunging into the unknown is infinitely better than ignoring the writing on the wall.
All shoes, all the time
From stocking millions of styles to standing behind them, Nordstrom’s shoes-only site is aiming high. Here’s how it’s setting the bar for its competitors:
— 30 manufacturers, ranging from Kenneth Cole to Stride Rite.
— A $15 million advertising blitz to launch the site. The six-week television and print campaign got consumers’ attention with a tongue-in-cheek “Make room for shoes” theme that cut through the holiday clutter.
— Portal deals with AOL, iVillage and Yahoo!
— Integration among channels: Like goods sold at nordstrom.com, shoes purchased on the Web site can be returned at any Nordstrom store. What’s more, the company’s catalogs refer shoppers to the Web.
— What one analyst calls “a brain-dead simple” solution to minimize the inconvenience of returns for consumers: a pre-addressed, postage-paid envelope shipped with every order.
The ultimate closet organizer
How do you sort through a virtual Imelda’s closet in mere seconds? Nordstromshoes.com looked at search engine technology from Inktomi and other vendors, but ultimately chose to build its own search engine using Microsoft’s OLAP technology.
“What that allows us to do is chunk through huge sets of data within seconds,” says senior program director Chris Dressler. “OLAP rolls up the data into key segments, like sizing and color, so the relationship is already built in between different key points for which the shopper is searching.”
So when you search for black pumps, for instance, you’re not really searching the whole database but through an already-defined subset. That means quick answers for every search—even with a universe of 30 million possibilities. 
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