E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Retailers like Jamie Nordstrom are pouring millions into a new generation of mobile and web technology to engage the empowered consumer.
Nordstrom Inc. plans to spend $140 million on e-commerce in 2012, 40% more than last year, and nearly $1 billion over five years as it devotes roughly 30% of its capital budget to web-related expenditures, company executives disclosed earlier this year.
But web-related expenditures cover a lot of ground, well beyond spending on its primary e-retail site, Nordstrom.com. For instance, the upscale apparel chain distributed 6,000 mobile devices to its stores so employees can check customers out in the aisles and e-mail them receipts, as well as upgraded its point-of-sale systems so associates can find items not in stock and order them from web inventory. It is also rolling out new features on a quarterly basis that will further bring Internet functionality into Nordstrom stores.
Before long, the mobile devices Nordstrom employees wield will enable a shopper to order a dress in a different size or color online from in the dressing room—"things you can do with your phone today that would be awfully hard to do with a cash register," says Jamie Nordstrom, president of Nordstrom Direct.
Does this herald the arrival of omnichannel retailing? Nordstrom says he doesn't know what the term means, but he does know this: "Increasingly, customers expect a great experience no matter what channel they're shopping in. They're not going to give you credit if you're not great online because you have great stores. You're going to have to be good at both."
This is no surprise to Nordstrom and his colleagues. He says they started hearing from shoppers a decade ago that they wanted it to be easy to shop Nordstrom both in stores and online, and have taken a series of organizational steps to give customers what they want.
Now Nordstrom has company, especially from many of the big retail chains. Over the past year, such chains as Wal-Mart Stores Inc., The Home Depot Inc., Lowe's Cos. Inc., Macy's Inc., Kohl's Corp. and Staples Inc. have announced major technology investments. Many of their projects bring the Internet into their stores or involve mobile devices—either those that shoppers carry with them or those in the hands of associates. And increasingly they're adding social components, such as making it easier for consumers in stores to check reviews or post messages about items they like or have purchased to social networks such as Facebook, Twitter and Pinterest.
"You can't be like Amazon unless you invest like Amazon," says Gene Alvarez, vice president and analyst at technology research and advisory firm Gartner Inc., referring to the leading online retailer Amazon.com Inc. "And you have to be willing to experiment and try new things that would change the customer experience. The customer experience is paramount now."
Retailers are engaging in many experiments, especially the largest companies that are investing in web and mobile technology. What it means for retailers large and small, online and multichannel, is that they are all going to have to make shopping more pleasurable and satisfying for the shopper. Meanwhile, the retailers going through this transformation to the Internet-is-everywhere age are finding that deploying technology is just part of the process: They also face challenges related to recruiting, compensation and their organizational charts.
While retail chains investing in whiz-bang web-in-store technology is a big part of the story, it's hardly all of it. Web-only retailers or consumer goods manufacturers that sell online are investing heavily as well—Amazon.com last year spent $2.6 billion on technology and content, 68% more than in 2010, much of it related to expanding its electronic books line for consumers who use its Kindle e-book reader.
And many of the investments by retail chains are for core e-commerce requirements. Operators of bricks-and-mortar stores are investing in more distribution centers for their e-commerce operations—Kohl's, for instance, announced this year it is building its fourth e-commerce warehouse as it reported 40% growth in web sales. They are also putting money into their web sites—Wal-Mart recently overhauled the site search function at Walmart.com, for example, and Home Depot this year completed a major overhaul of its e-commerce platform, moving to the high-end WebSphere Commerce software from IBM Corp.
But, given that they still operate many stores even as consumers research and shop more online, many retail chains are investing in projects that blur the lines between e-commerce and physical stores.
"E-commerce is one of these words that's getting harder and harder to define," Joel Anderson, president of Walmart.com U.S., said last month at the Internet Retailer Conference & Exhibition 2012 in Chicago. He pointed to Wal-Mart's ship to store program that allows a consumer to order online for in-store pickup. "Is that e-commerce?" he asked.
It doesn't matter, at least not to consumers, Nordstrom says. "The larger question is, as new generations of consumers come along, what retailers are going to serve them best and who's going to get their business? It's going to be the ones who have the ability to deliver a great experience no matter what channel they're shopping in."
There are plenty of examples. Besides Nordstrom, such retail chains as Eastern Mountain Sports and Moosejaw Mountaineering are handing mobile devices to employees so they can help consumers shop in stores. Wal-Mart, for instance, rolled out last December a Facebook app called Shopycat that mines the Likes and posts of a consumer's friends to create lists of suggestions of gifts for each friend, which can be purchased at Walmart.com or some 50 other retailers. It was one of the first products of Wal-Mart's @WalmartLabs social and mobile research unit that the retailer created in Silicon Valley last year. The center is built around staffers from Kosmix Corp., a start-up specializing in analyzing social data like Facebook posts to personalize web content, that Wal-Mart bought last year for a reported $300 million, and other smaller tech firm acquisitions that followed.