Nordstrom President Cuts Direct Mail. Then This Happened.

I often join earnings conference calls with public companies to hear how they see market trends and learn from their experiences.

Here’s a lesson I was not expecting.

Erik B. Nordstrom, Co-President, Nordstrom
Erik B. Nordstrom, Co-President, Nordstrom

This past Tuesday, I listened in as Erik B. Nordstrom, Co-President, slashed his forecast for sales and profit after they had a weaker than expected quarter.

Well, this part, I mostly expected.

But the reason as to why sales fell is what caught me by surprise.

According to Erik, their results were in part hurt by their decision to stop using direct mail to reach its customer for their loyalty program.

Here’s precisely what Erik said:

During the first quarter, we had some executional misses with the customer experience that had an impact on sales.

We have a well-established program with nearly 12 million active customers contributing more than 60% of sales in the first quarter.

Last fall, we evolved the program with the introduction of The Nordy Club, which allows customers to earn reward notes faster and provides early access to product and events.

However, the execution of our rollout was not as successful as we had planned.

As part of our decision to move to a digital-first program, we eliminated paper notes but later discovered that a segment of our customer base relies on receiving these notes by mail.

You catch that?

He claims that Nordstrom stopped sending rewards “notes” to its loyalty customers by mail in an attempt to get the program online and reach customers faster.

But what happened instead?

That decision caused a reduction in foot traffic at all of its stores, Erik said, as many customers relied on receiving those rewards by mail. It seems that Nordstrom executives were not expecting this outcome.

Honestly, I cannot recall the last time I heard a company of Nordstrom’s size say that cutting direct mail from their ad budget is having such a negative impact on sales.

But that’s what he’s saying, right?

So here are your takeaways:

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Whatever the case may be, I’m wondering: Maybe direct mail is having a resurgence due to the electronic noise from all the social channels. Do you think direct mail is making a come back?

Would you have made the same decision as Erik and his executive team?

MAY 21, 2019 / 8:45 PM, JWN – Q1 2019 Nordstrom Inc Earnings Call