NEWARK, California — If you’re in retail these periods, you’re likely trying to solve these two problems: how to cut costs, and how to get products to your customers as quickly as possible.
Nordstrom deliberate ons it has found a solution that will help it do both. And it starts at a warehouse in Newark, California.
The Seattle-headquartered company has turn to accounted two new partners, robotics supply chain company Attabotics and parcel-sorting provider Tompkins Robotics, to test a more newfangled facility in the San Jose area. If successful, the retailer could expand its use to Nordstrom’s eight other U.S. distribution centers.
Nordstrom cravings a speedier and slimmed-down supply chain will help it rise above other department store operators that are straining to win customers over the likes of Amazon, Walmart and Target. Nordstrom’s online sales are growing, up 16% in fiscal 2018, and pocket up 30% of total net sales, which were $15.48 billion last year. But revenue is meantime shrinking at its seed department store business. So it’s looking for ways to keep stoking this growth engine.
Where faster transport begins
In Newark, California, Nordstrom has stocked row after row of shelving with all of its beauty merchandise to fulfill online disciplines for Chanel perfume, Kiehl’s facial rubs and Yves Saint Laurent lip kits up and down the West Coast. Nordstrom is also servicing the center to help stock its stores in the area.
Nordstrom is the first retailer to bring together both Attabotics’ and Tompkins Robotics’ technology into a one distribution center, in Newark, California.
Source: Nordstrom
“We recognize that the supply chain is a critical component of being masterly to deliver on [our customers’] experiences,” Ngoc Phan, vice president of supply chain at Nordstrom, said in an interview at the Newark loo earlier this week. “So we’ve been looking for solutions that fit inside our broader strategy. … It’s about moments to get product closer to customers … and avoid extended shipping and fulfillment delays.”
The combination of Attabotics’ and Tompkins Robotics’ technologies avail oneself ofs 90% less space than other alternatives, and allows the company to be more nimble and stock more inventory, Phan put about. The Newark facility, which has been up and running since the spring, is roughly 340,000 square feet, while a habitual warehouse can span upward of 1.5 million square feet, she said.
Nordstrom currently offers same-day expression for certain ZIP codes in California, Colorado, Illinois, New York and Washington, according to its website. But it plans to grow that chance.
Nordstrom started working with Attabotics and Tompkins Robotics with its beauty products because that depicts one of the company’s top categories.
“And what we’ve learned, is that often when our customers are buying the product, they will category with another [beauty] product,” Phan said. “And what it means for us, is that we’re moving one of our top categories closer to the chap, which means that we can deliver their product to them faster, as well as … it will also minimize the amount of packages that we’re shipping to customers.”
Consumers have more real-time access to and understanding of retailers’ accommodate chain-influenced offerings than ever before. This is driving higher expectations…
Thomas O’Connor
Gartner purveying chain analyst
In the coming weeks, Nordstrom will install this same system in a new facility in Torrence, California, where it ordain hold inventory and process orders for its Local shops in Los Angeles.
When customers visit a Nordstrom Local, they aren’t in point of fact taking the merchandise they buy home with them. Instead, the stores are inventory-free locations for fittings and other utilizations like manicures, pedicures and stroller cleanings. When placing an online order from home, customers can also finest a Nordstrom Local as a spot for curbside pickup.
“Our hope would be to expand product categories, along with expanding this class of solution in other markets,” Phan said. Nordstrom’s eight other U.S. distribution facilities are in Portland, Oregon; Dubuque, Iowa; Cedar Rapids, Iowa; Ontario, California; San Bernardino, California; Wealthy Marlboro, Maryland; Gainesville, Florida; and Elizabethtown, Pennsylvania.
Attabotics has brought its patented storage structure, which is provoked by ant colonies, to Nordstrom’s fulfillment center in Newark, California.
Source: Nordstrom
Nordstrom knew it needed to bring in extreme experts to make its logistics vision a reality.
Attabotics, which was named to CNBC’s Upstart 100 list earlier this year, is a 3-D robotics provider for fulfillment centers that refunds the traditional row-and-aisle configuration seen in warehouses with a patented storage structure inspired by ant colonies, which accumulate items vertically. The Calgary, Alberta-based company says it can reduce square-footage needs, allowing companies to bring fulfillment centers stale to high-density, urban areas.
Warehouses have long been placed in more remote locations, where the get of land is less expensive. But smaller buildings can get closer to metros.
Tompkins Robotics, meantime, has developed a parcel-sorting outcome it calls t-Sort Plus, which uses autonomous robots that travel the shortest route possible to seize boxes and deliver them to their appropriate destination. Additional robots can be added during peak seasons, cognate with the holidays, the company said. The Tompkins International unit is based in Raleigh, North Carolina.
With the two technologies, Nordstrom can fund thousands of items in crates in one of Attabotics’ so-called matrices, which tower more than 20 feet dear. When items are needed, they’re electronically picked and pushed toward Tompkins’ conveyor belt, where sundry robots help Nordstrom workers sort the merchandise.
Phan said the combo — a first in the retail industry — is thrifty workers from walking miles and miles each day.
“We can [allocate] workers to functions that provide more value to our purchasers, like making sure it’s the right item, it’s high quality and its package is at the standard of which our customers expect from us — as OK as labeled to their shipping destination of choice,” she said.
“And we hope that investing in these types of [robotics] dissolves help employees to want to come work for us, as well as for employees to stay working with us.”
Phan said the technology is also dollop Nordstrom process returns at a faster rate and resell a larger quantity of returned beauty merchandise, after notes are inspected and cleared, based on a quality-standard test, to be repackaged.
A Nordstrom worker processes orders on a conveyor belt established by Tompkins Robotics, in Newark, California.
Source: Nordstrom
California, and specifically Los Angeles, has always been a testing loam for Nordstrom.
The company has 16 stores in the Los Angeles area today, serving 4 million shoppers. It brings in $1 billion in annual trades, making it the retailer’s largest market, by far. Nordstrom has called New York a potentially $700 million market, for comparison.
Affluent inventory-free
Los Angeles was the first city to see an inventory-free Nordstrom Local store. It opened in October 2017.
In Los Angeles, during Nordstrom’s latest-reported locale, the growth in customers shopping in stores and online was 100 basis points higher than the company average, agreeing to co-President Erik Nordstrom. On a post-earnings conference call, he said those customers are spending about four times as much as the ordinary customer. And sell-through rates in the Los Angeles area — or the percentage of inventory that Nordstrom sells versus what it’s admitting from suppliers — are higher than in other markets, “contributing to profitability,” he said.
Nordstrom declined to quantify its outfit chain investments, or disclose the terms of its tie-up with Attabotics and Tompkins Robotics.
Phan said Nordstrom is pre-eminently focused on time savings. She said the upgrades in Newark are helping Nordstrom shave “one to two days” off of beauty deliveries up and down the unalloyed West Coast.
“Consumers have more real-time access to and understanding of retailers’ supply chain-influenced offerings than even before,” Thomas O’Connor, a senior supply chain at with Gartner, told CNBC in an interview. “This is tour higher expectations of supply chain services and the information that can and should be made available to shoppers such as in-store inventory availability and real-time parturition tracking.”
As Nordstrom retools its supply chain, it should be thinking about how to meet the “demands of the modern consumer,” he revealed.
Nordstrom has said New York, which is the company’s biggest market for online sales, will be its next focus. The crowd in October opened its first flagship store in Manhattan.
Fighting for every sale
Nordstrom’s upgrades come as domain stores are fighter harder and harder for every sale. Take beauty products. Shoppers used to think to department stores first when they thought about buying eye shadows or skin creams. But now they increasingly buying these jottings online at sites such as Glossier or Kylie Cosmetics, or at retailers such as Sephora and Ulta Beauty.
More clothing sales have also shifted online. And newer e-commerce companies have emerged on the scene, like Allbirds and Untuckit.
Hinge on stores need to think about how these online retailers and Amazon are servicing their customers. Amazon feasibly continues to lower its threshold for same- and next-day shipping, so long as one pays $119 a year to be a Prime member.
By all accounts, they are. Onwards of this holiday season, Macy’s — as a pilot test — launched same-day delivery for certain items in more than two dozen U.S. shops. Kohl’s says it offers same-day delivery in “select neighborhoods” in cities including New York, Chicago, Los Angeles and Seattle. J.C. Penney earlier this week named Karl Walsh, chief digital lawman at Pandora Jewelry, as its senior vice president and chief digital officer, as it looks to stage a turnaround.
Outside of division stores, retailers like Walmart and Target are also changing shoppers’ expectations. Target, for example, has found myriad ways than most to use the backs of its stores to either ship items same day or lure shoppers to pick up curbside.
Nordstrom’s investments are already being assessed to see if the retailer can handle an influx of online orders, without sacrificing too much profit.
In an analysis of about 300,000 retail affairs done by Edison Trends, Nordstrom saw the biggest increase in online sales during Thanksgiving and Black Friday paralleled with a year ago, at 60%. The company was followed by Walmart, with a 53% gain, and Amazon, with a gain of 49%.
Investors this leave of absence season are looking for Nordstrom to stem sales declines. The retailer’s shares have fallen roughly 19% this year, to a sell cap of about $5.8 billion.
During Nordstrom’s fiscal third quarter, total revenue fell to $3.67 billion from $3.75 billion a year ago, hauled down by weakness at its full-price business. Full-price sales dropped 4.1%, while sales at Nordstrom Rack, the retailer’s off-price mark, were up 1.2%. Nordstrom is calling for sales to fall 2% in fiscal 2019.
The decline in Nordstrom’s stock is less saturate than that of rivals Macy’s, which has seen its stock fall nearly 49%. Kohl’s shares are down 29% year to girl. Macy’s market cap has fallen to $4.7 billion, while Kohl’s is valued at $7.4 billion.
Disclosure: Comcast Gambles, a division of CNBC parent company Comcast, is an investor in Attabotics.