US: Nordstrom Rewards goes multi-tender

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By: RickFerguson |

Posted on May 27, 2016

U.S. upscale department store retailer Nordstrom announced last week that their Nordstrom Rewards programme - which has long been available only to customers who purchase with the Nordstrom store card - will now go multi-tender, with customers able to participate and earn rewards regardless of how they pay. That's big news for Nordstrom, which is doubling down on its reward programme as a way to combat truly challenging economic headwinds.

Offering a multi-tender loyalty programme has long been considered best practice for retailers. programmes tied to private-label store credit cards can and do build relationship value amongst a retailer's best customers, but retailers must always balance the risk of losing high-potential customers who prefer to pay with general purpose credit cards. By expanding their programme to include all tender types, Nordstrom will capture those additional customers in the programme and even offer them the opportunity to double-dip by earning rewards at Nordstrom and through their favorite credit card rewards programme.

As in the former private-label card programme, Nordstrom Reward members will be able to earn rewards on purchases made at all Nordstrom stores, Nordstrom Rack stores, or online at Nordstrom.com, Nordstromrack.com and HauteLook. The retailer will rely on member mobile phone numbers as the member identifier. In addition, Nordstrom will use the programme as an accelerator to drive switch to its lucrative store card programme: private-label cardholders will earn two points per dollar, while members who use other tender will earn one point per dollar. Soft benefits include Anniversary Sale access, private shopping parties, free alterations, and personal bonus point days. Money quote from Nordstrom co-president Erik Nordstrom:

"As customers' definition of service continues to evolve, we are focused on being responsive and delivering services and experiences that are important to them. Our customers have asked us to make Nordstrom Rewards more flexible. They've told us they want to be able to earn points whether they use their Nordstrom card when they shop with us or pay in another way, and today we hope we've delivered on their request."

The move is not without risk; the reason many retailers limit reward programmes to private-label cardholders is that higher interest rates allow retailers to fund richer programmes, and expanding the Nordstrom programme to all tender types will raise programme costs as more customers join and earn rewards. According to a report in Retail Dive, Nordstrom hopes to add five million more members to its programme in the next 12 months.

Balanced against those rising costs are the retailer's truly dire financial performance. Facing systemic economic forces that are driving consumers away from the traditional department store format, Nordstrom recently reported Q1 profit of $46 million, down 64% from $128 million it earned in the same quarter last year. No retailer can long survive such a downturn.

The good news: while Nordstrom Rewards alone can't overcome the macro-economic forces driving the downturn, the company clearly believes that rewarding and recognizing a wider swath of best customers is an essential component of its turnaround. With members responsible for 40% of the retailer's sales and spending four times more annually than non-members, expanding the programme to multi-tender is the right move for Nordstrom. Here's hoping that the move pays dividents for the company and its best customers.

-Rick Ferguson

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