Nordstrom plots ad expansion as retail media network generates $40M

Dive Brief:

Nordstrom is broadening its advertising ambitions with the Nordstrom Media Network, a retail media offering the company has been building out for several years but previously shared few details on, according to an announcement.
The retailer first started experimenting with the concept in 2019 through off-site campaigns on platforms like Google and Meta, formerly known as Facebook. In 2021's fourth quarter, Nordstrom began placing on-site sponsored ads through the Nordstrom Media Network. The program generated $40 million in revenue last year while working with "hundreds" of brand partners, results that exceeded initial expectations.
Nordstrom Media Network draws on data from 32 million customers and digital properties that accrue roughly 1.9 billion unique annual visits. In the near term, Nordstrom wants to expand ad placements on its core website and Nordstrom Rack, as well as deepen reporting and targeting capabilities for marketers hungry for alternatives to digital platforms that are seeing those features impacted due to privacy changes.

Dive Insight:

Nordstrom is sharing more details on its advertising program to capture the interest of brands that are adjusting their strategies to account for privacy headwinds that have shaken mainstay platforms. Retail media has grown increasingly competitive as first-party shopper data sees its value increase amid Google's plan to deprecate cookies and Apple making its mobile identifier an opt-in feature. The latter change has already delivered a hit to Facebook campaign performance.

Owning online and in-store points of sale provides an advantage to brick-and-mortar companies that previously felt like second fiddles in the race for digital dollars. While Nordstrom's bid to crack into the space is still early days, it's already generating tens of millions in revenue and has developed close ties to marketers like L'Oréal's Luxe group, which owns the Lancôme and Kiehl's brands. On a call discussing Q4 earnings earlier this week, executives also nodded to an opportunity to help scale newcomers.

"When you look at our digital business, it's large," CEO Erik Nordstrom said on the call with analysts. "It is one of the key attributes that allow us to be the software partner for a lot of up-and-coming brands, especially digitally native brands that we can expose their brands to a lot of people that wouldn't see them otherwise."

Previously, many direct-to-consumer brands built their reputations through performance-driven campaigns on Facebook and Instagram. But the social networking giant's ongoing struggles with Apple's tracking changes could spur upstarts to spend elsewhere.

Nordstrom is framing the Nordstrom Media Network as part of its larger Closer to You mission that centers around personalizing the customer experience. That effort has included an extensive ad campaign and growth roadmap that touches on improving services, broadening who Nordstrom serves and its product portfolio, and better using technology to paint a full picture of customer behavior.

The Nordstrom Media Network currently carries on-site media placements like sponsored product ads and brand pages and off-site options including paid social and display ads, YouTube video ads, search and shopping ads and affiliate campaigns. Native display pages will soon be added to the on-site suite, according to Nordstrom's website. Nordstrom has recently introduced new shopping channels that try to capitalize on the e-commerce boom and could factor into the Nordstrom Media Network. Last March, it rolled out a livestream shopping portal, adding to momentum for virtual events that have become common during the pandemic.

Nordstrom is moving quickly to deepen its ad products during a period where other retailers are seeing their own advertising programs hit new levels of maturity. Walmart now generates $2 billion annually from ads and is implementing its own demand-side platform, a complicated piece of ad tech. Target, which also reported earnings this week, said it wants to expand its Roundel media network into a $2 billion business within the next several years.

Nordstrom's Q4 report topped analyst expectations as it continued to recover from the early COVID-19 disruptions, though net sales were still down versus the same period in 2019.