The Reason Nordstrom Used AI To Tap Into a Century of Customer Data

The value is not in the data, but in what patterns can be discerned from it that offers insights into how its customers may be evolving so the company can anticipate and sell into those changes. JL

Tess Townsend reports in Venture Beat:

This has helped in areas like identifying customers of Nordstrom’s discount brand who might be willing to shop for full price items. “It costs a lot more to acquire a customer than it does to engage and effectively retain” existing customers. Nordstrom is looking to apply AI across its business, including in fulfillment, distribution, and customer experience.

Nordstrom marketing executive Brian Hovis knows his company is not a tech company. But in an effort to better reach customers and meet their needs, the retailer is getting savvy with artificial intelligence.
The company’s strategy, Hovis explained at the Transform conference in Mill Valley, is to be discerning and agile about when to develop its own internal resources and when to bring in third-party tools.
“We have invested in a data scientist capability in-house. That doesn’t happen overnight. You have to source that talent, onboard that talent, and build that capability,” said Hovis, vice president of marketing for Nordstrom’s full price business.
The investment is worth it for Nordstrom because the company has more than 100 years of customer data. Hiring developers familiar with artificial intelligence is also important, but instead of building new AI software, these developers work with third-party tools that help Nordstrom apply its data.
“We would recognize that we are a retailer, we’re not a technology company,” he said, adding that certain investments in things like building AI software from the ground up wouldn’t make sense for the corporation. The company needs to focus “without spinning [its] wheels.”
Where this focus has helped is in areas like identifying customers of Nordstrom’s discount brand, Nordstrom Rack, who might be willing to shop for full price items.
“Not every Rack customer is open to shopping, or prone to shop, full price,” he said, adding, “It costs a lot more to acquire a customer than it does to engage and effectively retain” existing customers.
Nordstrom is looking to continue to apply AI across its business, including in fulfillment, distribution, and customer experience.
The company has received attention this year for its forays into visual search and personalized messaging with customers. In March, Nordstrom announced it had bought BevyUp and MessageYes. BevyUp helps associates give customers style advice, and MessageYes sends customers personalized messages from which they can purchase items.
While Nordstrom’s attention to technology has ramped up in the last year, Hovis said leadership has been making “conscious decisions … to invest in digital” since around 2015. He specifically said the company had worked on talent acquisition over the last several years.
“The momentum was there,” said Hovis, who joined the company last year.
The company has also used technology to innovate its brick-and-mortar offerings with the creation of “Nordstrom Local,” where a store location is centered more around services like tailoring and stylists. Instead of inventory for customers to browse, customers purchase clothing or other items ahead of time and pick them up at Nordstrom Local.
“This business is really centered on one thing, and that’s the customer and the customer experience,” said Hovis.