Nordstrom seeks ways to reduce fulfilment costs

One of the thorny issues faced by all businesses is how to achieve cost efficiencies. Speaking about the multichannel fashion retailer Nordstrom’s fourth quarter earnings call, CFO Michael Koppel said that the company is looking at how to reduce the costs of fulfilment.

Koppel said, “Currently we fulfill out of multiple locations, and are there opportunities for us to get more efficient at that?”

“That creates not only additional labor costs but additional shipping costs because you’re shipping multiple items per order.

“We’re also looking at how spread out we want our assortment to be, because the more lower-price items we have in it, the less unit profitability we gain.”

Koppel went on to say that the costs in expansion are outrunning their gains in sales, “With our increased investments to gain market share along with the changing business model, expenses in recent years have grown faster than sales.”
One of the obvious ways to tackle the costs of expansion will be in reducing fulfilment as well as distribution costs.

It may well be through arranging a good deal with a delivery company, or centralising its fulfilment operations. The company is open to suggestions from experts in supply chain management, and may well be willing to listen to the right voice at the right time.

Nordstrom reported sales of USD $4.1 billion, up 5.2% from 2014, though its earnings were down by $75 million on last years to $180 million as the company rode the stormy waters of expansion – in part driven by its fast growing sales at its online outlets Rack.com and Haute Look. Even giants go under and unless the company can rectify its problems it could be in difficult times in the year ahead.

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