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How HauteLook Is Solving Nordstrom's Online Problems

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Nordstrom is working on its image. Like just about every other retailer out there, the 111-year-old department store is trying to dust off its reputation and upgrade with a younger, digital-friendly twist.

In the past couple years, the brand has done a bunch of things recently to try and make that happen: They've courted Jason Wu (straight off the smash success of his Target collab) for a younger, contemporary line and will be launching Topshop boutiques within its stores and on the brand's website this fall. But probably their biggest push in the young-hip-online direction has been the acquisition of flash-sale site HauteLook. A recent profile in WWD takes a look at why the brand feels it's been a worthwhile investment—even though it's not making them any money yet.

"We may have done a good job over the years with the Baby Boomer generation, but we have also got to figure out how to be relevant to the Millennial customer, and HauteLook has built a business on figuring that out," Nordstrom Direct president Jamie Nordstrom told the trade paper. "They talk to customers who are rabid fashion fans on a daily basis. Our ability to get Nordstrom into that conversation has driven some meaningful results."

HauteLook's members are 30 years old, on average, and have an annual household income of more than $75,000, according to WWD. So, yeah—you can see the appeal.

But beyond that tantalizing customer base, the flash sale site also gives the traditional retailer a place to experiment without jeopardizing brand credibility. "With Nordstrom and nordstrom.com, it is a big ship, and we are appropriately protective of our brand. We are always maybe a little hesitant to try out-of-the-box things, where with HauteLook, that's always what it is about," says Nordstom.

On HauteLook's end, Nordstrom's deep pockets and far-reaching customer base are helping the site's exponential growth: due in part to a windfall advertising budget, their membership has gone from 4 million to 9 million since the beginning of 2011.

HauteLook has also tapped into Nordstrom's strongest markets, like shoes, and is building a state-of-the-art fulfillment center: "We ship hundreds of millions of dollars worth of goods, and we need to have the expertise [to do so]. Having expertise from a company with the size and knowledge of Nordstrom will allow us to have a better experience for our members, which is going to be the difference between winning and losing," said HauteLook founder Adam Bernhard.

The most interesting thing in the article, though, was the marketing synergy between the brands: Marketing initiatives have been geared toward getting the HauteLook shopper to go to Nordstrom stores and getting Nordstrom shoppers to join HauteLook, WWD notes. That includes Nordstrom's lower-priced chain, Nordstrom Rack. WWD gives the examples of an April contest on HauteLook's Facebook page to win Nordstrom Rack shopping sprees. Later that month, HauteLook put inserts in bags at a handful of Nordstrom Rack stores offering discounts to Rack customers who signed up for HauteLook.

In general, flash sales have entered their 2.0 phase and all of them are looking for ways to provide value besides making a profit selling cheap overstock: Gilt, the grandmother of flash sale sites, is rebranding as a luxury e-commerce destination, for example, while Fab is focused on undiscovered indie gems. If the Nordstrom-HauteLook model proves to be successful from a branding perspective and ultimately profitable, it could mean really interesting things for the future of online shopping.

· Nordstrom's Lessons From HauteLook [WWD]
· Today in Surprises: Topshop Will Be Sold at Nordstrom Starting This Fall [Racked]
· Jason Wu Is Doing a Younger Line, and it Sounds a Lot Like His Target Capsule [Racked]