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Nordstrom Rewards Expansion Plan: Mass Appeal Trumps Exclusivity

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Nordstrom Rewards Expansion Plan: Mass Appeal Trumps Exclusivity

Starting today, Nordstrom will expand access to its Rewards loyalty program with a stated goal of adding five million members over the next 12 months. If the retailer is successful, it will more than double the program's current membership of 4.7 million.

By removing the requirement that Rewards members hold a Nordstrom credit or debit card, the retailer hopes to reap significant top-line benefits. The unanswered question, however, is whether these new members will spend at the same high levels as current loyalty program customers.

"Our Rewards customers are many of our most loyal and best customers, spending four times more annually," said Nordstrom Co-President Blake Nordstrom during a conference call discussing the retailer's Q1 financial results. "Today, only one out of five customers are part of our program, yet their spend contributes roughly 40% of our sales."

Nordstrom noted that adding new members will "drive more sales and trips, and more importantly, it will enable us to better engage with our customers."

Tiered Program Rewards Biggest Spenders

Nordstrom's move to mass appeal represents a major shift. Its Rewards program has four tiers, with increasingly valuable — and exclusive — goodies reserved for the top-tier Level 4 participants, who must spend a minimum of $10,000 annually to qualify. Members can advance from the basic Level 1 to Level 2 for a relatively paltry $2,000 per year.

Like many department stores, Nordstrom has been struggling to adjust to a changing retail environment. The retailer has sharpened its focus on e-Commerce and other digital initiatives, and has also made plans to eliminate 400 jobs, primarily at its Seattle headquarters. Nordstrom is also attempting to operate more effectively as an omnichannel retailer, expanding curbside pickup for its buy online/pick up in-store service to all its full-line stores.

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