What Trunk Club’s demise says about apparel subscriptions

What Trunk Club’s demise says about apparel subscriptions

Courtesy of Trunk Club A Nordstrom Company Nordstrom is quitting Trunk Club.

The department store has tried to make the apparel subscription service work since acquiring it in 2014 for $350 million — tweaking its fee structure, shortening its return window and adding women’s. But it’s been bumpy almost from the start. The company took a $197 million write-down on the service three years after buying it, forcing a $10 million third quarter net loss . Last year, Nordstrom stopped dedicating styists to Trunk Club, enlisting its regular full-line stylists to work with those customers instead.

Apparently, none of that was enough to salvage the operation. Last week, CEO Erik Nordstrom told analysts that Trunk Club is done , surprising few observers.

“Nordstrom has always struggled with Trunk Club. The acquisition made sense at the time because Nordstrom wanted to showcase its credentials in personalizing fashion,” GlobalData Managing Director Neil Saunders said by email. “However, they never really managed to make the business profitable and it always remained something of a poor relation compared to the department store and off-price business.”

Yet, personalizing fashion does remain in focus at Nordstrom. While the box service has struggled, stylists have been proving their worth. Customers engaging with a stylist, online or in a store, spend seven times more and report higher levels of satisfaction, Erik Nordstrom said. As a result, the company is investing more in that side of the business, which ranges from what Nordstrom called “low-touch outfit inspiration through our digital channels to a high-touch and personalized relationship with a stylist.”

“As we position our styling program for further growth, we are sunsetting Trunk Club and redirecting our resources to the services that our customers tell us they value most,” he said. “I want to be clear. This move reflects our belief and commitment to styling and we are dedicated to growing and investing in these services.”

Nordstrom joins ThredUp in giving up on the apparel box idea, which leverages data gleaned from style quizzes, purchases, returns, customer feedback and interactions with human stylists, along with some decision-making by the stylists themselves. At Stitch Fix and elsewhere, deliveries and returns are free.

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Because it requires signups and a styling fee (credited to any purchase), with company-selected items sent by box, it’s known as a “subscription,” although Trunk Club, Stitch Fix and others allow for occasional deliveries rather than regular ones. Even with such flexibility, the approach is problematic in terms of cost to the retailer and the experience for the customer, according to Jeffrey Sward, founding partner and CEO at Merchandising Metrics.

“On the cost side, it turns out that, after massive amounts of time, energy and money spent trying to make these business models viable, the math simply does not work for these businesses,” he said by email. “‘Free’ and ‘convenient’ have become the most expensive words in retail. Subscription models thought the fee would make it all work. Nope.”

“On the cost side, it turns out that, after massive amounts of time, energy and money spent trying to make these business models viable, the math simply does not work for these businesses.”

Nordstrom dumping Trunk Club but investing further in its styling services also shows how important people are to apparel selling, according to Sward.

“On the customer experience side, it turns out that human interaction is huge,” he said. “Customers want to engage with a stylist, not an algorithm. Of course algorithms can be great tools, but artful selling is still an emotional process. And ‘emotional algorithm’ sounds like a great example of an oxymoron to me.”

The box-styling setup is also high risk to a retailer’s reputation because it purports to be highly personalized — thanks to sophisticated algorithms plus the human touch — and therefore carries higher expectations than the data-fueled recommendations shoppers encounter when browsing online, according to Kirsten Allegri Williams, chief marketing officer at Optimizely. Jun 02, 2022 Foot Locker hires first chief strategy and transformation officer Jun 01, 2022 Prada plans monthly product, NFT drops May 31, 2022 Gucci opens persistent digital space on Roblox

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