Faced with slow sales, the Nordstrom family is exploring taking the iconic department store private. It’s no secret that despite the strong economy, the retail industry has been hit hard and the rise of ecommerce has impacted brick and mortar stores across the world. Department stores like Nordstrom, Macy’s, JCPenney, and Sears are struggling to adapt to a changing retail environment and new online competitors like Amazon.
While normally not viewed this way, privatization is a type of acquisition where the Nordstrom family, along with key shareholders, would acquire the department to strategically reposition the company. Here are three reasons why going private might help Nordstrom grow in today’s tough market.
- Shed Cost – Nordstrom will be able to shed some of the costs associated with being publicly traded. While not the primary driver for going private, this is certainly an advantage for a company looking to increase the bottom line.
- Focus on the long-term – Publicly traded companies must manage the expectations of the stock market and file quarterly reports. On the other hand, private companies can pursue strategies that may have a longer pay off period, without answering to anxious investors. Nordstrom will likely have to make some drastic changes including restructuring, which may impact revenue in the short-term in order to reposition the business for long-term success.
- Stealth – Why should Nordstrom share its strategy with a competitor like Macy’s? As a private company, Nordstrom will be able to maintain a level of stealth in a marketplace that is becoming increasingly competitive. Secrecy will be advantageous as retailers compete in the shrinking market of brick and mortar stores and try to expand in ecommerce.
Going private may help Nordstrom grow in a changing retail landscape, but it may not be enough to ward off powerful market forces. One thing is certain: retailers can’t keep going about business as usual and expect to survive in the future. In any industry, successful companies are those that proactively adapt and anticipate changes in future demand.
