Back on May 11th, NYU Professor Scott Galloway appeared on Kara Swisher's Recode Decode podcast. During that conversation, he predicted that Amazon would acquire Whole Foods. One month later, Jeff Bezos made his move. Amazon purchased the organic supermarket retailer for $14 billion. Yesterday, Professor Galloway appeared on Swisher's podcast again. This time, he predicted that luxury retailer Nordstrom might be Amazon's next big acquisition target. He explained, "It would be cheap, it’s in Seattle, they’re operationally very sound, it’s a great company and they’re [Amazon is] trying to establish relationships with high-end brands, which they have been unable to do. Nordstrom has those and a lot of credibility, and a lot of wealthy households have a Nordstrom credit card."
Like many brick and mortar retailers, Nordstrom has experienced a sales slowdown as mall traffic has declined. In fact, news reports in June indicated that the Nordstrom family was considering taking the company private. Earlier this week, the company announced that it was opening a test store next month called Nordstrom Local. The Wall Street Journal explained the concept:
Nordstrom Local, scheduled to open Oct. 3 in West Hollywood, Calif., will span 3,000 square feet, far less than the 140,000 square feet of one of Nordstrom’s standard department stores. It will contain eight dressing rooms, where shoppers can try on clothes and accessories, though the store won’t stock them. Instead, personal stylists will retrieve goods from nine Nordstrom locations in Los Angeles, or through its website. The stylists can also pull together looks for shoppers through a “style board” app.
Is this acquisition a real possibility? I can certainly see Professor Galloway's logic. However, as he notes in the podcast, the company is led by the Nordstrom family. Indeed, the firm's ownership structure could be a formidable obstacle. The Nordstrom family owns roughly 1/3 of the company, and family members continue to lead the retailer. Amazon would find it very difficult to acquire the company without the family's consent. However, Galloway's comments do make you wonder whether other retailers might be acquisition targets. As Amazon contemplates opening a second headquarters with up to potentially 50,000 employees, it's clear that Bezos' ambitions know no limits. Could a luxury apparel retailer be next? Nieman Marcus, anyone? They have been struggling. They announced an exploration of strategic alternatives several months ago. Perhaps they might be a target. They are not as operationally sound as Nordstrom's, and they have considerably more debt, but perhaps it's a more attainable target.