Nordstrom Buys Social Commerce Platform for $270m: The future of luxury advertising?

US department store chain Nordstrom is to acquire LA-based social commerce platform HauteLook ($100m+ 2010 sales, 4m members) for $270m ($180m stock + $90m earn-out incentive stock) in a similar move to Comcast’s purchase of DailyCandy (Swirl) for $125m. We think it’s a smart move, and one that other brands, media companies and retailers will emulate as they integrate live event-shopping into their value propositions.

Competitors to Gilt Groupe, Rue La La, BeyondTheRack, Ideeli and home-decor specialist OneKingsLane, as well as variations to Europe’s Vente-Privée, Hautelook and Swirl are member-get-member powered private event-shopping clubs that run regular time-limited live ‘flash’ sales events allowing luxury brands to gracefully offload overstock/sample designer gear without appearing to stoop so low as to offer oxymoronic brand-damaging discounts direct.  Wrapped up in an exclusive private shopping event, the reverse halo-effect of discounting goes unnoticed – that’s the theory anyway.

What’s smart about Nordstrom’s acquisition of Hautelook, in our view, is the potential for repurposing the event-shoppng platform from natty solution for offloading overstock to a premium online advertising platform for luxury goods.  Just as Groupon has reinvented local advertising; the group-buy site is essentially a (redemption-first) online advertising platform – Google ads for local retailers – private event-shopping clubs could evolve into something similar – online advertising platforms – not only for offloading last seasons gear, but for advertising current/next season’s hits.  In other words we think one future for private event-shopping clubs lies as an ultra-premium advertising platform: a Google ads for the luxury sector.  We think this will boost popularity of the platforms, that whilst successful, pale to insignificance versus the meteoric rise in popularity of daily deal sites smartly rebranded as online local advertising platforms such as Groupon.

So, it’s advertising Jim, but not as we know it. Private shopping events advertise themselves and the brands they include – and by offering customers sneak previews and early VIP access to latest collections – as Starbucks has done with it’s ultra premium coffee on Gilt – Nordstrom can create online buzz for its suppliers – and thereby negotiate better prices.  Smart move.

We also think there is potential for enhancing these event-shopping social commerce platforms by making them, well, more social.  For some, the inclusion of private live event-shopping clubs within social commerce is, prominent referral programs notwithstanding, somewhat disingenuous. What’s social about them?  These clubs rarely feature social commerce 1.0 features connecting customers online via user reviews, forums etc, and nor do they feature social commerce 2.0 connecting consumers via the social graph.  Indeed, their very status as ‘clubs’ – inherently social entities – is rather dubious; there is little social interaction or user-contributions going on.  But we think that will change as private event-shopping clubs evolve to embrace their inner social selves.

By integrating social commerce 1.0 and 2.0 technologies, the potential for private event-shopping clubs to evolve into powerful word of mouth advertising platforms is considerable.