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Nordstrom Acquires Minority Stake in Supply Chain Software Solution to Compete With Amazon

Nordstrom is digitizing its supply chain.

The Seattle-based company acquired a minority stake in DropShip Commerce (DS Co.) and its Dsco platform, a software solution that allows retailers, brands, third-party logistics and distributors to monitor, manage and scale their drop shipping operations.

Nordstrom’s “Drop Ship Supplier Partner Operations Manual” describes drop shipping as “the process of supplier partners fulfilling orders from their inventory direct to customers.”

DS Co., based in Lehi, Utah, allows retailers and suppliers to communicate through a standardized supply network, simplifying the way they connect and exchange inventory, order and catalog data through a single touchpoint. This can help trading partners build better partnerships, streamline operations, generate more sales and fulfill more orders.

“Drop shipping increases brand visibility, awareness and sales revenue by offering a wider breadth and depth of product,” Nordstrom’s manual noted. “As items become more broken in sizing, we miss sales. Drop ship gives us the inventory coverage to capitalize on missed sales opportunities.”

As Nordstrom’s executive vice president of strategy and development, Ken Worzel, told the Wall Street Journal, “Dsco is helping to improve [customers’] online experience by reducing complexity in our supply chain.”

Experts said it’s a smart move.

“They’re shifting the risk of the inventory up the supply chain to their suppliers,” Irv Grossman, executive vice president at consulting firm Chainalytics, told the Journal, noting that it’s the “best way a retailer can expand their offerings and compete against Amazon without carrying inventory risk.”

News of the acquisition follows last month’s decision by the retailer to delay building a distribution center purely for purchases made on the West Coast until 2020. Investing in Dsco instead could put those plans on hold for good.