Rent the Runway and Nordstrom (JWN  ) announced a wide-ranging partnership on Friday that is being touted as the future of retail. The most visible change will be Rent the Runway's drop-off boxes to be placed at nearly 30 locations. Previously, there were boxes at five locations, indicating some synergies that the companies are looking to build on.

Changing Retail Landscape

In recent decades, the retail industry has been in upheaval. Mom-and-pop businesses were squeezed out by department stores and discount retailers. Now, many of these winners are unable to adapt to this new retail and economic environment.

The struggles of retailers targeting the middle and upper-middle class like Macy's (M  ) and Nordstrom (JWN  ) versus the success of those targeting the lower-end or upper-class reflect increasing inequality. In addition to macro conditions, these retailers are also facing increasing competition from online sellers who can offer more varieties with less overhead.

Nordstrom has fared better than JC Penney (JCP  ) and Sears, but its stock is unchanged from ten years ago. Compare this to the broader retail ETF (XRT  ) or discount retailers like Walmart (WMT  ), TJ Maxx (TJX  ), or Burlington Stores (BURL  ), all of which are near all-time highs and have more than doubled in market capitalization over the last decade.

Rent the Runway Partnership

One reason that Nordstrom's path hasn't been as disastrous as Sears or JC Penny is its successful investments in eCommerce. Online sales now account for 33% of total revenue as of Q3 2019 which is an improvement of 25% from the previous year. Additionally, brick-and-mortar sales declined by nearly 9% over this same period.

Nordstrom's future survival and success depend on its ability to continue growing online as brick-and-mortar revenues inevitably erode. Going forward, Rent the Runway customers will be able to return items at Nordstrom stores and allow them access to exclusive services, leading to more foot traffic in stores.

More Nordstrom products will also be made available on Rent the Runway's platform. Additionally, the companies will leverage user data to help guide product development. Essentially, Nordstrom's inventory will be more fully monetized on Rent the Runway, while also giving it valuable feedback that it can use to create better-selling products for the next season.