Nordstrom 5.0: The Best Fashion Retailer in a Digital World?
INTRODUCTION
It was a big day for Nordstrom on April 12th 2018 when first phase of its New York’s flagship store - a 47,000-square-foot men’s wear store - at the corner of Broadway and 57th Street, just south of Central Park - was opened in Manhattan (New York). Nordstrom family had been waiting for this day for more than five decades. Just before a few final moments of the opening time (10am), the store manager gave a final pep talk, “Have fun out there, and focus on that one customer in front of you.” Dozens of Nordies (shared nickname of Nordstrom employees) formed a long greeting line just inside the entrance of the first-ever, stand-alone, full-line men’s store at New York. Finally, Nordstrom opened its doors to the supposedly fashion-forward shoppers of New York.
For 3rd generation Nordstrom, Bruce Nordstrom (Bruce), the octogenarian chairman emeritus, the opening of the flagship store in New York city was a dream come true which he had aspired as a 30-year-old. On the opening day of the store, as Bruce entered the store and walked through the greeting line, he received an ovation and euphoria was spread across the spectators, including his three sons – Blake Nordstrom (Blake), Erik Nordstrom (Erik), and Pete Nordstrom (Pete) – who were Nordstrom’s working co-presidents, and the 4th generation of the Nordstrom family to run the company. When asked about how he felt about the launch of Nordstrom’s first-ever store in New York, Bruce exclaimed, “More than exciting, I got to tell you, inside it’s more than that, mainly – this is really corny – it’s my family. Those three guys – Erik, Blake, Pete – they’re the guys, they run this business, and they have now for some time. I couldn’t be more proud of what they’re doing, I couldn’t be. It really is true.”...................
FASHION RETAILING IN THE US
Accordng to HTF Market Intelligence forecast report(2018-2025), North America region, especially US, was expected to exhibit higher growth rate over the coming years due to development trend of online fashion retailing.
eMarketer projected that US apparel’s e-commerce sales growth was expected to grow from $103.66 billion to $170.52 billion. Among the top ten apparel retailers based on US apparel retail e-commerce traffic in the first quarter of 2018, Macy’s and JCPenney ranked first and second while Nordstrom grabbed the third position (Exhibit III (A))............
Family Businesses in the US
Many wonder how Nordstrom lasted beyond the third generation, as it’s said that “the first generation builds them, the second generation enjoys them, and the third generation destroys them. No one even bothers to mention the fourth generation because there are so few businesses that last that long” Chinese proverb, 富不过三代?...........
NORSTROM: BUILDING ‘THE NORDSTROM WAY’
Nordstrom: A Family-Run Public Company
The Seattle-based company, Nordstrom with 117-year-old legacy was one of American retail’s most respected names. Despite its conservative heritage, it had evolved into a fashion leader by being a quick adapter and a consistent innovator. The upscale retailer had emerged as a $15 billion company by 2018 with the vision of its founder who started his journey with a meagre $5............
Evolution of Nordstrom’s Customer Service Culture
Nordstrom’s philosophy was built around the credo – “Offer the customer the best possible service, selection, quality and value.” The founder of Nordstrom built the company around the strong commitment to customer service. Writing on how Nordstrom nurtures Nordies, Robert Spector and Patrick McCarthy observed, “Nordstrom is an organization fuelled by emotions. Motivated employees bring a passion to their business, a drive to succeed, a desire to sell, and a long-term devotion to serving the customer”..........
Nurturing the Customer-First Service Culture
Though the company expanded into apparel business in 1963 and went public in 1971, it continued to be family-run business and its founding principles remained as the guiding principles for even the fourth-generation of Nordstrom leadership. Nordstrom’s business was comprised of people, product, and place. Nordstrom’s family combined superior merchandise and motivated people to create an experience for customers that exceeded their expectations..........
Empowering Employees
Nordstrom’s organizational structure rests on an inverted pyramid approach since the beginning. Frontline sales people who serve the customers directly were the most important people of the company. Rest of the people in the pyramid support the frontline people in all possible ways (Exhibit X). Pete and his brothers attributed Nordstrom’s success to frontline employees and emphasized that their family is in service to them..........
Internal Communication and Team Coordination
It had been a continued practice that Nordstrom brothers attend all the new store openings. They meet the new employees, explain them about the history and guiding principles of the company with key emphasis on customer service. Writing in the employee publication, Loop, Nordstrom brothers said, “The single most important reason we try to provide great service is this: It enables us to sell more. Over the years we’ve learned that the best way for our company to achieve results is to do what’s best for the customer.............
Customer Experience-Led Innovations
Nordstrom had a long tradition of innovations leveraging on technology and in conjunction with its customer-first approach. It had innovated the concept of discount stores by launching Nordstrom Rack in 1973 much before others. Besides, Nordstrom was known for leveraging its technology to optimize customer experience. The upscale retailer experimented with online sales and home delivery as early as the mid-1990s............
Collaborations and Acquisitions
In an attempt to offer superior customer experience, Nordstrom also pursued several acquisitions. Indeed, Nordstrom Rack’s e-commerce site was launched in 2011 when a flash sale site, Hautelook, was acquired by Nordstrom. As both are built on a shared platform, option was available to navigate back and forth between Nordstrom Rack and Hautelook. Customers at US, Canada and Australia could access the off-price fashion through these sites............
Nordstrom Local
In support of its growth strategy of connecting the physical and digital shopping experience for customers, in October 2017, Nordstrom Local was introduced by opening a revolutionary merchandise-free service hub on Melrose in Los Angeles spread across 3,000-square-foot location. The concept store offered guests a 360-degree experience with services such as personal styling..........
Data-Driven Design
Though Nordstrom was not a technology company, it was making conscious efforts to get savvy with AI and leverage the insights to serve customers better. Given that the company had over 100 years of customer data, it made investments in AI space to use the insights while formulating the customer-centric strategy.........
CONFRONTING CHALLENGES
American retailers were struggling in a challenged retail environment. Retail apocalypse had been ripping through America from 2010, became more prominent in 2015 and continued even in 2018 with record high store closures. Year 2017 witnessed a record 6,700 retail store closures and continued through 2018 with more than 5,000 store closures.........
NORDSTROM’S NEW YORK STORE
In a move that was aimed at reinventing brick-and-mortar offerings, the 117-year-old American retailer opened it’s first-ever, full-line, stand-alone men’s store in the nation’s fashion capital with a reported investment of $500 million. Nordstrom’s bold move gained more prominence as it had come at a time when many retailers were shuttering stores, even in New York.........
Store experience
Nordstrom’s Manhattan emporium, spanned across 47,000-square-foot area, embraced technology more aggressively than ever to make it more of an experience for its customers. The flagship store combined a differentiated merchandise assortment across various categories, custom products, and a wide range of services aimed to serve customers on their terms..........
Product Mix
Branded in-store shops of Calvin Klein, Valentino, Dior and Balenciaga were made available on the top floor which were separated by chainmail curtains. The store also accommodated two exclusive branded boutiques: a Christian Louboutin men’s shoe shop on the lower floor (for the first time, the boutique was set up outside its own stores) and Comme des Garçons pop-up shop on the main floor............
Technology and Services
Technology was made integral to store’s functionality and was featured throughout the store in ways both large and small. For instance, the store was equipped with digital screens which showcased custom-made jackets on a digital avatar representing a shopper (Exhibit XIII). Also, a wireless communication system dubbed as Theatro was installed that enabled salespeople to share information..........
NORDSTROM: STORMING THE FUTURE
As Nordstrom was experimenting with newer ways of doing business and continued to adapt to the changing retail landscape, the year 2018 proved to be a significant year for the company. Consequently, Nordstrom Inc. posted same-store sales that were almost four times higher than expected. Nordstrom confirmed that all its stores are 100% cash positive and.............
Assignment Questions
I What is Nordstrom’s core purpose? How has this core purpose translated into ‘The Nordstrom Way’? What according to you could be Nordstrom’s incumbent advantage, if at all. If yes, what would it be and how do you think Nordstrom can leverage the same to be the best fashion retailer in the digital world?
II How do you think Nordstrom kept itself relevant through the changing times through the four generations? What are the critical elements of its continual rediscovery?
III ....................
Exhibits
Exhibit I: Nordstrom Inc. (JWN) vs Retail-Apparel/Shoe Market Growth (%) (Price Return Performance Since December 29th 2017)
Exhibit II: Nordstrom’s Return on Invested Capital (ROIC) FY2014-2018
Exhibit III (A): US Apparel Retail Ecommerce Traffic Share of the Top 10* Apparel Retailers, Q1 2018 (% of total tracked by SimilarWeb)
Exhibit III (B): Composite Loyalty Index – Premium Fashion Retailers
Exhibit III (C): Premium Fashion Retailers Ranked by Attributes
Exhibit IV: The Largest Family Businesses in North America
Exhibit V: Nordstrom’s Multichannel Customer Centric Strategy
Exhibit VI: Nordstrom, Inc. Awards
Exhibit VII: The World’s 10 Largest Retailers, 2017
Exhibit VIII: Nordstrom and its Competitors
Exhibit IX: Newspaper Advertisement on Klondike Gold Discovery
Exhibit X: Nordstrom’s Inverted Pyramid Organizational Structure
Exhibit XI: Brick-and-Mortar Retailers Lagging Behind Amazon
Exhibit XII: Same-Store Sales Change at ‘Full-Line’ Stores (YOY)
Exhibit XIII: Digital Screen Displayed at Nordstrom Men’s Store at New York
Exhibit XIV: Nordstrom’s Express Returns Kiosk
Exhibit XV: Nordstrom has a Manageable Store Count for a Digital Era, as on March 2018
Exhibit XVI: One Nordstrom: Whole > Sum of the Parts
Exhibit XVII: Nordstrom – Defining the Future of Fashion Retail
Exhibit XVIII: Online Marketplace vs Nordstrom
Exhibit XIX: Nordstrom – Inflection Point in 2018
