Return to Previous Page

Nordstrom 5.0: The Best Fashion Retailer in a Digital World?

CASE STUDY, FAMILY BUSINESS
ET Cases, 33 Pages
AUTHOR(S) : Bala Bharathi Yelamanchi and Dr. Nagendra V. Chowdary

Case Preview

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

Teaching Note Preview

Nordstrom 5.0: The Best Fashion Retailer in a Digital World?

Synopsis

This case study is about how a 117-year-old family business had been able to reinvent itself through 4 generations with timely (and at times ahead of the curve) and generational investments to maintain its relevance for the changing customer profile. Given its customer-centric and customer-driven approach, Nordstrom was able to serve 4 generations of customers (The Silent Generation, Baby Boomers, Gen X and Millennials) with its legendary customer service and customer experience. How would the next generation of customer – the Gen Zers - warm up to Nordstrom’s omnichannel strategy? Are the 4th generation family business Co-Presidents preparing Nordstrom well for the 5th generation? Would its high-tech, high-touch endear itself to the fashion aficionados? Its iconic status in the annals of customer service wasn’t easy to replicate despite its proven discourse being available in the public domain for decades. ‘The Nordstrom Way’, as it is popularly referred to across industries, exemplifies in a way what the 117-year-old family business stands for.

With its latest $500 million investment in New York store, Nordstrom’s intentions to continue to bolster customer experience through brick-and-mortar stores, are quite pronounced. With all the other generational investments it had been making since 1993 – in technology especially – to design and deliver an omnichannel experience to its customers, would Nordstrom be successful in keeping its legendary customer service in the digital world?

Suggested Reading

• Robert Spector and Patrick McCarthy, The Nordstrom Way To Customer Service Excellence: The Handbook for Becoming The “Nordstrom” Of Your Industry, 2nd Edition, John Wiley & Sons

Prerequisites for the Classroom Discussion/Orchestration

Given the fairly large size of this case, the case was distributed 3 days prior to the scheduled classroom discussion. All the students were also distributed the suggested reading material to contextualize the learning outcomes.

Preamble to the Case Analysis

The purpose of this case study is to understand the underlying logic of Nordstrom’s continued and generational investments in brick-and-mortar stores when scores of stores were being shut down in the USA for the past few years and more prominently during 2017 and 2018. Coupled with this discussion point, the case study should enable an animated discussion on whether Nordstrom would be able to be the best fashion retailer in the digital world. Highly suited for Family Business course or Retail Management course, the purport of this case, interspersed with anecdotal evidences, can steer the classroom to delve in to the critical elements (through CLASSIC approach as outlined in this Teaching Note) that kept this family business in the reckoning for 4 generations. The suggested classroom orchestration of this case study is given in Exhibit (TN)-I. This analysis, suggestive at best, is based on a classroom orchestration in Family Business Course’s Managing through Generations module/topic....................

$7.31
Rs 0
Product code: FMB-1-0003, FMB-1-0003A

Abstract

When 117-year-old Nordstrom opened its first store (men-only) in New York (Manhattan) in April 2018, after 50 years of calculated and patient waiting, it wasn't just another store for Nordstrom. It wasn't just another store for fashion retailing world either, especially for US fashion retailing industry. It was a profound business statement on how Blake Nordstrom, Pete Nordstrom and Erik Nordstrom, the 3 Co-Presidents of Nordstrom plan to steer Nordstrom into digital world. With its new 47,000-square-foot store in New York with $500 million investment, along with its omnichannel strategy and other digital initiatives over the last 5 years, Nordstrom aspires to be the best fashion retailer in a digital world. Given its legendary customer service approach, Nordstrom was being able to serve 4 generations of customers (The Silent Generation, Baby Boomers, Gen X and Millennials). Also, it had been embracing technology like no other department store. With more than 30% of sales from Nordstrom's full-service store division coming from online, Nordstrom had been making "generational investments" in digital technologies to reshape the fashion retailing world.

With $15.5 billion sales revenue in 2017, up from $9.1 billion in 2007, Nordstrom's investments seem to be paying off while its closest competitors saw largely flat revenues during 2007-2017. Yet, Nordstrom faced several challenges - declining market share, dwindling mall traffic, and decreased profits - resulting in about 40% decline in its share price since its peak in early 2015. While nearly 6,700 stores were shut down in 2017 in US alone due to retail apocalypse, why is Nordstrom investing in another brick-and-mortar store with a plan to open women-only stores in New York in 2019? What is so distinct about Manhattan's store? How can 4th generation co-presidents of a 117-year old fashion retailing company prepare the family business for a 5th generation? How is Nordstrom reinventing itself with customer-driven innovations? What's the business logic behind Nordstrom opening a high-tech, hightouch store in an expensive trade center in New York? How does Nordstrom plan to deliver its legendary customer service in digital world?

Pedagogical Objectives

  • To understand how a 117-year-old fashion retailing family business had been reinventing itself to keep itself relevant through the changing times with a focus on its 'core' purpose and to examine whether Nordstrom can leverage its incumbent's advantage even in the digital world
  • To understand how 4th generation family business's 3 co-presidents are preparing Nordstrom to be the best fashion retailer in a digital world and to discuss and debate on whether Nordstrom would be able to continue with its legendary customer service in the digital world with its omnichannel strategy
  • To understand the broad contours of running a publicly-listed family business

Case Positioning

This case study can be used in any of the following

a) MBA Program – Family Business Management Course - Managing Through Generations Module - To understand how a 117-year-old fashion retailing family business had been reinventing itself to be relevant not compromising on its core purpose

b) MBA Program - Retail Management Course - Designing an Omnichannel Strategy for a Digital World Module - To understand how a 117-year-old fashion retailing family business aspires to the best fashion retailer in a digital world

c) MBA Program - Strategic Management – Innovation Strategy Module - To understand Nordstrom's generational investments for designing and deploying customer-driven innovations



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)


**Electronic downloadable links (PDFs, PPTs, Supplements etc.) are available immediately after purchase. Please use Indian Currency Option (INR) when you are Making Payment within India. "No. of Copies" reflects the number of permissions you intend to use in Classroom Discussions / Corporate Trainings.

No. of Copies
$7.31
Rs 0

Related Products

There are no related products to show here at the moment.




Request for an Inspection Copy

(Strictly for Review Purpose, Not to be Used for Classroom Discussion/Trainings)