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Nordstrom Retail Analysis

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Nordstrom Retail Analysis

  1. 1. The Nordstrom Way to Customer Service Excellence “At Nordstrom, we value the richness that diversity brings to our workforce which makes out Company better and the communities we serve stronger.” By Ji Young Lee
  2. 2. *The Nordstrom Profile Blake W. Nordstrom, chief executive officer Erik B. Nordstrom, executive vice president and president of Nordstrom Direct Peter E. Nordstrom, executive vice president and president of merchandising James F. Nordstrom Jr., executive vice president and president of stores Nordstrom is the leading industry of fashion retail in U.S. to employ 49,700 full-time employees where it operates for the sub segments such as indirect selling of e-commerce and catalogs, and credit operation. “Yahoo Finance” states in 2005, Nordstrom has operated 152 stores to include 95 full- line stores, 49 Nordstrom Racks, five boutiques, one shoe store, and two clearance stores in U.S. other than 32 boutiques in Europe. Nordstrom’s roles are based on to pursue the most pleased service and focus its effort on making customers to be satisfied by serving an excellent service, selection, quality, and value.
  3. 3. *History of Nordstrom After the Gold rush, the store was born: The founder of most of America’s retail dynasties was an immigrant. Wallin & Nordstrom grew their business to a larger space in downtown Seattle. The gain of experience to work for the retailers, Everett and Elmer had taken an ownership of business which compromised the stores. The Nordstrom Heroics: Employees who witness the colleague to give the customer service beyond the call of duty is encouraged to write up the description of what they saw and submit to manager. The heroics give Nordstrom people the standard to aspire to-and even to surpass.
  4. 4. *History of Nordstrom cont’d… In 1960s, Nordstrom began its ambitious expansion which company has created the fast career track for up-and-coming employees. Nordstrom continues to find the ways to attract good people, and keep them motivated with opportunities to ascend the corporate ladder. Each division within Nordstrom has a life of its own which people carry missions and feel good about their development. The leaders with deep understanding of the Nordstrom culture and who live the values can’t be bought from a competitor for high salary. The expansion strategy was based on to open stores in new markets states Bruce Nordstrom. Within the Nordstrom there is residential feeling, layout, design, lightning, seating, wide aisles, display fixtures, amenities, and the merchandise which is an essential facet for the customer service.
  5. 5. *History of Nordstrom & right choice at the right time An illustration of choice for Nordstrom is its longstanding commitment to stock its stores with wide selection and deep inventories to compel the combination of world renowned brands. Nordstrom manages an excellent inventory control which holds down the costs and produce the better profit margins. Nordstrom launched “” in late 1990s which the company has proclaimed the website as “World’s largest shoe store” to offer million pairs of shoes, and 400,000 stock-keeping units of apparel, and shoes for men, women, and children. The primary Nordstrom responsibilities include to hire the right people, empower, manage, mentor, praise, reward, and retain the people. Nordstrom creates the culture where every managers remain as the frontline salespeople Nordstrom creates.
  6. 6. *The right choice at right time cont’d… The can attitude and the positive personality, and the strong work ethic is the primary success for the Nordstrom. The key to customer success is to hire good people, nurture them, and give them the successful tools. The high quality merchandise, wide range of product choices and sizes, and customer- friendly policies is unconditional. Employees are put on the sales floor and expected to grasp the values and expectations of the culture. The demands and expectations are high where individual can work in an unrestricted environment where it’s the place to work. More than 3000employees worked for 10 years where Nordstrom has set up the compensation system to help employees to achieve personal wealth where it has 401 (k) plan, and a profit sharing plus the employee stock purchase plan.
  7. 7. *Diversity of Nordstrom & New employees in new markets As Nordstrom expands across America, the company has the challenge of finding the kind of people who would like to give Nordstrom-like service. Nordstrom’s policy aims to reach out for the communities to recruit, employ, train, and promote ethnic and racial minorities. The 15.7 % of Nordstrom managers are people of color; in 2004, the figure was 26.4%. In 1988, 23.9% of entire Nordstrom workforce were people of color; today number is 39.1%. Nordstrom pursues the recruitment of multicultural and multiethnic workforce through job fairs, community organizations, and college placement centers.
  8. 8. *Diversity of Nordstrom cont’d… Nordstrom was considered the first upscale retailer to advertise in Ebony, the magazine which catered for African Americans, and advertised in Essence, Hispanic, Business, Latina Style, Minority Business News, Black Enterprise magazine. Nordstrom has been committed to feature the models of color, and models with disabilities in one-third of its advertisements. The Nordstrom enters the new market, and company sets out to cultivate minority-owned, and women-owned vendors of office supplies, food, music, photography, and other services. Nordstrom concentrates on bringing in the smaller vendors and trying out their products. Nordstrom spends almost $600 million with minority and women-owned vendors.
  9. 9. *Diversity of Nordstrom cont’d… The CEO of Nordstrom states they would not like to be homogenized where Nordstrom would not offer the manual saying for how the service would be like since it would limit the potentiality and creativity. The uniqueness in workforce and fair treatment of employees are important. The people should have different types of background of different races to acquire the good support from the society where they would participate for non-profit organizations of Fair Labor Association and non-government organization to support colleges and universities.
  10. 10. *Diversity of Nordstrom cont’d… In compared to the strong competitors in market such as J.C Penny, Dillard’s Federated Department Stores Inc. who runs Macy’s, and Nieman Marcus Group, Nordstrom is the one who operates the business in Europe. Nordstrom records almost one billion of their sales revenue since 2000, but they possess 7.5 billion of total sales which is 400 million higher than the one Nordstrom actually obtains. Nordstrom has its original boutique “Faconnable” which is not the full-line stores in Europe. The technological change offers the Nordstrom an opportunity to expand the business which an internet is critical. In 2001, the Nordstrom cooperated with IONA Technologies to build a online retailing system.
  11. 11. *Diversity of Nordstrom cont’d… The Nordstrom contributes for inventory control, and reduce the time spent for response of physical distribution management. Based on the fact that Nordstrom is the fashion retailer, factors differ within the demands of age, gender, and population which is important for sales. An image of people towards the Nordstrom influences to their business. Since the product Nordstrom offers are categorized as the high-classed and are expensive in compared to Old Navy or GAP, they have the disadvantage in the market when economic decline would reduce people’s wage. The clothing merchandise are manufactured in another country where the labor cost is cheap in compared to the expense caused by the domestic manufacture which the change in tariffs impact the Nordstrom’s business. The change in tariffs impact Nordstrom’s business where many of clothing manufacturing factories have been built in countries of Southeast Asia or China today which are the members of North American Trade Agreement (NAFTA) or Free Trade Area of the America (FTAA).
  12. 12. *Nordstrom’s net sales and profit *The significant highlights were made in 2005 in Nordstrom which was an incredible year for Nordstrom; Total sales increased 8.3% to $7.7 billion and same-store (comparable) sales increased to 6% for the consecutive year of same-store gains. SG & A rate ( expenses as a percentage of net sales) improved for the fifth consecutive year with the lowest SG & A rate in over 10 years. Nordstrom has topped 2004 with the best gross margin performance in 2005, marketing the fourth consecutive year of gross margin improvement. The pre-tax margin has improved for the third consecutive year-at 11.5% being the highest level in company’s history and ranks in industry’s top tier. Nordstrom focuses on to exceed $8 billion in sales, and continues to improve the pre-tax margin, SG & A and same-store sales. The long-term strategy of Nordstrom is based on to drive for profitable growth by serving more customers, and increasing the presence where customers shop.
  13. 13. *Nordstrom’s net sales and profit cont’d… Nordstrom’s aim is based on to maximize women’s apparel where its potential is based on to increase the share of customer’s spending. The merchandise category has the potential in relation to total company sales and they’re planning the groundwork in 2006 to make Nordstrom the stronger part of retail business. Nordstrom approaches an effort from the perspective of customer to combine the feedback from selling floor with an objective demographic data to obtain a clear picture of how they can serve customers. The competitive aspect of Nordstrom is based on the blend of art merchandising talent and science for an operational efficiencies. Nordstrom has reorganized the merchant teams, and leveraging the system tools to identify the market opportunities and react efficiently.
  14. 14. *Nordstrom’s merchandising strategy Nordstrom was focused in Direct based on the catalog and online business which they get up to speed with the growing trend of online shopping. Nordstrom is focused on to introduce Nordstrom’s catalogs which reflects the merchandise assortment in stores, and are designed to inspire customers to shop. Nordstrom aims for the substantial investment in website and the system upgrade to have the single view of inventory and provide the customer experience. Nordstrom plans to expand the entry to Boston market other than Manhattan where U.S. metropolitan market has no incentives. Nordstrom anticipates the clarity on the specific sites and markets available to them by year’s end. An expansion is focused on to remain as full-line stores which they can be new or existing markets.
  15. 15. *Nordstrom’s competitive advantage Nordstrom is consistently testing new shop concepts which can include trend accessories to feature unique jewelry and handbags and designer shop-in-shops to house notable designer collections. Nordstrom finds the new ways to give customers what they want by customizing men’s shirt program which customer sit down with the salesperson to build his own shirt. Nordstrom has also launched the designer website on which featured the photography in addition to the illustration, and anima Ruben Toledo which has showcased the 10 designer shops to mirror the look and feel of designer’s collection. The markdown optimization, a new tool implemented last fall has helped to leverage out the Perpetual Inventory System. The markdown optimization has the recommendations based on the science of retail. The personal book of the Nordstrom continued to evolve as sales tool which clientele software helps the salespeople to track customer’s personal preferences to utilize comprehensive service relationship with customers to result in increased business.
  16. 16. *Nordstrom’s significant contribution Nordstrom was honored to be the fortune magazine’s 100 best companies to work for in America for the ninth time. They are proud of recognition where they strived to create a positive environment for employees to deliver great service and achieve the goals. Nordstrom extends to give appreciation towards Bruce and John Nordstrom whom are retired from the Board of Directors after 40 years of service. These four has taken public in 1971, and contributed to share the leadership responsibilities for Nordstrom as co- chairmen until 1995. It has developed from an $80 million company in 1971 to nearly an $8 billion company. Bruce and John exemplifies the characteristics of grandfather and founder-John W Nordstrom. Hard work, persistence, honesty, competitive spirit, an unwavering commitment to the customer would reflect the high standards and image of Nordstrom.
  17. 17. *Nordstrom’s retail goal Nordstrom is the universal ambition of retailing which its unique characteristic is based on being the chain store to target middle to upper-income women and men. Nordstrom is separated from its competitors in a way of having the highly motivated, self-empowered people who have an entrepreneurial spirit to make more money. The salespeople have the freedom to make decisions. Nordstrom has the faith and trust in the frontline people to push decision-making responsibilities. Nordstrom’s shopping experience would be working with an owner of small business as customer can get. The key to Nordstrom’s success is based on giving their employees the charge to service the customer and authority. The leadership of Nordstrom is to make it clear to empower workers as part of ethic and approach an organization. Nordstrom creates an environment for empowerment where they assemble a team and allow them to fail.
  18. 18. *Nordstrom’s retail goal cont’d… Nordstrom expects, encourages, preaches, and demands individual initiative from the people who are frontlines, and have the freedom to generate ideas to promote fashion direction. Nordstrom is acknowledged to be the first apparel retailer in country to pay sales commission performance incentive. Nordstrom is not perfect where it has an urgency to compete and perform. Although demands and expectations of Nordstrom is high if employees would like to work in an unrestricted environment which can provide the great merchandise and freedom to do it. Nordstrom develops the characters of people who start at the bottom, and do it in Nordstrom way, and the standards are unnegotiable. If company can build and develop a character, starting at the bottom can survive the steps and move on for the success in career.
  19. 19. *Contribution from Nordstrom Heritage Nordstrom family holds the largest single portion of the stock for the traded company which its continuity of family management is the most important reasons for Nordstrom’s success. John W. Nordstrom, like the founders of most America’s retail dynasties was an immigrant and was driven by the immigrant’s desire to succeed. Nordstrom packs its selling spaces with the highest value of inventory per square foot of any specialty apparel retailer in country which is 20 to 30 percent more than the competition. The Nordstrom partners prefers the stable, staid business of high-quality, conservative shoes. The Nordstrom employees derive some of compensation from the profit sharing to receive the feeling of ownership in the company. The Nordstrom brothers were the entrepreneurs who were Mr. Everett, Mr. Elmer, and Mr. Lloyd and their abilities, ideas, and working habits were complemented.
  20. 20. * Contribution from Nordstrom heritage cont’d… Lloyd was the mentor for men and women throughout the Nordstrom organization, and he was an imposing figure who liked the designers and social events. Three Nordstrom brothers have shared the single-minded devotion to business. All Nordstrom family members were strong on the sales floor where they hired the people and act as the cheerleaders to encourage the people. High expectation level of Nordstrom was empowered to make own decisions and support the decisions. The Nordstrom brothers emphasized the basic retailing rule which the customer was always right, and underscored an importance of sales associates to give an attention to every customer. The Nordstrom brothers have enjoyed the friendly fraternal competition, and desired the success in own business.
  21. 21. *Perfecting the Nordstrom Way Lloyd Nordstrom wanted to move into women’s apparel which required the less capital investment in inventory than shoes which provided the better turnover and profit, and complemented the shoe business. Nordstrom places the merchandise (along with the special purchase) on the sale for ten- day period where brothers see an opportunity to observe the expansion sites, financing, and leases. Nordstrom indeed rejuvenates into a young-thinking company which had been in the business more than six decades. Expansion of Nordstrom has created the fast career track for energetic, entrepreneurial young people who were rewarded for their performance with the increased responsibility and advancement. The promotion within an essential ingredient for Nordstrom’s success had led people to learn the business on different levels. Nordstrom was committed to be aggressive in promoting women to high executive positions. 40% of company officers and 66% of store managers were female where it signified for its positive policies towards women in workplace sponsored by Progressive securities.
  22. 22. *Perfecting the Nordstrom way cont’d… With annual sales over $100 million, Nordstrom was the largest-volume specialty fashion apparel store on the West Coast and was on the way to become Saks Fifth Avenue of the Pacific Northwest. In 1975, Nordstrom acquired three stores in Alaska from the Northern Commercial Company. Nordstrom created the new store concept which has catered to younger customers which stores were 15,000 to 20,000 square foot spaces to stock shoes, clothing, cosmetics, and accessories, and were located in small college towns. Lloyd Nordstrom headed a group of Seattle investors who sought an expansion National Football League (NFL) franchise for the city. Nordstrom wanted to make good decisions to give us the guidance and counsel. In 1988, the Nordstrom has chosen to concentrate their energies and cash on their ambitious retail expansion.
  23. 23. *Perfecting the Nordstrom way cont’d… Nordstrom had many ownerships, where they were involved in the litigations and partnerships. In 1977, with sales of $250 million. Nordstrom was the third largest quality apparel specialty retailer in the United States besides Saks Fifth Avenue and Lord & Taylor. To attract new employees Nordstrom ran clever newspaper advertisement with the headline stating, “Wanted People Power,” accompanied by the positive personal attributes. Nordstrom is the dominant fashion specialty retailer in California to generate sales of $1 billion from 26 full line stores, and five Nordstrom Rack Clearance stores. The Nordstrom provides the local store managers the autonomy “to hire a hue sales staff and to buy as much inventory for their departments.
  24. 24. *Transferring the culture of Nordstrom Nordstrom has an acquisition and conversion of other chains to Nordstrom stores to take more time build, stock, and open new Nordstrom store in new market, establish the service-level consistency. Nordstrom considers its culture the key element to separate from the competition company in expanding to other regions which focuses on to bring the new markets and teach and inspire the new employees in customer service the Nordstrom way. When Nordstrom opened the new store its strategy was based on opening a formal party to raise thousands of dollars for local charity to be known as putting money into a community before the first sale.  The central philosophy of Nordstrom is based on not punishing the many for the dishonesty and is authentic in a way of providing the salespeople the freedom to sell an item at lower price to match the competition.
  25. 25. *Managing & Heroics of Nordstrom Nordstrom strives on encouraging its vendors to interact with Nordstrom customers. Nordstrom have the centralized buying for imports and merchandise where inventories to mark down the price of merchandise for sales-volume goals. The main business unit of Nordstrom includes the full-line stores, the Rack division, the direct sales division, the Nordstrom Product Group, Nordstrom National Credit Bank, and new growth areas. Nordstrom encourages salespeople to take the entrepreneurial initiative by giving their manager and buyer an input in fashion direction, style, quantities, size, and colors of the merchandise. The sharing responsibility and rewarding communication promotes the loyalty, teamwork, and enthusiasm for the job.
  26. 26. *Managing & Heroics of Nordstrom cont’d… The profit sharing plan builds on the financial incentives which would encourage industriousness, teamwork, customer service, and expense savings. Employees have an incentive to be productive and cost conscious which can promote the loyalty. The meaning of loyal to company is when they are given appreciation, respect, good pay, and the price of action. The Nordstrom achieves the better performance over the long-term when employees share the risks and rewards of an ownership. Nordstrom creates the memorable experience at their stores which the lesson should be heeded by the business. The construction of Nordstrom reached the peak of elegance in late 1980s when affluence was in full bloom with the construction of the luxurious downtown San Francisco Center store.
  27. 27. *Managing & Heroics of Nordstrom cont’d… During Nordstrom’s aggressive expansion period, John Nordstrom has influenced the philosophy based on its aesthetic proposals, and the construction of details of every department. Nordstrom continues to show the commitment and consistency on being the tinker with the store design in order to reflect the changing times and consumer tastes which would allow the customers to get in and out of stores quickly.
  28. 28. * The Nordstrom’s response to an increased retail competition Nordstrom maintain its price and make a profit through the private label merchandise which is in every category of goods which Nordstrom carries. In 1990s, company has experimented the home shopping as a way to expand its sales base while providing the customers with the options to buy Nordstrom products, and capitalize on its enhanced name recognition. In 1993, Nordstrom joined with Bloomingdale’s in a closed-circuit home shopping originated from the Mall of America in Bloomington, Minnesota. The successful sales alternative is the Nordstrom Catalog which is the direct-mail marketing tool to lead customers to shop with Nordstrom from the comfort of homes, 24 hours a day.
  29. 29. *The Nordstrom’s response to an increased retail competition cont’d… The company’s direct mail customer is a fashion-conscious women who enjoys to wear the casual clothing and ages between 35 and 55 has an average household income of $50, 000 to $100, 000 and is likely to shop from Bloomingdale’s by mail. When company ironed out the technical and aesthetic aspects of electronic commerce, the next step is to create the powerful brand. Nordstrom prospects the electronic commerce as the marketing tool which is the way to deliver merchandise to customers.
  30. 30. * The Nordstrom’s response to an increased retail competition cont’d… The differential strategy is based on Nordstrom working on an exclusive marketing alliance and relationships with the wide assortment of vendors who can reach the target customers through a reliable retailer. Since 1992, Nordstrom has given the Nordstrom Partners in Excellence Awards to Vendors “whose products and business practices signify the commitment to the quality and value, service and integrity. In 1993, Nordstrom installed multi-million dollar computerized system which linked all of stores and corporate headquarters to provide managers and buyers with the product information to track inventory, analyze sales activity, identify customer’s buying trends, make purchase decisions, create pricing strategies, and monitor the performance of suppliers. Nordstrom continues to expand the employment of information system technology to improve flexibility in merchandising and response to the customer’s needs.
  31. 31. *The Nordstrom’s response to an increased retail competition cont’d… Nordstrom family continues to have an aggressive battle plan for the store expansion in regards to the strong cash flow and long-term debt which leads the company attractive to financial equity markets. Nordstrom’s expansion plan is to attract good people and keep them motivated with opportunities. Nordstrom has made the policy to reach out to the minority communities to recruit, employ, train, and promote the people of color. The fortune magazine place Nordstrom 37th of the 50 best companies for Asians, Blacks, and Hispanics. When Nordstrom enters a new market, company sets out to cultivate minority-owned vendors of office supplies, food, music, photography, and other services to include the construction.
  32. 32. * The Nordstrom’s response to an increased retail competition cont’d… Through its Supplier Diversity Program, company encourages the women and minority owned business to supply the locally produced merchandise. Based on decentralized buying, Nordstrom is able to bring in smaller vendors, and try out their products. Since 1990, Nordstrom has sponsored the Nordstrom community service awards in Seattle, Los Angeles, and Chicago to recognize the efforts of individuals who have made difference in communities. When service counts more than ever, competitive companies are rediscovering an importance of the people who delivers it. The companies scramble to hire, train, and hang on to the ordinary moral who perform the feats of extraordinary service.
  33. 33. *Understanding Nordstrom’s revenue streams & online business for the fastest growing channel
  34. 34. *Understanding Nordstrom’s revenue streams & online business for the fastest growing channel Nordstrom’s core category of full-line stores accounted for 62% of retail segment revenues. The full-line store revenues have been declining over the years due to increasing off-price Nordstrom Rack revenues and growing Direct or online business. In fiscal 2013, Direct business and Nordstrom Rack stores accounted for 13% and 22% of retail segment revenues. HauteLook’s online business and Jeffery boutiques made up 3% of retail segment revenues. Other department stores like Macy’s (M), Nieman Marcus, Dillard’s (DSS), and Kohl’s (KSS) have expanded their e-commerce business. Women’s apparel and accessories accounted for 31% and 14% of fiscal 2013 net sales. The shoes contributed 23% of fiscal 2013 net sales, and men’s apparel made up 16%. Cosmetics and kid’s apparel accounted for 11% and 3% of net sales. Nordstrom attracts customers through concepts like pop-up shops. In January 2015, Nordstrom opened Zone Zella pop-up shops in select stores to sell apparel and workout accessories from Zella, the company’s private label activewear brand. Nordstrom expands its online merchandise offerings.
  35. 35. *The comparison of profitability of Nordstrom vs. Nordstrom Rack
  36. 36. * Nordstrom’s capital expenditure for new stores & technology best-in-class inventory management Nordstrom Rack stores are more profitable than the company’s full-time stores. In fiscal 2013, Nordstrom Rack has generated $533 in sales per square foot in compared to the $372 in sales per square foot generated by full-line stores. Nordstrom Rack’s fiscal 2013 net sales were up to 12% to $2.74 billion. The company’s 22 new stores drove the growth while Nordstrom’s full-line store sales declined by 3.25% to $7.71 billion. Growth plans: Nordstrom Rack stores outnumber the Nordstrom full-line stores. At the end of third quarter of fiscal 2014, there were 167 Nordstrom Rack stores, and 119 full line stores. The company is investing in the expansion of Nordstrom Rack stores. The goal is to reach 230 stores by 2016. In the first nine months of fiscal 2014, the company opened 27 Nordstrom Rack stores in contrast to only three full-line stores. Off-price war: Off-price - The stores were carrying damaged and unsold merchandise. The Nordstrom Rack stores now carry the merchandise from full-line stores along with the items purchased from many of the top brands sold at Nordstrom. Upscale peer Nieman Marcus has similar off-price store called Last call. Even Macy contemplates opening off stores to compete with Nordstrom Rack and T.J Maxx (TJX).
  37. 37. *Nordstrom’s multichannel strategy, customer focus leads to success Nordstrom’s target customers
  38. 38. *Nordstrom’s multichannel strategy, customer focus leads to success Nordstrom’s target customers cont’d… The company has grown beyond its full-line stores business. After being successful in the luxury retail category, company saw the growth prospects in the off-price or outlet space. The company expands Nordstrom Rack stores to attract younger consumers in particular. Today, Nordstrom Rack stores outnumber the company’s full-line stores. Nordstrom invested in the e-commerce channel, which has become the key growth driver. The 2011 acquisition of the flash sale site HauteLook has boosted an online channel. Customer-centric approach: Nordstrom has linked its online and stores business, giving consumers the freedom to shop where they want. For instance, consumers now return their HauteLook online purchase in Nordstrom Rack stores which helps to increase store traffic. The company is also working on to make its merchandise attractive where Nordstrom adds more accessible price points in the department where it sells more quickly.
  39. 39. *Conclusion The successful employee are resilient and resourceful, empathetic and enterprising, competent and creative. Nordstrom directors states the fourth generation’s challenge would be to achieve much success as the previous generation, but in much more difficult market since world is moving for greater participation, more shared decisions, and more decisions at the point of service. The workers at all levels of the organization would be empowered by the technology and information which would have collaboration and shrinking hierarchies. Unlike the traditional manufacturers of Nordstrom the companies strive to establish the close relationships with suppliers and customers in an effort to react quickly to shifts in markets. The primary goal of Nordstrom remains the same which they would like their customers and communities to be the best based on the willingness to change and question.