Corporate Strategy Assignment - Nordstrom

2013

Figure 1 – Nordstrom (Source: Google)

Name:

Amany Hamza

Student number:

21202244

Tutor:

Geoff Goddin

Course:

MBA / Corporate Strategy This is the final submitted hard copy for your consideration.

Nordstrom Corporate Strategy Table of Contents 1.

Executive Summary ............................................................................................................................ 4

2.

Introduction ......................................................................................................................................... 5

3.

Dimensions of the industry development ........................................................................................ 6

4.

The Paradoxical Choices ................................................................................................................... 8 4.1.

THE PARADOX of Compliance versus Choice to the industry development .......................... 8

4.2.

THE PARADOX OF CONTROL VERSES CHAOS IN THE ORGANISATIONAL CONTEXT .................................. 15

5.

Conclusion ......................................................................................................................................... 19

6.

Acronyms ........................................................................................................................................... 21

7.

Reference .......................................................................................................................................... 22

8.

Appendices........................................................................................................................................ 25

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Nordstrom Corporate Strategy Table of Figures Figure 1 – Nordstrom (Source: Google) .......................................................................................................................... 0 Figure 2 – Nordstrom At A Glance (Source: Adapted from Google) ............................................................................. 3 Figure 3 – Nordstrom and its web of relational actors...................................................................................................... 7 Figure 4 – Retail Market Evolution Model ..................................................................................................................... 12 Figure 5 – Generation Share of Population....................................................................................................................... 13 Figure 6 – Omni-channel Retailers .................................................................................................................................... 14 Figure 7 – Holistic Communication Strategy Across Omni-channels……….……..……….……………..………………...17

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Nordstrom Corporate Strategy

Figure 2 – Nordstrom At A Glance (Source: Adapted from Google)

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Nordstrom Corporate Strategy 1. Executive Summary This report develops a critical assessment of Nordstrom Inc. strategy’s implementations in relation to its industry development and within its organisational context. It analyses Nordstrom Inc.’s distinctive business model that differs from its competitors, whereas it is driven by outpacing performance and its savvy competitive strategy. This paper also outlines the development of its integrative strategic thinking in a way to relieve the tension embodied by the intense macro environmental forces or as a result of its passion to further grow on the market and yet to sustain its business heritage as it has been operating in the marketplace for more than 100 years. In addition, the assessment cites the core competences of Nordstrom’s leading position in the American marketplace. Yet, this leading position is driven by strong inherent culture that counts for the well execution of Nordstrom’s strategies. Nordstrom attributes its distinctive performance in the marketplace to the implications of its integrated communications which is tightly aligning between meeting customers’ needs and the company activities in order to differentiate its products offerings and to seize the targeted segments. Internally this integrated communication structure, which forms the control perspective, allows a clear understanding of Nordstrom’s corporate objectives. Empowerment, which denotes the chaos perspective, on the other hand is highly regarded to create involvement and commitment in order to deliver these strategies. This internal formation is its gateway to lead the industry- whereas the US retail market is moving towards a Post-Modern market evolution phase which signals an era defined by wall-less Omni-channel stores (PWC, 2012), Nordstrom was the first retailer to integrate its stores into omni-channels back in 2008 (see Appendix PA-CVC-OC). It also adapts to the new customers spending habits as noted further in the report. And with Nordstrom’s consistency in paying attention to the new consumer trends and preferences, Nordstrom will be the market dominant. The conclusion encloses the imperatives for Nordstrom to sustain long term competitive advantages in the industry and to run a profitable business through efficient anticipation to what customers need, or want and effective recognition to its employee’s efforts with taking into consideration the importance to give back to its communities. The pillars of its forward vision strategy will position the company to master the highly dynamic marketplace. Furthermore this format will generate an ethical business to benefit the industry and all stakeholders.

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Nordstrom Corporate Strategy 2. Introduction Nordstrom, Inc., the world's number 16th most admired company for 2013 by Fortune, is a leading fashion specialty retailer offering compelling clothing, shoes and accessories for men, women and children. Since it was founded in 1901, it has been committed to providing its customers with the best possible service, selection, quality and value (Nordstrom Company History, 2013). This philosophy has remained unchanged for over 100 years. Today, the company mission is still the same. Nordstrom has developed its own niche in the retail industry as an affordable retailer, positioned between mid-tier retailers such as the Macy's Inc. stores and high-end, luxury retailers, including Saks Fifth Avenue and privately-held Neiman Marcus (Wikinvest, 2012). Thus it offers a broad array of over 500 brands, targeted toward the whole family, through a strong nationwide network of more than 248 stores situated across 33 states (Nordstrom Company Facts, 2013). Nordstrom differentiates itself by offering inclusive selection of quality merchandise at affordable prices (see Appendix PA-CVC-AP); it reformed its pricing strategy to adapt to the macro-environmental forces where its initial primary target market was the upper echelons of society, as noted in depth in the later descriptive analysis based on a proactive pricing strategy which distinguishes it from other mall-based department store retailers and benchmark against its rivals. Beyond differentiating its physical product and prices, Nordstrom further differentiates itself based on its services as of an exemplary one, thereof its customer experience is characterised by providing high value proposition that fills the void in the American market for luxury fashion forward brands at attainable prices. Hence Nordstrom has cultivated a distinctive brand in the marketplace, and while it is known for its selection of designer clothing, its real claim to fame is its quality customer service. This is driven by a cohesive internal culture to best advocate the underlying prerequisites of customer service that customers value over and above the product they're buying (Nordstrom, 2012).

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Nordstrom Corporate Strategy 3. Dimensions of the industry development The branded fashion industry has benefited from demographic shifts and changes in consumer preferences over time due to globalization and a rise in brand awareness (see Appendix PA-CVCME). With fashion emerging as a means of self-expression, consumers are increasingly choosing branded fashion with images or logos over private label. Despite the prolonged instability in the world economy that has taken its toll on the branded products market - as a result of reduction in household wealth, falling consumer confidence, frugal discretionary spending patterns, and shifting consumer demand to value for money bargains and has correlated to erode sales growth over the last 5 years - the United States still represents the world’s largest branded apparel market having an estimated share of 29.26%1. The retail fashion industry includes retail stores and online (PEC Research, 2012).

1

According to Global Industry Analysts Inc.

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Nordstrom Corporate Strategy Figure 3 – Nordstrom and its web of relational actors

.Contemporary brands such as teen fashion are seeing explosive growth (Nbcnewyork, 2013); .The surge of post digital age tends towards personalised and customised products, changing the landscape on the industry.

S

E Rivals-Fierce competition The high fragmentation of the industry leads to increased competitor rivalry.

. The impact of peak cotton prices is associated with long lag between the purchase of raw materials and the appearance of finished apparel goods on store shelves (Euromonitor, 2012); Price-sensitive consumers trade down or wait for promotions as a result of the economic downturn (Euromonitor, 2012); Increasing fuel and transportation costs as well as labour costs are continue to rise as the standards of living in the developing countries that house many apparel manufacturers drive inflation (Euromonito, 2012)

Competitive Landscape Lens Threat on New Entrants Potential new entrants face low barriers – generated by direct-toconsumer, online retailers

Threat of New Entrants

Incumbent Rivals 4 3 2 1 0

Threat of Substitutes

. Each state across the country has consumer protection laws in place, with the goal of preventing businesses from using misleading marketing campaigns as a means to drive sales numbers (Chron, 2013); Labour Concerns Rise amid Increased Competition & Costs.

P/L

Threat on Substitutes Is high because of the increasing number of discount retailers and supercentres like Wal-market

Buyer Power

Buyer Power Is high to moderate due to the empowered customers with internet advances.

Supplier Power

Supplier Power Is low because of the large number of suppliers available

T

.The emerging cutting-edge 21century technology migrates retailers services online. .The increasing pace of technology is a doubleedged sword that both enables and requires agility and adaptability;

Source: Adapted from De Wit and Meyer, 2010

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Nordstrom Corporate Strategy 4. The Paradoxical Choices 4.1. THE PARADOX of Compliance versus Choice to the industry development

The low level of differentiation between the individual retailers and the fragmented nature of the industry results in a very competitive environment which makes it difficult for the industry to outperform the overall market (PEC Research, 2012). Moreover, despite the improving trends witnessed in retail sales, along with declining unemployment rate confirms that the U.S. economy continues to be on track for recovery, there is still a general uncertainty on the economic front with the GDP growth remaining sluggish. Zacks Equity Research (2013) suggested that this uncertainty in the retail industry development and the instability noted early into the interplay economy forces underlie risky adaptation to this industry orthodoxy which can even damage the industry itself on the long-term (De Wit and Meyer, 2010). The industry structure was characterised by many retailers being unprepared for the sharp decline in consumer confidence that occurred in late 2007, opting for a bunker mentality rather than a strategic one, where the most common view was that many retailers were cutting back in the wrong places of fewer products, less service, or even less inventory (Gensler, 2008). Another view was that other retailers chose to rest on their laurels without connecting to the new customer behaviour, which was the reason for them to be selected out of the industry. De Wit and Meyer (2010) suggest that, while compliance to the industry rules can be very beneficial, contradicting them can also be strategically valuable. In the light of this, compliance to these poor underlying industry dynamics could jeopardise Nordstrom corporate brand credibility. Whereas the industry recipe was held towards trade-offs between product quality, cost and customer service, Nordstrom successfully lived up to its brand promise and has developed an integrative strategic thinking through its innovative approach of the Omni-channel initiative in 2008 to create new ways of selling (see Appendix PA-CVC-OC), as well as leverage a masstige2 pricing strategy to adapt to the accelerated pace of consumers price sensitivity as they are trading down to lower price points, or even cheaper private label brands and also as a mean to reach out to a wide and diverse target audience.

2

Masstige products are defined as "premium but attainable," and there are two key tenets: (1) They are considered luxury or premium products and (2) They have price points that fill the gap between mid-market and super premium (Wikipedia, 2013).

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Nordstrom Corporate Strategy This paper illustrates the integrative ways of strategic thinking rather than a solution to tackle infinity of hostile environmental forces, where Nordstrom used the industry dynamics as a powerful explanatory lens to understand the mainstay of the retail business, the consumers, and even go beyond meeting their needs to a new concept of anticipating these needs. Hence it depicts on how to go beyond the crucial stage of transitioning from original retail model into non-traditional to relate to the new future of retailing. Capitalising on blending both effectiveness and efficiency attributes to yielding a new concept called “the new efficiency” that is tied to the practice of attainable prices of high end luxury products with emphasis on providing top of the line of customer services. This contrasted with the approach of the majority of retailers who are trimming their costs by competing solely on price which resulted later in their failure to relate to consumers’ needs and retain them. This made Nordstrom stand out against its rivals. Nordstrom developed an innovative strategy which demonstrates characteristics of both dichotomous poles to reap augmented value in the form of ROI (PWC, 2012). Despite applying the masstige pricing strategy, service is not scarified even at the lower priced Nordstrom Rack stores. This entails from lowering its cost structure, such as taking the initiative of integrating its inventory by virtually pooling its online and in-store inventories (see Appendix PA-CVC-IN). As a result of this, Nordstrom keeps items in the inventory for an average of 62 days; hence its turning inventory is about twice as fast as its competitors (Schermerhorn et al, 2011). Also Nordstrom’s dynamic strategy of being highly responsive to address customers’ value-oriented buying behaviour results in the growing number of its customers and the long term supply/demand balance which accelerate revenues and lead to scale economies and lower costs with greater agility. The perceived value from adapting to the industry development embodies an opportunity rather than a threat of not achieving profits because of lowering its prices. Most notably, all Nordstrom transformations strategies have built up designated competitive advantages based on both leadership and dynamics perspectives. Right from the start when Nordstrom was co-founded in 1901 as a shoe store, it incorporated exceptional customer services, selection, quality and value forming its brand equity. Drawing from this mission, it expanded its stores in 1923. By the 1960’s the market reached maturity, and in an attempt to diversify itself it opened for the first time in history a department store which ventured into the clothing market; under the name of Nordstrom Best; it offered a diverse products no other competitors offered. In order to retain its competitive advantage, in 1973, it Page | 9

Nordstrom Corporate Strategy opened up its first Nordstrom Rack - the off priced stores - to reinvent new ways to induce consumers to buy during the economic stagnation (Nordstrom Company History, 2013). By 1975 it adapted to the industry dynamics at the time, as getting out of the recession, and penetrated into the new American markets. As of Nordstrom recently, despite the deterioration of economic conditions, Nordstrom weathered the recession better than most retailers with total sales surpassed $10 billion in 2012, where over $1 billion is coming from its direct sales, a first in the company’s history, as e-commerce achieved an impressive 37 per cent growth (Nordstrom Annual Report, 2013). Thereof Nordstrom enjoys a healthy financial position that entailed from diversifying its portfolio marked with a high level of quality merchandise with strong brand presence in fullline stores for the newest forward fashion with attainable prices, which were at premium prices before the recession -and in order to retain its customer base it employs tactical marketing strategies of promotional pricing to offer the implied affordability without damaging its brand on the long term. In addition, they also found a good presence in lower priced value market for new brands with its Rack stores. While its supply chain expedites merchandise in the areas of handling highly innovative fashion products, partnerships are also enhancing the in-store and online experiences. In 2012, Nordstrom achieved another pioneering advantage by becoming the only major U.S. retailer to sell a broad assortment from the renowned British fashion brands Topshop and Topman to entice younger shoppers and to translate its engagement with young customers through the digital media into compelling merchandise offering that they favour to push on the sales (Nordstrom Company History, 2013). As a matter of fact, Nordstrom is making all of the right moves to accelerate sales growth in line with commitment to stay true to its reputation of having excellent customer service (Inside FFM, 2012). Hence its continuum customer centricity ranged from its liberal returns policy, to return items without a receipt to efforts by employees to make a connection with existing customers and acquire potential ones (Nordstrom Annual Report, 2012). Besides, its Fashion Rewards Program features as a shopping-based loyalty as Nordstrom operates in credit segment through its owned federal savings bank to provide private label cards (Reuters, 2013). On one hand, this has been highly regarded among customers and, on the other hand, it resulted in robust sales as Nordstrom builds strong value-laden customer relationships with its customers (Kotler et al, 2012).

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Nordstrom Corporate Strategy Nordstrom’s core competences are derived from its customer centric approach which has created multiple growth opportunities that is coupled with savvy competitive strategy. With regard to this approach in 2009, Nordstrom aggregated its inventory across its network and made it visible by displaying stock from both the Web warehouse and its stores all at once (see Appendix PA-CVC-IN), This might not seem revolutionary in other industries but a melding of Web site and store was surprisingly rare in the retailing world (The New York Times, 2010). Thus, such fluidity was hard to find among Nordstrom’s competitors, therefore many retailers at the time were experiencing YOY sales decreases at other stores. Although Nordstrom did have to hire more shipping employees to wrap and ship items from each store, the increased sales more than offset the operational costs (Banker, 2011). Selected by U.S. News as one of America's Most Connected Companies for its use of technology to expand shopping options, Nordstrom has been aggressive about snapping up promising Internet ventures to diversify its business and experiment with new retail platforms. Its social media strategy extends well beyond the likes of Facebook, Twitter, and YouTube to an array of buzz-generating fashion and photo-sharing sites. Recognizing that its customers always want to stay connected, the company introduced complimentary Wi-Fi in its high-end department stores in 2010 (see Appendix PA-CVC-TE). Late 2011, it distributed in its flagship stores 6,000 modified iTouch devices to sales staff that can ring up purchases on the spot, a process called "mobile checkout" and track inventory (see Appendix PA-CVC-POS). Sales personnel also use iPads to assist customers with the selection of everything from wedding wardrobes to cosmetics to business suits (Hatch, 2012). Despite the high cost of operating these mobile POS devices, the integrative thinking of reducing the potential amount of time customers have to think about their purchases before they reach the register has translated into higher profits in both Nordstrom’s 2012 March Sales Report (see Appendix PA-CVC-SR). According to the company, 2012 sales was $1.73 billion increased 15.3 per cent compared with total retail sales of $1.50 billion for the same period in fiscal 2011 (Forbes, 2012). While customers are trading down, Nordstrom has responded by expanding its off-price Rack stores. Moreover as Nordstrom has not been a typical retailer, it evolved a new trend to exploit the strength of the Rack division and benefit from its strong fundamentals in the offprice space by opening one of its Rack stores a crosswalk away from its flagship in downtown Seattle (Martinez, 2012). It argued that around 60 per cent of the Rack division's customers also shop at Nordstrom's flagship stores as they want the newest, latest, greatest thing so for Page | 11

Nordstrom Corporate Strategy their convenience they go across to the full-line store and get it the day it comes out. Nordstrom is challenging the conventional wisdom that a retailer's full-price and off-price stores cannibalize each other. Much more complete, this approach seems to contribute to the industry risk averseness (De Wit & Meyer, 2010). However, it addresses the two poles in an efficient and effective way. On one hand it allows customers from the Rack to shop at the full line stores, where most customers shopping there are young customers who are time deprived so bringing both stores next to each other is far convenient to them. On the other hand the customers from the flagship store if they want other complementary products at lower price instead of going to other stores to save them the time driving the whole way out of town to go to the Rack, they would benefit from just crossing the road and they could shop there. Most importantly is to divert customers from other stores with products’ values are competed away to the Rack for their less competitive products, either less quality or high prices, in this way to increase customer base. Nevertheless, Nordstrom could be leading the industry into the transition from Maturation to Post-Modern market as exhibited in figure 4 (PwC/Kantar Retail, 2012). Figure 4 –

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Nordstrom Corporate Strategy Besides, while Rack customers tend to skew younger than Nordstrom's flagship stores whose customers are from Baby Boomer generation. This is another insightful reason for its integrative strategy to locate the Rack stores in this new landscape next to the full line stores to polarise the two reference groups as noted in figure 5. Nordstrom noted that while baby boomers will hit their peak spending potential in the future (Figure 5), as that happens, it wants to attract a younger customer without alienating its core customer (Anderson, 2012). Figure 5 –

Furthermore, the value innovation underpins Kim and Mauborgne point that innovativeness comes from fundamentally new and superior ways of creating value for buyers which contradicts what Moore suggests that it is based on technology pioneering (De Wit & Meyer, 2010). This opened the door for the future not to be innovative in other ways without being totally dependent on technology where the increasing reliance on cloud computing solutions to process and store relevant data ads imposes a dimension to low security and high privacy risk (BDO USA Report Finds, 2013). However, as it is Nordstrom way to incorporate the best of both worlds, the company expects to spend 25% of its planned five-year capital expenditures towards e-Commerce and technology investments, including initiatives to improve e-Commerce delivery and fulfilment, online and mobile experience and personalisation. With its preliminary transition towards the omni-channel, Nordstrom has been the industry rule breaker which has benefited from its innovative transition through its integrated stores Page | 13

Nordstrom Corporate Strategy the online, brick and mortar, m-commerce (fig 6). Hence this puts Nordstrom 4.8 per cent ahead of comparable retailers according to Internet Retailer (Djambazov, 2013).

Figure 6 – Omni-channel Retailers

Source: Kym Mcnicholas

Moreover, Nordstrom will make its first foray outside the American market by opening four full line stores in Canada in 2014 with a view to open Rack stores (see Appendix CA). And with more than 15,000 Canadians already have a Nordstrom credit card, either for online purchases or for cross-border shopping in bricks-and-mortar locations in the U.S. (CBC News, 2013), Nordstrom has an immense opportunity to expand its customer base. Hence to sustain growth, Nordstrom evolves its strategies to build a diverse market channels to resonate to the new frontier of a polarized world in 2020 (PWC, 2012).

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Nordstrom Corporate Strategy 4.2. THE PARADOX OF CONTROL VERSES CHAOS IN THE ORGANISATIONAL CONTEXT

Nordstrom’s approach to the compliance-choice dichotomy in achieving strategic competitive advantages is exemplary with its approach to empowering the employees, the dynamics organisational perspectives, and its organisational leadership perspectives reconciled using a holistic strand (Hamza, 2013). The underlying framework underpins Nordstrom commitment to never lose sight of its original philosophy which has remained unchanged and is entrenched in its efficient approach that it follows towards its employees. In order for Nordstrom to well communicate its corporate brand value and the brand distinctive DNA to its customers, as well as benchmark against its competitors, Nordstrom approaches its employees with a shared vision. Furthermore Nordstrom designs its organisation in a way that enables generative learning3’, which is the only sustainable source of its competitive advantages as exhibited by Peter Senge (De Wit & Meyer, 2010). This approach is in line with the above noted approach towards acting on the industry development by reconciling both industry leadership and dynamics dichotomies. Moreover to leverage its strategic decision making in planning its engagements into the industry development and the relevant transformational processes, it needs full support from all levels in its hierarchy to give strong impetus to the fragile initiatives towards the industry change (De Wit and Meyer, 2010). The Nordstrom family owns 25% of the business, as the 21st century dawned, Nordstrom was in trouble. Its sales had slowed down and its stock prices had declined. While Blake Nordstrom took over the CEO position, he reemphasised Nordstrom's personalised service culture to bring back disenchanted customers. He was quoted as saying "We know by giving good service we sell more," Blake told BusinessWeek in 2001. Blake attributed his success to his policy of listening to and supporting his sales force rather than ordering them to perform (Reference for Business, 2013). It has been perceived that the company’s inverted pyramid where management is on the bottom and salespeople and customers are on the top, correlate to optimising its internal and external communications and forming a holistic understanding of its main resources (Figure 7), the total value chain, loyal customer and potential ones who are the main reason of its existence and sustainability to be a profitable business (Hamza, 2013).

It is about creating as well as adaptive learning, which is about coping as described by Peter Senge, (Source: De Wit et al, 2010) 3

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Nordstrom Corporate Strategy This holistic consortium is driven by tying up between its partners. The employees are observed as the business partners that offer the best service to their customers to build on loyalty and generate a profitable relationship to both ends while Nordstrom ROI increases for being the customer‘s favourite retailer to buy from. The customer, hence, receives a high perceived value from Nordstrom’s merchandise offering. The below-mentioned model of communication eliminate any negative chaos by enabling the flow of clear, consistent shared vision promoted by ambiguous challenges to find the best way to the customers and for a dynamic feedback flow among all channels to understand the latent needs of the customers in order to anticipate what they need and be the best in the market.

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Nordstrom Corporate Strategy Figure 7 - Holistic Communication Strategy across Omni-channels

Customers Engagement

B&C

Customer-Centricity

Objectives)

(Achieve Corporate

Internal integrated culture

Department Manager Want-Satisfying offering

B&B

Products

Capture greater Value

Feedback

Proposition

Capture Value in Return

Sales and Support People

Vendors, Distributors, Regional Managers ROI

Commitment

Board of Directors Source: Adapted from Hamza, 2013

Almost all of its “heroics,” as Nordstrom calls them, can be traced back to the above inverted triangle organization of priorities, with salespeople at the top and executives at the bottom. Through this business structure, sales associates on the floor are empowered like entrepreneurs, given tools like well-stocked stores, digital customer profiles, and thank-you notes to keep track of and service individual customers in the interest of long term Page | 17

Nordstrom Corporate Strategy relationships to optimize its CRM and retain its customer base. High-tech inventory and replenishment systems are some of the most important tools with which Nordstrom equips its employees to become even more efficient, as these tools contribute to making the store a gateway to the entire retail supply chain rather than the final destination (Lew, 2012). Nordstrom’s management empowers its employees to do whatever is needed to satisfy or even exceed customer needs and expectations; employees serve their customers as if they are running their own personal business. From Nordstrom standpoint, it stated its output of achieving its number one goal of providing outstanding customer service. However, despite this kind of control in setting both the employees personal and professional goals high, it emphasises having a great confidence in their ability to achieve the goal by using good judgment in all situations, this considers a potent prescription for chaos by inviting everyone in the organization to rely solely on good judgment when making decisions (Goman, 2010). Nordstrom is decentralised; hence it gives a lot of power to supervisor and store managers, while keeps pushing the power down to the sales floor. It strives to put as much responsibility as possible into the hands of as many people as possible to give the culture a chance to progress (Spector, 2012) Despite the decentralisation, people for their outstanding acts of customer service are rewarded, as a recognition of their remarkable performance and to motivate others to benefit from this chaos in a positive attitudes in a way of controlling this chaos. Furthermore the good application of the hygiene factors4 for the positive attitudes and the motivations catalyses control in multifaceted efforts to emerge order from chaos as demonstrated by Ralph Stacey (De Wit & Meyer, 2010). Nordstrom practices both formal and informal training. To help employees learn the Nordstrom philosophy, the company relies heavily on socialisation with peers and supervisors to teach that unique brand of customer service delivered by Nordstrom. Hence, Nordstrom management prevailing view of leading people capitalizes good application of attuning between the employees hard and soft skills to leverage its unrivalled human resources. Nordstrom has deliberately set out to counter what it views as negative traits of centralisation management. It deliberately stresses decentralised management structures, praises the achievement of individual, make merits the key to promotion and awards responsibility to bottom line levels, however it established control over the chaos of

Hygiene factors include supervision, working conditions, security, peer relationships, salary and company policies (Herzberg). 4

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Nordstrom Corporate Strategy decentralisation. In other words, it progresses flexibility with a tacking motion along a welldefined path of communication (De Wit & Meyer, 2010).

5. Conclusion Nordstrom has been proactive in anticipating the way of shaping the fashion retail industry as well as adapting through other transitional stages to preserve its position; the adaptation is important to relate to the changes happening in the industry till Nordstrom seeks a new value creation to pick up again and to take the lead. The reasoning then to reconcile both dichotomies - the industry leadership and the dynamics perspectives - is to hallmark its competitive advantages. On the one hand, its savvy approach to the industry development did not only benefit its leadership role but it has also contributed to the revenue of the fashion retail industry. This is achieved by being adept at harnessing product, service and process innovation to anticipate and meet customer needs. Drawing from this concept, Nordstrom proved that companies can still achieve profit in industries that are going through harsh times conversely to the inherent profits which exists only in attractive industries. Its achievement of ascendancy in market share incurred as a reward for its effectiveness and efficiency in dealing with its core competences through its integrative strategic thinking, being prudent leaders in the form of stewards to its people and above all contributing to its communities (De Wit & Meyer, 2010). As part of Nordstrom CSR, it makes ethical business decisions that benefit all stakeholders. More is in Appendix SH. On the other hand, Nordstrom has relied on its people to earn a reputation for top-notch customer service when its selling activities were just in the brick and mortar stores. Nowadays, with its inherited implementation towards decentralisation and empowerment, it deliberately relies on them to be the new market‘s motion - the market of social media and digital channels - to actively interpret the expectations of these channels. This helps in creating the right want-satisfying market offering and has transformed the landscape of its relationship into a B&C conversely to the old model of B2C, where applied through its holistic spectrum (Hamza, 2013). The finding of this paper is that gaining a significant competitive advantage should not be framed by adapting to the industry rules because it means doing business in more or less the same way as competitors (De Wit & Meyer, 2010). The best trajectory that Nordstrom has Page | 19

Nordstrom Corporate Strategy sought so far is reinventing itself to go beyond the comfort zone of the traditional formats and home markets to rapidly and continually rethink its stores format. This enables Nordstrom to capture the best of the two poles’ opportunities and values, the pole of compliance and the other pole of choice. And as a matter of fact this reconciliation is the core competence that makes Nordstrom master the industry development and differentiates itself from others, hence this unique core competence is hard to imitate. What distinguishes Nordstrom is very simple; it is its recognition of what people need, they are the customers who represent the most empowered driver, through the digital and social media channels, amid other drivers that determines the industry development. Moreover Nordstrom’s recognition of what motivates its employees - who perform the designated activities - with early anticipation to these needs alongside a focus on integrative strategic thinking to well position itself for the success of the polarized world in 2020, Nordstrom will position itself at the fine line/market which is created as a result of getting the two contradictory poles of dichotomies as close as possible to each other. This attempt redefined by reconciling dichotomies is Nordstrom’s distinctive strategic thinking that no other companies in the fashion retail industry have been able to achieve.

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Nordstrom Corporate Strategy

6. Acronyms ACRONYM YOY P / L FACTORS E FACTOR S FACTOR T FACTOR POS

MEANING YEAR ON YEAR POLITICAL, LEGAL FACTORS ECONOMIC FACTOR SOCIAL FACTOR TECHNOLOGICAL FACTOR POINT OF SALE

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Nordstrom Corporate Strategy

7. Reference Anderson, G. (2012) Nordstrom Doubling Down on Rack Concept [Accessed on May 29, 2013] http://www.retailwire.com/discussion/16202/nordstrom-doubling-down-on-rack-concept BDO USA Report Finds (2013) Regulatory Environment Poses a Top Threat to Retail Industry [Accessed on May 29, 2013] http://www.businesswire.com/news/home/20130520005152/en/Regulatory-Environment-Poses-TopThreat-Retail-Industry Bennett, C. (2013) Which Retailer Had the Best December? [Accessed on June 02, 2013] http://www.fool.com/investing/general/2013/01/16/which-retailer-had-the-best-december.aspx Bickle, M. (2013) Nonanchor and Anchor Stores Equally Popular among Consumers [Accessed on June 02, 2013] http://www.forbes.com/sites/prospernow/2013/05/28/nonanchor-and-anchor-stores-equally-popular-amongconsumers/ Business Wire (2013) Regulatory Environment Poses a Top Threat to Retail Industry, BDO USA Report Finds [Accessed on June 02, 2013] http://www.businesswire.com/news/home/20130520005152/en/RegulatoryEnvironment-Poses-Top-Threat-Retail-Industry Caplinger, D. (2013) What Makes Nordstrom One of America's Best Companies [Accessed on June 02, 2013] http://www.fool.com/investing/general/2013/02/27/what-makes-nordstrom-one-of-americas-bestcompanie.aspx CBC News (2013) Nordstrom expands Canadian footprint to Yorkdale mall [Accessed on June 02, 2013] http://www.cbc.ca/news/business/story/2013/04/08/business-nordstrom-yorkdale.html Chulis , K. (2012) Apply price sensitivity to improve retail performance [Accessed on June 02, 2013] http://www.ibm.com/developerworks/library/ba-price-sensitivity/ Clay, K. (2012) Nordstrom Sees Sales Boost From Mobile POS Devices [Accessed on May 20, 2013] http://www.forbes.com/sites/kellyclay/2012/04/06/nordstrom-sees-15-3-increase-in-retail-sales-followingintroduction-of-mobile-pos-devices/ Clifford, S. (2010) Nordstrom Links Online Inventory to Real World [Accessed on May 25, 2013] http://www.nytimes.com/2010/08/24/business/24shop.html?_r=0 De Wit, B., Meyer, R., (2010) Strategy Process, Content, Context an International Perspective: 4 Ed. Djambazov, A. (2013) Nordstrom’s e-commerce bet pays off big [Accessed on May 27, 2013] http://www.geekwire.com/2013/nordstroms-ecommerce-bet-pays-leaves-big-box-retailers-dust/ Family Business Magazine (2013) Family stewardship at Nordstrom [Accessed June 05, 2013] http://www.familybusinessmagazine.com/index.php?/blog/family_stewardship_at_nordstrom/

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Nordstrom Corporate Strategy Goman, C. (2010) Nordstrom's one and only rule [Accessed on June 04, 2013] http://views.washingtonpost.com/leadership/panelists/2010/04/nordstroms-one-and-only-rule.html Grailresearch (2009) The Global Fashion Industry – Growth in Emerging Markets [Accessed on May 20, 2013] http://www.grailresearch.com/pdf/ContenPodsPdf/Global_Fashion_Industry_Growth_in_Emerging_Markets.pdf Hamza, A. (2013) Nordstrom Global Marketing Plan. Hatch, D. (2012) Nordstrom in Fashion with Social Media, Mobile Tech [Accessed on May 25, 2013] http://money.usnews.com/money/business-economy/articles/2012/05/15/nordstrom-in-fashion-with-socialmedia-mobile-tech Inside FMM (2013) Nordstrom Gets Digital: Mobile Check-Out, Geolocation & Apps [Accessed on May 15, 2013]http://insidefmm.com/2011/06/nordstrom-mobile-marketing-strategy/ King, J., Culver, B (2010) Nordstrom: A Marketing Analysis [Accessed on May 15, 2013] http://www.docstoc.com/docs/24447494/Situation-Analysis-(SWOT-Analysis)---DOC Kotler, P., Keller, K., Brady, M., Goodman, M. (2012) Marketing Management, Pearson; 2 Ed. Lew, K. (2012) At Your Customer Service: Lessons from The Nordstrom Way [Accessed on May 29, 2013] http://www.publishingtrends.com/2012/04/reading-robert-spector-and-patrick-mccarthys-the-nordstrom-way/ Lister, J. (2013) Government Regulations That Affect Marketing in Retail [Accessed on June 02, 2013] http://smallbusiness.chron.com/government-regulations-affect-marketing-retail-35217.html Martinez, A. (2012) Nordstrom Rack ready to open near downtown Seattle flagship [Accessed on May 20, 2013] http://seattletimes.com/html/businesstechnology/2017727337_nordstromrack12.html Orange County (2012) Best Department Store - 1st place winner Nordstrom [Accessed on May 20, 2013] http://www.ocregister.com/articles/nordstrom-371655-customer-help.html PEC Research (2012) US Branded Retail Apparel Industry [Accessed on June 02, 2013] http://analystreports.som.yale.edu/reports/BrandedApparel2012.pdf PeLLegrin , B. (2008) Recession-Proof Retailing [Accessed on June 02, 2013] http://www.gensler.com/uploads/documents/Recession-Proof_Retailing_11_20_2008.pdf Pinson, L. (2012) City's FashionNYC2020 Report Outlines State of Apparel Industry, Plans for Growth [Accessed on June 02, 2013] http://www.nbcnewyork.com/blogs/threadny/THREAD-Citys-Fashion-NYC2020-Report-OutlinesState-of-Apparel-Industry--Plans-for-Growth--146983325.html Reference for Business (2013) Blake W. Nordstrom 1961 [Accessed on June 02, 2013] http://www.referenceforbusiness.com/biography/M-R/Nordstrom-Blake-W-1961.html#b Research Articles Base (2011) Employee Motivation: the of the Nordstrom Legend [Accessed on June 03, 2013] http://researcharticlebase.blogspot.co.uk/2011/11/sample-essay-on-employee-motivation-of.html Reuters (2013) Nordstrom Inc (JWN) Profile [Accessed on May 13, 2013] http://www.reuters.com/finance/stocks/companyProfile?symbol=JWN Page | 23

Nordstrom Corporate Strategy Schermerhorn, J., Osborn, R., Uhl-Bien, M., Hunt, J. (2011) Organizational Behavior [Accessed on June 02, 2013] http://books.google.co.uk/books?id=8eRtuZeIguIC&pg=PR8&dq=Organizational+Behavior++By+John+R.+Scherme rhorn,+Richard+N.&hl=en&sa=X&ei=shxUfHoLYzAPJWEgfAF&ved=0CC4Q6AEwAA#v=onepage&q=nordstrom%20inventory&f=false Spector, R., McCarthy, P. (2012)The Nordstrom Way to Customer Service Excellence: 2 Ed. Speer, J. (2012) Nordstrom's Big Secret Revealed [Accessed on May 25, 2013] http://apparel.edgl.com/casestudies/Nordstrom-s-Big-Secret-Revealed-82375 The Behar Group (2013) Retail Game Changers [Accessed on June 02, 2013] http://www.realestateforums.com/cantech/docs/Session%20A1.pdf Wikinvest (2012) Wiki Analysis [Accessed on May 20, 2013] http://www.wikinvest.com/stock/Nordstrom_(JWN) Wyatt, L. (2013) State of the Industry: Retail Fashion [Accessed on June 02, 2013] Zacks Equity Research (2013) Retail Industry Stock Outlook - March 2013 [Accessed on June 02, 2013] http://www.zacks.com/commentary/26346/Retail-Industry-Stock-Outlook-March-2013

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Omnichannel-More than Retail Buzzword » SW Retail Advisors Stacey Widlitz

6/6/13

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Appendix PA-CVC-OC

« GPS UK: As Holiday Dust Settles 75% off is Name of the Game ICR Retail Takeaways; Managements Do Matter » Jan 08

Omnichannel-More than Retail Buzzword Blog by StaceyRetail This article appeared on thestreet.com Dec 31 Omnichannel has to be the retail buzzword of 2012. Funny, for as often retailers refer to the word, not many investors seem to really know what it means. If you google “omnichannel” a simple Wikipedia explanation: “A seamless approach to the consumer experience through all available channels, ie mobile Internet, computers, bricks and mortar, tv and catalog. Sounds simple right? Quite the opposite. Integrating in store and online takes years, vision and plenty of loot. Don’t forget we are talking about the seamlessly merging inventory, systems, returns, shipping, pricing and customer service. A recent personal experience of retail therapy at Saks (SKS) sums up the importance of this buzzword and why it is not going away anytime soon. I recently purchased a full price item at the NY Flagship store. To be specific the day before Thanksgiving. There were plenty of sales but I am a Saks dream and fell for a full price item. The sales associate assured me this item would NOT go on sale any time soon. Fast- forward and I see the item 60% off online several weeks later. Annoyed, I pull up Saks online chat and explain my issue. The response? Unfortunately the stores may not honor a sales price adjustment. Online and stores are two separate entities. What? Wait a minute. What happened to omnichannel? You mentioned it no less than 10 x on your Q3 conference call. I am not picking on Saks but this illustrates the urgency for integration as multi channel consumers spend well in excess of exclusive channel shoppers. Saks has started the omnichannel process but it will take place in a phased approach through 2016. Problem is customers like myself may get frustrated along the way and seek alternatives. Note: Saks as of the end of last year is no longer breaking out dot com sales staceywidlitz.com/blog/2013/01/08/omnichannel-more-than-retail-buzzword/

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Appendix PA-CVC-OC That brings me to Nordstrom (think happy medium between Macy’s and Neiman/Saks). Nordstrom was the forward thinker in the group and as early as 2009 began integrating online and offline inventories. The company is focused on making omnichannel the real thing and will spend 30% of cap ex ($140M) on ecommerce this year. Investments including Hautelook and mobile POS rollout should keep JWN well ahead of the pack. And just to be sure I tested out the same scenario with Nordstrom.com. The response? There occasionally is a price difference though we do our best to make sure prices are the same in store and online. Though it does happen we are happy to honor each others prices. Now that response is customer friendly. Note: JWN does break out online sales, which increased 38% last quarter. 0 Tw eet

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Appendix PA-CVC-OC

Nordstrom Corporate Strategy Appendices

6/6/13

Retail Therapy? Not Anymore … With Technology, Shopping is More Stressful Than Ever | Chain Store Age

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Retail Therapy? Not Anymore … With Technology, Shopping is More Stressful Than Ever APRIL 24, 2013

Appendix PA-CVC-OC

By Brian Gillespie, Continuum RELATED CONTENT

Once upon a time, shopping was simple. People drove to the store, viewed the selection at hand, decided what they wanted, and bought. Now, however, shoppers are confronted with an amazing array of

Survey: Back-to-school sales may soar 16%

channels through which they can research, browse, and purchase,

Fast-fashion retailers slow dow n to

engaging with both brands they know and those they don’t in

engage w ith customers

increasingly complex ways. Let the converged retailing evolution

In addition to brick-and-mortar stores, they are interacting with companies through web sites, mobile sites, mobile apps, social media,

begin Kantar Retail: Holiday forecast mixed

email, phone, online chat, video chat, discount coupon sites, and, if you can believe it, more. The customer journey they take from identifying a

Survey: More holiday shoppers to use

need to considering a product, using a new product, and becoming a

social media, mobile this year

loyal customer is no longer a linear path but rather a rollercoaster of parallel and intersecting lines and loops. The emergence of all of these new channels and devices provides consumers with great flexibility in forming their shopping strategies — and, in theory at least, should be empowering. They can research it here, touch it there; compare it here, read review there; question here, get answers there; get personal recommendations here, get coupons there; deliver here; return there … the choices are endless. Recent shop-alongs and observations of an internationally diverse group of shoppers on their path to purchasing products, however, have shown precisely the opposite. Shoppers are as overwhelmed by the extensive range of similar products and services as they are the range of channels through which the purchase may be influenced. Since most of them adopt new channels quite readily, it’s easy to find themselves suddenly out of their comfort zones. The most common feelings resulting from the experience now are stress, frustration, alienation, uncertainty, and confusion. Where once shopping was therapy for people, now people need therapy to shop. The solution: Create a unified experience — crafting the system of interactions that form the customer’s experience of an organization and the company’s means of delivering it. Our research suggests four opportunity areas that get to the heart of customer behavior and motivation, on which companies should focus in order to deliver a great shopping service experiences. Generate and maintain confidence: Once shoppers have built sufficient confidence in the qualities of a product or service, they will be more likely to take the leap to purchase. Without that confidence, they will be more likely to delay or cancel the purchase. Companies can provide “confidence builders” along the shopping process to help bolster this feeling. For example, after customers have decided on which product they want and are completing their checkout process online, the lack of information about delivery costs or delivery times is a common confidence buster. They are more likely to abandon their cart and shift their attention to another retailer if companies don’t build confidence with clear and transparent information on shipping. Facilitate the power of influence: Knowing how diverse shoppers can be positively influenced can speed the path to purchase. Companies that are respected for their depth of knowledge of certain products can leverage that knowledge upfront to build consumer trust. For instance, Nikon’s USA web site provides extensive information for the camera enthusiast to understand whether or not a camera is the right one for them. The “Digitutor” contains engaging videos to understand how the camera works and an extensive sample of photos to show possible results — helping the shopper understand their particular needs and identify them with a specific product. Mak e channel transitions seamless: Shoppers get confused and frustrated by their inability to transition between channels that don't work with one another. This can slow down the purchasing process or cause people to decide not to buy. One way to counter this problem is to take an omni-channel view of the experience and ensure seamless consistency within and across channels. Nordstrom is a pioneer in delivering a seamless omni-channel experience, being one of the first companies to integrate its online and offline inventories.

chainstoreage.com/article/retail-therapy-not-anymore-…-technology-shopping-more-stressful-ever

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Appendix PA-CVC-OC

Shoppers can purchase products online and pick them up or return them in stores, or order out-of-stock items online that are then shipped from a nearby store. In this way, the website and brick-and-mortar stores complement one another rather than compete. Deliver a customer experience that adjusts to your customer’s needs for k nowledge: Shoppers enjoy discovering a new product or product attribute they did not know or expect, especially if they can relate to it on an emotional level. That discovery can empower and galvanize shoppers and encourage them to make a purchase. Understanding how a product or experience will resonate with consumers’ needs and building discoverability into the shopping experience is a great way to create moments of unexpected delight. Often, small attributes can offer a big bang: A cruise control that allows the driver to increase or decrease speed one mph at a time, an easy way to recycle a toothbrush, an automatic way to pay a bill — all speak to an inner emotional driver in the consumer. The safe driver, the concerned environmentalist, and the absent-minded financial planner, all will respond positively to discovering these unique and distinctive features. Many companies today are focusing on getting on the underlying technology required to build an omni-channel organization. This is important. However, this effort needs to be complimented and supported by an over-arching customer-driven strategy that transforms how a company services its customers. This requires a deep understanding of customer needs and their preferred way of interacting with all of a company’s points of contact. Creating feelings of joy and confidence, rather than anxiety, will ensure that a consumer’s decision to purchase will be less circuitous and more fulfilling overall, and that shopping will be something they look forward to once again. Brian Gillespie is a digital design principal at Continuum, a global innovation and design consultancy. More Web Exclusives/Guest Commentaries

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Related Term s: Newsletter: TechTalk Tuesday Exclusives & Analysis Technology Brian Gillespie Business Continuum Coupon Customer experience Customer experience management commerce Marketing Omni-channel Retailing Online shopping Retailing Shoppers Drug Mart Shopping Technology

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Nordstrom woos young women with lower prices | Business & Technology | The Seattle Times

Winner of Nine Pulitzer Prizes

Business / Technology Originally published March 28, 2013 at 7:10 PM | Page modified March 29, 2013 at 6:22 AM

Nordstrom woos young women with lower prices Seattle-based Nordstrom has rev amped its “Sav v y ” clothing department to attract trendy y oung women on tight budgets.

By Amy Martinez

Appendix PA-CVC-AP

Seattle Times business reporter For young women in a wired world, a mobile device is as much a fashion statement as the clothes they wear. Even if money’s tight, many willfind room in their budgets for a smartphone and tablet and make the most of old clothes. That’s a challenge for Nordstrom, which now hopes to attract 20- and 30-somethings with more trendy, moderately priced clothing that better suits their spending habits. Nordstrom’s nearly 120 full-scale stores nationwide have revamped their “Savvy” clothing departments to give off an affordable, ready-for-the-weekend vibe. At the downtown Seattle Nordstrom, bright plexiglass displays call out women’s tops for $36 and boyfriend-style jackets for $78. Scattered throughout are $18 woven-leather bracelets and earring-and-necklace sets for less than $40. The makeover builds on Nordstrom’s move last year to sell edgy, cheaper clothes from British chain Topshop, signaling a desire to go down-market to accommodate smaller budgets. “One of the things that we heard from our customers for a number of years is, ‘Boy, the stuff we love, we can’t afford, and the stuff we can afford, we don’t like too much,’ ” Nordstrom Chief Financial Officer Mike Koppel said at a recent investors conference. “We felt that we had an opportunity to have better product that was more accessible,” he said. Seattle-based Nordstrom’s Savvy department now carries newcomers such as MinkPink, a vintage-inspired label also found at Urban Outfitters, as well as BlankNYC, which sells “sprayon” skinny jeans and studded ripped shorts for $98. High-end labels like Robert Rodriguez and Haute Hippie have moved to other departments, bringing Savvy’s average price down to about $50 from more than $150. “It’s nice that they’re offering low prices,” said Tiia Lustig, 24, who eyed short, flowy skirts for $48 at the downtown Nordstrom last week. “It’s not just Chanel and Gucci.” The new Savvy department also tears a page from the fast-fashion playbook, changing up its merchandise almost daily to get customers coming back more frequently. seattletimes.com/html/businesstechnology/2020663776_nordstromsavvyxml.html

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Appendix PA-CVC-AP

“This is newness at a faster rate,” said Tricia Smith, general merchandise manager of women’s apparel at Nordstrom. “The product comes in at twice the rate of other departments, and we’re able to react more quickly.” Shake-up praised But what if the changes turn off well-heeled customers who see Nordstrom as their go-to place for luxury classics? Some say that’s both an unlikely risk and one worth taking anyway. Last May, retail analyst Jennifer Black warned of a void between Nordstrom’s teen-clothing section and various women’s departments. “There are no in-between younger brands once she graduates from Brass Plum,” Black wrote in a research note to clients. “Savvy, TBD and Individualist are too expensive, and the other departments are too old, in our opinion.” Black now gives Nordstrom strong marks for its Savvy shake-up. “They’ve kept some of the older brands and brought in these other brands that are what I’d consider great fashion at attainable prices,” she said. “It’s really edgy, and you can afford it, and it just seems like it’s gaining traction.” Women’s apparel down Since the recession, Nordstrom and other department-store stalwarts have had to get creative as global rivals H&M and Zara bring runway trends to the malls faster and cheaper. At the same time, young women are stretching their budgets across an ever broader set of products. Nordstrom’s sales rose a solid 12 percent last year to more than $11 billion, but its largest merchandise category — women’s apparel — shrank to 31 percent of the total from 33 percent in 2011. “When the consumer cares more about their cellphone than their outfit, we know we have a challenge in the industry,” said Marshal Cohen, chief industry analyst at market-research firm The NPD Group. “It’s no longer about me telling you what I think you want. It’s now about reacting to what you tell me you want, and at a price you think is worthwhile,” he said. “Nordstrom is saying, ‘We need to compete in the 21st Century.’” Positive signs Cosmetics, accessories and men’s apparel have become a bigger part of the Nordstrom business as women’s apparel has waned. The company says sales of handbags, makeup, and men’s fashion were especially strong last year, while women’s apparel picked up toward the end. Nordstrom launched Topshop at 14 stores in September and revamped Savvy last month. It also is expanding its off-price Rack chain to a projected 140-plus stores by next year from 119 at the end of 2012. President Blake Nordstrom says the efforts appear to be working. “We anticipate continuing improvement in our women’s business in 2013 and an expansion of Topshop into more stores,” he said on a February earnings call. College student Chandler Jones, 20, browsed Nordstrom’s large shoe selection Monday at Westfield Southcenter in Tukwila, admiring the new Toms Spring collection. She said she’s loyal to Nordstrom when it comes to shoes, but for clothes she also shops at H&M, Forever 21, even Target, to save some money. seattletimes.com/html/businesstechnology/2020663776_nordstromsavvyxml.html

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Appendix PA-CVC-AP “I find myself buying phone cases for 30 bucks when I could be buying something else,” she said. Amy Martinez: 206-464-2923, or [email protected]. On Twitter: @amyemartinez.

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Appendix PA-CVC-ME

Appendix PA-CVC-ME

04/06/2013

Nordstrom Uses Web to Locate Items and Increase Sales - NYTimes.com

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Employees at Nordstrom’s flagship store in Seattle can check online for available merchandise at any location. By STEPHANIE CLIFFORD Published: August 23, 2010

SEATTLE — Retailers have been flailing about a bit in their efforts to get people to shop again, deploying all sorts of gimmicks and promotions to spur customer spending. Add to Portfolio Nordstrom Inc Go to your Portfolio » Enlarge This Image

Wal-Mart hoped that deeper cuts in its standard rollbacks would be a draw, but then said the prices went too low. At Saks, perhaps customers would go for designer labels if the lines offered less-expensive items. And for Macy’s, how about inexpensive clothes by Madonna?

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Merchandise being processed at the 600,000-square-foot Nordstrom Contact and Fulfillment Center in Cedar Rapids, Iow a. The center ships an average of 20,000 packages a day.

The secret, at least for Nordstrom, has not involved a piercing insight into a customer’s mind. Rather, it has changed the way that it handles, of all things, inventory. And that has brought the department store more success in improving sales than at most of its competitors, whose recent reports signaled that their consumers were still

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cautious. The change works this way: Say that a shopper was looking at a blue Marc Jacobs handbag at Nordstrom.com. She could see where it was available at nearby stores, and reserve it for pickup the same day. More significant, if the Web warehouse was out of that bag, it did not matter. Inventory from Nordstrom’s 115 regular stores is also included. Maybe there was just one handbag left in the entire company, sitting forlornly in the back of the Roosevelt Field store — it would be displayed online and store employees would ship it to the Web customer.

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What Nordstrom did on its Web site — displaying stock from both the Web warehouse and its stores all at once, was unusual. And that, said Jamie Nordstrom, president of www.nytimes.com/2010/08/24/business/24shop.html?_r=0

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Nordstrom Uses Web to Locate Items and Increase Sales - NYTimes.com

Nordstrom Direct, drove “some pretty meaningful results.” In fact, Nordstrom, based in Seattle, has been the department store with one of the best improvements in same-store sales over the last year, when its overall sales reached $8.26 billion. While it may not seem revolutionary, a melding of Web site and store is surprisingly rare in the retailing world. “Y ou’re talking about traditional retailers that have traditional ways of doing things, and sometimes those barriers are hard to break down,” said Adrianne Shapira, an analyst at Goldman Sachs. Wal-Mart has added a feature where online shoppers can ship items to nearby stores, and Target.com shows which stores carry which items, but customers cannot buy them in advance.

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Among Nordstrom’s competitors, such fluidity is hard to find, Ms. Shapira said. “I don’t see anyone going to the length they are,” she said of Nordstrom. In the 11 months since Nordstrom made the inventory change, its same-store sales — sales at stores open more than a year, a crucial measure in retail — have outperformed the department store average measured by Thomson Reuters. In those 11 months, Nordstrom’s same-store sales increased by an average of 8 percent. In the 11 months before the shift, they decreased an average of 11.9 percent. (The improvement is not all because of the inventory change — the economy improved, and Nordstrom made other operating changes.) Nordstrom began overhauling its online approach two years ago, adding the option to shop and buy online and pick up the item in a store. “It was the first thing that we did, because the No. 1 call we got at our call center was, ‘Hey, I’m looking at this item online, can I look at it at my store?’ ” Mr. Nordstrom said. The company was also trying to increase the number of people who shopped at Nordstrom in more than one way, since those so-called multichannel shoppers spend four times, on average, what a one-source shopper does, Mr. Nordstrom said. Inventory was a big issue, too. If Nordstrom.com did not have the item someone wanted, it was not as if the customer would wait for the company to restock it, Mr. Nordstrom said. “If we don’t have it, you’re going to go back to Google and say, ‘Who else has it?’ ” he said. “We have 115 full-line stores out there — chances are one of them has it.” In September 2009, the company wove in individual stores’ inventory to the Web site, so that essentially all of the stores were also acting as warehouses for online. Results were immediate. The percentage of customers who bought merchandise after searching for an item on the site doubled on the first day, and has stayed there (although, Mr. Nordstrom cautioned, that doubling was from a small base). “Customers that were looking for an item, we had their size,” he said. That meant the company hired a few more shipping employees to wrap and send items from each store. But, he said, increased sales more than offset the cost. It also means that inventory is moving faster, and often at higher prices. “If we’re out of something on the Web site, it’s probably late in the season and the stores are trying to clear it out,” he said. “By pulling merchandise from the store, you’ve now dramatically lessened the likelihood that you’ll take a markdown.” Nordstrom’s inventory turnover, which measures how quickly a company goes through inventory in a given year, went to 5.41 in 2009 from 4.84 in 2005, a five-year high. “The health of our business when we’re turning faster versus turning slower, it’s night and day,” Mr. Nordstrom said. Keith Jelinek, director in the global retail practice at the consulting firm AlixPartners, said that Nordstrom’s changes could give it a competitive advantage, but showing accurate inventory information to customers was difficult. “The customer ordering via the Web site is not concerned with where the product is, only that it is in stock,” Mr. Jelinek said in an e-mail message, but that could easily go wrong if a sales clerk entered an incorrect item number, which would “incorrectly display what the www.nytimes.com/2010/08/24/business/24shop.html?_r=0

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customer could see online. While, for the retailer, their financial inventory is still accurate.” On Saturday, Nordstrom introduced an updated Web site, trying to make it more interesting for customers and easier to navigate. The new site adds editorial features, like blogs about fashion and videos and photos of Nordstrom customers showing the clothes they chose for work and for weddings. Mr. Nordstrom said the company drew from sites like Net-a-Porter, which combine magazinelike stories with shopping. The site will also allow customers to post messages or photos. While customers are no doubt swamped with social-networking options already, Mr. Nordstrom pointed to the more than 120,000 product reviews added to Nordstrom.com since that feature was introduced last fall. The company has also improved how shoppers can search for products, allowing searches with multiple criteria — check boxes allow someone to search for, say, a purple cocktail dress under $150 for a curvy figure. Web-design experts asked to review the site were split on its success. Martin Zagorsek, a partner at Launch Collective, a fashion-business consulting firm, said that the editorial features did not promote the products mentioned within them, which was “a no-brainer.” But Andy Rhodes, director for commerce at the marketing firm SapientNitro, said that Nordstrom had long been ahead of the game on the digital-to-physical connection, “and it’s nice to see they’ve brought that capability to the forefront with the new Nordstrom.com.” All the changes, Mr. Nordstrom said, were about satisfying customers, but that translated into profits. “We can sell more without having to buy more inventory,” he said. “That plays through to margins and, ultimately, earnings.” A version of this article appeared in print on August 24, 2010, on page B1 of the New York edition.

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Nordstrom in Fashion with Social Media, Mobile Tech This Most Connected Company taps social media and mobile tech to meet customers where they are By DAVID HATCH May 15, 2012

At Nordstrom, innovation is never out of style. The upscale fashion apparel chain founded in 1901 wins plaudits for using cutting-edge 21st century technology to offer shoppers convenience—and to stay competitive as retail migrates online. Selected by U.S. News as one of America's Most Connected Companies for its use of technology to expand shopping options, Nordstrom has been aggressive about snapping up promising Internet ventures to diversify its business and experiment with new retail platforms. Its social media strategy extends well beyond Facebook, Twitter, and YouTube to an array of buzz-generating fashion and photo-sharing sites. Recognizing that its customers always want to stay connected, the company introduced complimentary Wi-Fi in its high-end department stores in 2010. [See America's Most Connected Companies.] To improve customer engagement at its 227 department and discount stores in 31 states, Nordstrom joins a growing list of retailers that are turning to Apple. Late last year, it distributed 6,000 modified iTouch devices to sales staff that can ring up purchases on the spot, a process called "mobile checkout," and track inventory. Sales personnel also use iPads to assist customers with the selection of everything from wedding wardrobes to cosmetics to business suits. "They are constantly pushing the envelope," says Patty Edwards, principal and chief investment officer for Trutina Financial and a leading retail expert. She praised the chain for offering a robust online shopping experience and extending mobile checkout to its Nordstrom Rack discount stores. Leslie Hand, research director for IDC Retail Insights, characterizes Nordstrom as "fully committed" to seamless engagement with customers, whether in store or via the Web. The Seattle-based chain was quick to recognize that customers want more choices and flexibility online. Four years ago, it offered shoppers the option to retrieve their online purchases at its stores. With customers gravitating to the Web, Nordstrom shifted most of its inventory online years ago in an effort to avoid missed sales opportunities. [See There's Retail Magic in Silicon Dust.] The company's tech strategy already is proving beneficial to its bottom line. In 2011, Nordstrom's Internet sales grew by 30 percent, according to data provided by the retailer. During a November 10 earnings call, Nordstrom President Blake Nordstrom said the retailer plans to increase spending on e-commerce from $100 million in 2011 to $140 million this year—its highest such expenditure ever. "A lot of this technology is changing [customer] expectations around speed, around convenience, and we are working really hard to keep up with that," says Jamie Nordstrom, president of Nordstrom Direct, the company's online division. "The retailers that deliver on those customers' expectations are the ones that are going to get their business," says Nordstrom, whose great-grandfather founded the clothier more than a century ago. To stay current about the latest innovations, the big-box chain regularly consults with technologists and venture capitalists "as a normal course of business," Nordstrom says, "because we want to know what's coming around the corner." It also keeps a lookout for new retail ventures that are "really engaging with customers," he says. In April, Nordstrom teamed with Silicon Valley venture capital firms to invest $16.4 million in Bonobos, a

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fast-growing online menswear site. Last year, it acquired HauteLook, a membership-based site that specializes in "flash sales" lasting a few days that offer deep discounts on designer brands. Also in 2011, Nordstrom invested in Sole Society, a "shoe club" that markets footwear, and a year earlier it invested in Peek, an e-tailer that sells clothes for kids up to age 10. 1

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NORDSTROM INCORPORATES SMS TEXT MESSAGING INTO MOBILE STRATEGY April, 2013 Nordstrom recently added SMS-based product sharing to their mobile application in an effort to further enhance the consumer experience. Available for iPhones and Androids since 2011, the concept behind the original application was to combine shopping, mobile and social elements to create a well-rounded user experience. The recent changes took these basic components and improved upon them by adding SMS messaging options, enriched product reviews, a streamlined shopping experience and enhanced overall app performance. In today’s text savvy culture, Nordstrom makes it easy for consumers to share products with their friends directly from their mobile app, via auto-generated text messages. If their contacts choose to click the link within the text message, they are taken to the product page on Nordstrom’s mobile friendly website where they can find additional product details, view images and even purchase the product. Knowing that texting is important to their customers, Nordstrom adjusted their mobile strategy to accommodate them. The addition of SMS messaging to their mobile app also enables Nordstrom to expand their reach to include users without Internet-enabled cell phones. Brand managers should take note that listening to your customers and adapting your strategy to cater to the user can make a huge difference in engagement and ROI. Do you think Nordstrom made the right choice by adding SMS messaging? Find out more here.

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Appendix PA-CVC-POS

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Long lines are one of the worst nightmares for retailers – especially 246 those with consumers about to make purchases worth hundreds of Most Read on Forbes dollars. For these customers, standing in line for several minutes NEWS People Places C ompanies provides the opportunity to think about the purchase they are 281 about to make. This time can allow customers to think about the California T o Wal-Mart: Enough! No necessity of the purchase and the cost, and given too much time to Tw eet More T axpayer Subsidized Profits For You +1 7 7 ,6 9 9 views over-analyze the potential purchase, a customer standing in line California To Wal-Mart: Enough! No More can easily decide to set aside part of the potential purchase and pay 174 'Game Of T hrones' Season 3, Episode 9 Taxpayer Subsidized Profits For You less for fewer items – or even walk away entirely. Review: T he Rains Of Castamere Retailers like Apple and Home Depot recognized the need to eradicate this wait several years ago, providing employees with mobile POS devices that enable them check out customers from anywhere within the store if the customer is paying with a debit or credit card. Employees at Apple’s retail stores have been armed with iOS devices for several years, enabling consumers to easily make purchases without waiting in line. In early 2011, Home Depot introduced their “First Phone” to allow customers to check out from anywhere within the store, also without having to wait in line.

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Now, Nordstrom, the Seattle-based fashion and beauty retailer offering apparel, shoes, makeup and other beauty products, is rolling out mobile point-of-sale (POS) devices throughout their full-line stores, as well as in some of their Nordstrom Rack stores. These mobile POS devices, which is a modified iPod Touch with a merchandise scanner and credit card slider, allow employees to check out customers from anywhere in the store. The app on the device also provides Nordstrom’s sales staff access to the company’s entire inventory, which is useful when helping customers

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check if an alternative size or color is available elsewhere, without needing a register to look up that information. Nordstrom has deployed over 6,000 of these devices throughout their 117 full-line stores, and at some Nordstrom locations, there are more mobile POS devices than regular registers. Colin Johnson, a spokesperson for Nordstrom, says that these devices are part of a larger plan for Nordstrom to help “provide a more technology enabled store experience.” He notes that in 2005, Nordstrom began offering the option to ship merchandise directly to customers, and in 2009 the company integrated inventory with its online store. In 2010, Nordstrom then introduced WiFi into stores to “make it easier for customers to stay connected in the stores by using their mobile devices to shop and to compare and learn more about merchandise.”

I am a Seattle-based Digital Communications Strategist for HasOffers with a passion for companies building products that solv e real problems. Y ou can find me on Facebook, Twitter, and Google+... and usually with a cup of coffee in hand, too. The author is a Forbes contributor. The opinions expres s ed are thos e of the w riter.

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With WiFi, Nordstrom laid a foundation for these new mobile POS devices, which Nordstrom finished initially rolling out in mid-2011 and are primarily being used in B.P. (the trendy young women’s section) and shoes, which is a conglomerate of smaller departments catering towards specific demographics. Other departments using these devices include men’s. At the flagship Nordstrom store in downtown Seattle, most sales associates in these departments can be found armed with a mobile point-of-sale device and using them to checkout customers paying with plastic. When a Nordstrom customer checks out with a mobile POS, they can sign for their purchase and enter an email address for a paperless receipt. For most Nordstrom customers, checking out with a mobile POS is an incredibly intuitive and almost shockingly simple experience. Johnson explains that the goal of using the mobile POS for Nordstrom is really to “take care of customer anywhere in the store. We don’t have to take you to the cash register, and instead, can do that right there with you on dressing room or when you’re trying on shoes – and then you’re on your way.” He adds, “that kind of ability to increase speed and convenience is increasingly important.” Increasingly important for not just the customer’s convenience, but for Nordstrom’s sales. According to the company’s 2012 March Sales Report, “Preliminary quarter-to-date total retail sales of $1.73 billion increased 15.3 percent compared with total retail sales of $1.50 billion for the same period in fiscal 2011.” Additionally, according to the 2011 Nordstrom Annual Report, “both the average selling price and the number of items sold increased in 2011 compared with 2010.” Is it a coincidence that the average number of items sold and the average selling price both increased after implementing mobile point-of-sale devices? While Johnson explains that the new mobile POS at Nordstrom is designed to provide a “faster and more convenient experience for customers and reduce the time it takes time for customers to check out,” he adds that “anything that can help that is beneficial.”

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This efficiency undoubtedly reduces the potential amount of time customers have to think about their purchases before they reach the register. Though consumers may enjoy the convenience these new mobile POS devices offer, www.forbes.com/sites/kellyclay/2012/04/06/nordstrom-sees-15-3-increase-in-retail-sales-following-introduction-of-mobile-pos-devices/

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Nordstrom Sees Sales Boost From Mobile POS Devices - Forbes

both Nordstrom’s 2012 March Sales Report and 2011 sales figures allude to the real benefit of these new mobile point-of-sale devices.

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