Company History
Interviewee
Organizational management is crucial for its growth since it allows the employees to take a direction that benefits it. Nordstrom Inc. has an effective management structure that has remained primal for its success.
Teri Bariquit is one of the managers at the company and heads the merchandising department. She holds the Chief Merchandising Officer position and has various responsibilities. The officer oversees the company’s buying and selling activities by gathering related information on the same. Teri Bariquit has vast experience in merchandising and has remained vital in Nordstrom Inc.’s business success.
Duration in Business and Performance
The organization dates back to 1901 when John W. Nordstrom and Carl F. Wallin founded it. Therefore, Nordstrom has been in the business for 122 years now (Nordstrom, 2020). While the company was originally founded as a shoe store, it began selling clothing in 1963, expanding its operations to forty U.S. states and two Canadian provinces (Hope et al., 2022).
The increased areas of operations significantly contributed to its increased profitability. The firm’s revenues have improved from $14 billion in 2016 to $15.8 billion in 2019 (The Wall Street Journal, 2023). The revenues are expected to increase, given the favorable economic conditions surrounding the business.
Mission Statement and Expansion Plan
A mission statement involves the reason for organizational existence and its overall goal in society. Nordstrom Inc.’s mission is to help its customers feel good and look their best. The mission is anchored on its 1901 foundation when the company focused on providing convenience and true connection for the customers (Hope et al., 2022).
According to Teri Bariquit, the company has set out a plan to expand its operations in other Canadian provinces. After that, the management is considering introducing the brand and its products in European countries such as the UK and France. The expansion plan will likely succeed since Nordstrom has a reputable brand image and high revenue.
Retail Strategy
Target Market
Customer Description
The company is focused on upper and middle classes people who can afford its products. The middle class targeted by the organization are those earning between two-thirds and twice the median household income. For instance, in the U.S., in 2021, the median household income was $70,784 (Peter G. Petersons Foundation, 2022).
Any American who earns as little as $47,189 and up to $141,568 is targeted by the company. Meanwhile, the targeted upper-class population involves earning twice the median household income. The class earns as little as $156,600 and can afford luxurious products sold by Nordstrom Inc. Therefore, the targeted market income levels range from $47,189 to $156,600.
Nordstrom Inc., additionally, targets the millennials: people aged 16 to 34. The millennials targeted are of both genders since the company specializes in providing clothing and shoes for males and females. The target group is highly educated and informed about the company’s products and technology. Consequently, it is easy for the organization to reach out to the millennials through online platforms such as Twitter, Facebook, and Instagram. Therefore, Nordstrom’s target market is educated millennials who are in the upper and middle classes and have knowledge of technology.
Trade Areas
The primary trade area produces 50% to 80% of a store’s sales and serves as the most significant location for the business (Levy et al., 2019). Nordstrom Inc.’s primary trade area is the U.S., where it has set up many stores that are convenient for its clients. The secondary trade area produces an additional 15% to 20% of the sales (Levy et al., 2019). The Canadian market is Nordstrom’s secondary trade area since it accounts for fewer sales than the U.S. Tertiary trade areas account for the remaining sales and may be insignificant for the business to some extent. Global sales to other countries other than the U.S. and Canada are Nordstrom’s fringe trade areas.
Merchandise Assortment
Major Brands Carried
Nordstrom Inc. carries over one hundred major brands that are globally recognized. Some of the brands that the company carries are Nike, Chanel, Christian Dior, Versace, Louis Vuitton, and Balenciaga (Nordstrom, 2021). Moreover, the company boosts the sale of shoes and clothing from other brands that are not as popular as the ones mentioned.
Some of those brands are Loewe, Mach & Mach, Akris, Agnona, and Amiri, among others (Nordstrom, 2021). The company has private brands such as Treasure & Bond, Zella, Caslon, and Open Edit, among others (Durham, 2022). Nordstrom Inc.’s collaboration with diverse brands allows its clients to have a wide variety of product choices.
Category Life Cycle
Any product undergoes a five-staged lifecycle, from its development to the time they are removed from the market. The stages are product development, market introduction, growth, saturation, and decline (Levy et al., 2019). Nordstrom Inc. is involved in selling the end-products to their client. Therefore, the retailer’s merchandise fit in the market introduction stage.
The company chose the stage to avoid costs associated with products, including the acquisition of raw materials. Moreover, the stage was chosen to provide clients with a wide brand variety to choose from. Nordstrom Inc.’s clients are not limited to a specific brand and can choose from the existing hundreds of entities whose products are available.
Type of Goods Carried
Goods can be categorized into convenience, specialty, and shopping depending on clients’ needs and ease of purchasing. Shopping for goods requires selection and examination from the customer before making purchase decisions (Levy et al., 2019). Nordstrom Inc. carries luxurious shoes and clothing that require the clients to examine size and color, among other attributes, before they buy. Meanwhile, specialty goods require special efforts from the customer as they have special attributes that make them unique (Levy et al., 2019). Therefore, Nordstrom Inc. carries the shopping and specialty goods for its customers.
Human Resources
Preparing and Training Sales Persons
Salespeople play a significant role in Nordstrom Inc.’s routine selling and product promotion activities. According to the interviewee, the salespersons are recruited from different areas of the company’s operations. The salespeople are then trained according to the specific target market. For instance, Canadian salespeople are taken through the organizational operation in Canada and expect conduct during fieldwork that is consistent with Canadian laws. The company conducts routine virtual training sessions for salespeople. During the sessions, marketing professionals are invited to equip the salespersons with the necessary knowledge.
Sales People Compensation
Salespersons can be compensated in various ways depending on the terms of the employment contract. The majority of the firm salespeople work permanently. Therefore, they are entitled to monthly salaries. The employees are given specific targets that they must meet within a given sales duration. Moreover, the salespersons are entitled to a commission for any sale above the target. The compensation approach adopted motivates the sales department to remain productive in the company.
Outsourced Activities
Nordstrom Inc. outsources some of its activities to remain sustainable in the business. According to Teri Bariquit, the company outsources legal and technical services. For instance, the company has entered into contracts with various law firms and tech companies that provide a wide range of services. Additionally, the company has collaborated with logistics companies that provide transportation of goods from its suppliers and to its customers. Outsourcing the activities has allowed the organization to save on transport, legal, and technical services expenses.
Retail Store’s Location
Nordstrom Inc. targets clients in city centers and those who can access internet services. Therefore, most stores are in shopping centers and central business districts (CBD) within cities and towns. Some major cities where the firm’s stores can be found are New York, Toronto, Manhattan, and Birmingham. Moreover, the company has picked locations in areas far from city centers. Consequently, clients can access the firm’s merchandise from various parts of the world.
Various conditions within city centers motivated Nordstrom’s choice of locations. Firstly, the areas near their target markets are urban areas. Therefore, client relationships are improved since they can physically visit the stores and make inquiries (Purwanto, 2022). Secondly, cities have developed technology and infrastructure, allowing the company to carry out its business effectively.
According to the interviewed manager, most cities have fast internet and stable power supply, which are crucial for the firm’s routine activities. Lastly, Nordstrom’s target market spends much of its time in CBD and shopping centers. The interviewee gave an example of college students who often visit cities.
The store locations are accessible to customers since they are highly developed. For instance, the CBD and shopping centers have a well-developed road network. Additionally, some of the firm’s store locations have ample parking that allows drive-thru clients to visit the store.
Furthermore, the chosen areas have a stable internet connection that allows clients to assess all the products on the firm’s e-commerce platform. Regarding lease arrangements, Nordstrom Inc. has different types depending on store location and country. However, the common lease type used is finance, in which rent is paid for a long-term operation.
Pricing
Pricing Policy
A reasonable profit margin is essential for business organizations and can be achieved through an effective pricing policy strategy. Entities change their pricing rates to attract more clients and make the business profitable over time (Huang & Liang, 2022). Nordstrom Inc. deals with expensive, luxurious products that can only be afforded by the middle and upper classes. The company has adopted a high-low pricing policy. Therefore, the rates are lowered on specific durations and increased in some seasons. Lowering prices seasonally attracts more clients who are unable to afford high costs.
Compete Price Practices
The luxurious apparel industry is competitive, requiring pricing practices that can help beat the competitors. Nordstrom Inc. adopts price matching and bundling practices to gain a competitive edge over other retailers selling luxurious clothing and shoes. Through price matching, the clients are allowed to bring the retailer’s attention to a lower price of a given item. Meanwhile, price bundling allows the clients to attain several items at a cheaper price than purchasing them separately (Huang & Liang, 2022). Price building and matching have promoted Nordstrom’s competitiveness in the market.
Pricing Type
Demand and cost-oriented pricing methods are used to determine products’ final prices. The demand-orientated involves varying the prices with market demands: high demands attract high prices and vice versa (Purwanto, 2022). Meanwhile, the cost-oriented method involves adding a desired profit percentage to the products’ cost to determine their final price.
The method is often applied under normal conditions. Nordstrom Inc. has a frequent shopper program, “Nordy Club,” that allows routine clients to earn points that can be redeemed for bonuses (Yellin, 2020). The pricing strategies adopted at Nordstrom promote its sustainability and long-term profitability.
Communication Mix
Product promotion is central to increased sales and brand awareness. Communication mix involves the use of digital and print media to promote and advertise products to a target market (Huang & Liang, 2022). Nordstrom Inc. uses various paid advertisements to attract more clients to its consumer base. The company promotes its adverts through Facebook and Instagram Ads.
Additionally, the firm promotes its products on YouTube by paying for its advertisement videos. Furthermore, paid billboards allow the company to promote products in major cities of operation. At times, Nordstrom Inc. uses celebrities and other influencers for advertisement purposes.
Nordstrom Inc. is one of the organizations with an excellent brand reputation that attracts more clients. Consequently, the company uses publicity through consumer-based brand equity to promote its products. Unpaid communication includes joining online conversations on major issues that are pressing in society. For instance, the company has been actively involved in promoting the rights of minority groups through public campaigns on Twitter, Facebook, and Instagram. The use of publicity helps the firm maintain a positive brand reputation with increased sales.
Strategic alliances can help business activities become more effective and profitable. Many organizations decide to promote a particular product by sharing promotional costs. Manufacturers such as Nike, at times, can make cooperative advertising funds available to local retailers to expand awareness of a product within the region of a retailer and its services.
Nordstrom uses the cooperative advertising approach with brands such as Lancôme and Kiehl’s (Nordstrom, 2019). Sales sampling is a technique that Nordstrom Inc. uses to promote new products. Through the technique, clients are allowed to test the products on their own. Nordstrom’s communication mix has remained vital for its success in the local and international markets.
Store Layout
Store layout largely contributes to customer attraction and the overall serenity of the shop. Nordstrom Inc. has no specific retail store layout since the design varies with the host building. However, the chain store commonly uses the free-form and grid types of store layout designs. In the free-form layout, the fixtures and aisles are arranged asymmetrically. Consequently, the clients have an intimate, relaxing environment that facilitates shopping.
Meanwhile, the grid layout of the merchandise is displayed in long aisles, allowing customers to weave up and down and browse as they go (Haycock, 2020). The adopted designs make Nordstrom Inc.’s stores attractive and convenient for customers. Therefore, the shops can accommodate many customers at a specific time since there is ease of in and outflow.
In addition to store layout, fixtures, lighting, music, and scent, the stores are attractive and comfortable to shop from. Fixtures are structures used to display products and attract customers (Haycock, 2020). Nordstrom uses rack fixtures to display clothing in an elegant, organized, and space-saving way. Moreover, clothes hangers are used in the stores, displaying multiple versions of the same piece of clothing. For the lighting, the majority of Nordstrom’s stores use colored fluorescent lights that are arranged aesthetically.
The stores have music that continuously plays, making the clients enjoy their shopping moments. The stores can be stuffy and have a foul smell, becoming a nuisance to the shoppers. According to the interviewee, lavender and rose perfumes are familiar scents their stores use to attract customers. Therefore, the overall store layout makes Nordstrom shops attractive to clients.
Customer Service
Customer service is essential for client retention and attraction over time. Nordstrom Inc. offers different types of customer services upon purchase. During festive seasons, the customers’ items are wrapped in gift boxes. Therefore, retail stores are preferred by clients who want to give gifts to their loved ones. Customers are also given after-purchase services, such as follow-up calls on whether they love their products. The excellent customer service has led to an increased number of loyal customers.
The interviewed customers had different opinions on the levels of customer service provided at Nordstrom retail stores. The first client said that he was satisfied with the services provided to him. According to the client, he often uses the firm’s e-commerce platform to order items, and there is no single day he receives a defective product. The second client said he was dissatisfied with the organization’s service levels since they took a long time to respond to her complaints. Meanwhile, the third customer stated that Nordstrom’s customer services are better than those of other retailers, and they would always shop at the company.
The retailer has structured the customer services department so that different but relevant departments handle complaints. Therefore, a client makes a complaint to the general inquiry desk, which refers them to the appropriate department. The approach was adopted to improve customer satisfaction levels.
Unlike many retailers, Nordstrom Inc. does not have “mystery shoppers” to check the levels of services. Instead, the company uses the clients’ feedback after purchase to measure their satisfaction. The salespersons at the firm are empowered to make decisions, and the management is only involved when there is a serious issue of concern. Nordstrom can maximize its existing excellent service levels to attract more clients.
Competitive Advantage
Nordstrom Inc. has various competitive advantages over similar retailers and can take some steps to retain the position. Firstly, the company has an excellent brand reputation compared to other retailers. The reputation is owed to the many years of its existence in the business, creating a broad consumer base.
Secondly, the firm has a long relationship with top brands such as Nike and Christian Dior. Therefore, the brands are always ready to collaborate with Nordstrom in marketing and product promotion activities. Lastly, Nordstrom Inc. has been recording high profits, enabling it to expand its operations to other countries.
Some steps can be taken to maintain the retailer’s competitive edge over others. The organization should use emerging social media platforms such as TikTok to reach a broader potential market base. Moreover, the company can extend its collaboration with other brands, such as Adidas and Umbro, to increase its product categories.
Furthermore, Nordstrom can recruit more experienced employees who can help maintain excellent customer service levels. Highly experienced salespersons are crucial for building a loyal consumer base. Nordstrom Inc. remains one of the most reputable luxury products retail brands, with the possibility of expanding its areas of operations.
References
Durham, M. (2022). Nordstrom has its own in-house brands—shop Zella, BP., and more. Web.
Haycock, L. (2020). What are fixtures in a store? Web.
Hope, O.-K., Li, C., Ma, M. S., & Su, X. (2022). Is silence golden sometimes? Management guidance withdrawals during the COVID-19 pandemic. Review of Accounting Studies. Web.
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Levy, M., Weitz, B. A., & Grewal, D. (2019). Retailing Management. McGraw-Hill Education.
Nordstrom (2019). Nordstrom expands into advertising with Nordstrom Media Network. Web.
Nordstrom (2020). Nordstrom company history. Web.
Nordstrom (2021). Designer brands-Popular designer brands. Web.
Peter G. Peterson Foundation (2022). Income and wealth in the United States: An overview of the latest data. Web.
Purwanto, A. (2022). What is the role of customer behavior for electronic e-commerce and modern market visit intention? Web.
The Wall Street Journal (2023). JWN | Nordstrom Inc. annual income statement – WSJ. Web.
Yellin, J. (2020). Guide to Nordstrom’s loyalty program — “The Nordy Club.” The Points Guy. https://thepointsguy.com/news/nordstrom-rewards-loyalty-program/#SnippetTab