The fourth generation of family members that runs Nordstrom has brought the store’s time-honored and successful retail practices into a new era. “Nordstrom, it seems, is that rarity in American business: an enterprise run by a founding family that hasn’t wrecked it,” says one business writer. The company provides a quality customer experience via personalized service, a compelling merchandise offering, a pleasant shopping environment, and increasingly better management of its inventory. The secret of this company’s success lies in its strategic planning efforts and the ability of its management team to set broad, comprehensive, and longer-term action directions, all of which are focused on the customer experience. The current generation of Nordstrom family members was quick to spearhead an ultramodern multimillion-dollar, Web-based inventory management system. This upgrade helped the company meet two key goals: (1) correlate purchasing with demand to keep inventory as lean as possible, and (2) give customers and sales associates a comprehensive view of Nordstrom’s entire inventory, including every store and warehouse. Instead of relying on one-day sales, coupon blitzes, or marking down entire lines of product, Nordstrom discounts only certain items.
“Markdown optimization” software assists in planning more profitable sale prices. According to retail analyst, Patricia Edwards, this helps Nordstrom calculate what will sell better at different discounts and forecast which single items should be marked down. If a style is no longer in demand, the company can ship it off to its Nordstrom Rack outlet stores. It’s all part of Nordstrom’s long-term investment in efficiency. “If we can identify what is not performing and move it out to bring in fresh merchandise,” says Pete Nordstrom, “that’s a decision we want to make.” Although inventory naturally fluctuates, Nordstrom associates can easily locate any item in another store or verify when it will return to stock. Customers on their smart phones and associates behind sales counters see the same thing—the entire inventory of Nordstrom’s stores is presented as one selection, which the company refers to as perpetual inventory. “Customer service is not just a friendly, helpful, knowledgeable salesperson helping you buy something,” says Robert Spector, retail expert and author of The Nordstrom Way. “Part of customer service is having the right item at the right size at the right price at the right time. And that’s something perpetual inventory will help with.” The upgraded inventory management system was an immediate hit. As of launch day, Nordstrom found that the percentage of customers who purchased products after searching the website for an item doubled. It also learned that multi-channel customers—those who shop from Nordstrom in more than one way—spend on average four times more than one-source customers. This profit more than offsets the cost of hiring additional shipping employees to wrap and mail items from each store. Now Nordstrom doesn’t have to turn away the customer who spied a red Marc Jacobs handbag but found it out of stock in her local store. She can buy it online or at the store counter and it will be shipped to her, even from a store located across the country. By displaying stock both on its website and in its stores, Nordstrom has realized some very meaningful sales and customer service results. Items don’t stay in stock very long. The chain turns inventory about twice as fast as its competitors, thanks to strong help from online sales. Fast-turning inventories are a sign a retailer is well managed, making it more attractive to investors. “The old, classic Nordstrom way is that if you sell more stuff, that compensates for any deficiency you may have in terms of technology,” says Robert Spector. “They didn’t want to replace the high touch with the high-tech. The challenge, not only for Nordstrom, but for other retailers, is how you strike that balance between having up-to-date systems and giving that personal service.” “Traditional retailers have traditional ways of doing things,” echoes Adrianne Shapira, Goldman Sachs retail analyst, “and sometimes those barriers are hard to break down.” But Nordstrom’s commitments to planning are paying dividends. Web-based inventory management is maintaining and monitoring a business’s inventory levels through online software. Nordstrom has already taken a few of the procedures necessary to assess the performance of its web-based inventories connectivity. To maintain Nordstrom’s multimillion-dollar web-based inventory management system, Nordstrom should continue following the five planning processes. The planned process consists of five steps: defining your objectives, determining your current position, developing premises for future scenarios, planning, and finally, implementing the plan and evaluating the result. Nordstrom has already put some of the preparation processes into action. They’ve already established a goal and achieved two of its primary objectives; it’s time for them to be exact. The web-based inventory management system can inform the business if it has enough products to meet expected sales or whether additional inventory needs to be ordered. If Nordstrom wants to maintain its success, it must pay special attention to the data. For instance, if a system report indicates that a particular item is continuously out of stock, this indicates to the business that the item is a hot seller.
Management’s wisest course of action would be to ensure that item is constantly accessible, owing to their high demand. If the system indicates that a certain bag is not selling, management will know not to order that product in the future. Because web-based inventory management software is effective and efficient, it is critical to make required improvements. Additionally, managers must consider if the system is designed to be compatible with the task. Occasionally, managers make choices without consulting their people first. Employee feedback, I believe, is critical since they are the ones who will utilize the program. Certain software applications may be beneficial in some areas but lacking in others. Management should ensure the system is secure in all areas. Making your employees feel that their input matters is key to a successful business. For instance, if my manager knows that I use the system the most, he or she is asking for my input would benefit the company because I would be able to share if the program is the best fit for the company vs asking someone who does not use the program. The term “participatory planning” refers to a process in which community members, such as residents, leaders, and stakeholders, come together to debate and make decisions on a common goal. Every Nordstrom employee has the opportunity to participate in the planning process. All views must be considered when working toward a goal. A diverse planning team can come up with concepts that are both interesting and innovative. If you don’t know what people are interested in or what the most recent fashion is, you won’t know what goods to purchase if you don’t involve the community in your decision-making process. Including investors in the planning process is crucial since they are the ones who will be lending money to the firm and purchasing high-quality items and services for the company to sell. To boost employee happiness at work, it is vital to collect input from them. Customer service representatives are the ones who have the most direct contact with customers and are thus the ones who are most likely to be alerted of any unfavorable feedback. They are the ones who are doing the work, and they are the ones who can suggest areas where the company may make improvements. Suppliers must be included in the planning process since they are the ones who will be supplying the goods and services in the future. The contribution of a supplier to the success of a firm is crucial. To ensure that they can provide a high-quality product and meet the needs of the business in the future, they must be active. Because they contribute vital feedback, stakeholders are essential in the planning process. The managers themselves are critical because they are the ones who have the expertise and, more importantly, are the ones who are passing that knowledge on to their staff. The fact that it is their firm makes them even more essential since they are there to hear everyone’s opinions to make the best judgments possible. As a result of my investigation, I discovered that Nordstrom’s founding family group is attempting to close a deal to sell the company to a private equity firm within the next few months.
Members of the Nordstrom family are reportedly on the verge of selecting the private equity firm Leonard Green to participate in the company’s operations, according to Hirsch (2017). Since their agreement has not been concluded, Leonard Green and Nordstrom are hesitant to finalize it because of financial worries on the part of the corporation. Because Nordstrom is a privately held corporation, the Nordstrom family anticipates being able to make a strategic investment that will assist the firm in adapting to the changing retail market without having to worry about short-term shareholder reactions. Because the company is privately held, management may be able to devote more time and effort to the day-to-day operations of the company as well as to its expansion because there are no SOX requirements to meet. There is a range of reasons that impact a company’s choice to go public or to remain in business. Some businesses attempt to achieve various objectives, including saving money, insulating themselves from public shareholder scrutiny, avoiding being sued by public shareholders, and a variety of other objectives. Taking a company private has its advantages and disadvantages. Still, Nordstrom has been in business for a long time, and I have faith in its ability to consider things before leaping confidence. I believe that going private will offer Nordstrom a fantastic opportunity to save money while also allowing the company to develop more sustainably in the long run. They might wind up in debt due to their purchase of public investors, which is the very minimum that could happen in this situation. A company’s failure to pay its debts might result in its death. After going through the five-step strategic planning process, Nordstrom should consider becoming private rather than continuing to operate as a publicly-traded company, in my opinion. Nordstrom’s expansion strategies are excellent in this regard. Customers receive outstanding service because of the company’s emphasis on giving personalized attention, a compelling product selection, a pleasant shopping environment, and superior stocks management. According to my present intentions, it is unlikely that I will make any big changes to the company at this time. A quick inventory turnover indicates that the company is well-run, which is a solid sign that a retailer is in excellent functioning. Nordstrom looks to be doing a good job with everything, at least from my perspective. As stated in the case study, the company’s performance is based on the efforts of its management team to define broad, comprehensive, and long-term action directions, all of which are focused on providing exceptional customer service. There is no other method that can compete with this one. Preparing ahead of time and providing exceptional customer service are the keys to achieving corporate success. A stretch goal is an additional goal that someone sets for themselves that is more difficult to fulfill than the original goal they established for themselves. When it comes to new ideas, Nordstrom is probably out of options. Therefore the only suggestion I can provide is that they may consider turning their company private rather than going public. Making your company private offers a corporation greater autonomy and decision-making flexibility than it would have if it were publicly traded. With the exception of making that alteration, Nordstrom has a sound business strategy in place and is operating its company in an effective manner. Continuing to incorporate all employees in the planning process and developing new software programs and ideas that will help the company’s operations in the future, as I have indicated, is essential for the company’s success. Because the status of technology is always evolving, I am convinced that there will always be room for improvement in the future. Their goods will continue to be updated as the public’s interests vary from one season to the next.
References
Schermerhorn Jr., J.R., Bachrach, D.G. (2016) Nordstrom—“High Touch” with “High Tech”.In Exploring Management (Cases for Critical Thinking).