Final Paper due Wednesday

McConville & Betancur 1

Term Paper

Nordstrom Retail Business vs. Online Business

Erin McConville & Rachel Betancur
INFO 301: Business Decision Making
Montclair State University
Professor Elhussini
24 April 2019

Table of Contents

I. Background Pages 2 – 3
II. Literary Review Pages 3 – 6
III. Findings Pages 6 – 8
IV. Conclusion Page 8
V. Graphs of Net Sales & Growth Rate Page 9
VI. Works Cited Page 10-11

Background

Nordstrom is known to be a luxury department store that began with a 16-year-old Swedish immigrant, John W. Nordstrom with only $5 in his pocket in the year 1887, that $5 blossomed to create a billion-dollar company that is now worth $3.8 billion. The up and coming company, Wallin & Nordstrom soon creates a undeniable reputation by 1960 so soon that the downtown Seattle shoe shop becomes the largest shoe store in the country. Along with having eight locations in Washington and Oregon, it becomes the largest independent shoe chain in the United States. With much success, Wallin & Nordstrom began to venture into the women’s apparel and clothing market that later become Nordstrom Best, offering customers a selection of shoes and apparel. A couple years later, Men’s and children’s wear was added to the company. As of 1968, the three Nordstrom brothers handed the company over to the third generation which then changed the name to Nordstrom Inc. in the year 1971. Two years later, with the annual sales surpassing 100 million, the company was recognized as the largest-volume fashion specialty store on the West Coast. Still rising, in 1973, the first Nordstrom Rack was opened as a clearance center in the basement of the downtown Seattle store. Then in 1975, Nordstrom expanded into Alaska, and three years after it entered the competitive California market. The expansion continued across the United States throughout the 1990’s and into the next decade. Once Nordstrom took their company virtual in 1998, they could serve their customers successfully online. By 2009, Nordstrom had implemented industry leading inventory management and order fulfillment capabilities to provide a seamless shopping experience both online and in store, and customers were thriving. Within the same year and years to follow, Nordstrom began shipping orders abroad and it currently serves 96 countries online along with enhanced features and functionality of its online website. Nordstrom also has mobile shopping apps for their company and began offering customers free shipping and free returns within the United States to attract more online consumers. To this day, Nordstrom continues to improve their personalized and empathetic experiences that merges in-person stores with online. They achieve success in doing so by focusing on the service, selection, and capabilities, not where and how the customers are receiving their products. At the starts of the new millennium, Nordstrom entered several strategic alliances which affected their company thematically. By 2012, Nordstrom became the only major U.S. retailer to sell a broad assortment from the renowned British fashion brands Topshop and Topman. Finally, in 2014 Nordstrom went international and opened a store in Canada which threw revenues through the roof. Starting out to what was once just a shoe store, Nordstrom today has grown into a leading retailer, with immense global reach and continues to expand worldwide with its extensive range of services, it’s liking for an open-mind, amazing customer service values and thrive for success, especially in their online market.

Literary Review

In the book, the Nordstrom way, by Robert Spector and Patrick McCarthy a lot of information was received about the success of the retail store, Nordstrom. “Nordstrom has been ranked by Fortunes magazine, “100 best companies to work for in America” every year since the list was first published in 1998.” Business people all around the world compare their businesses and companies to the in-store Nordstrom experience, a top broker for Century 21 said, “I want people to think of me as the Nordstrom of Real Estate” (Spector, Robert, and Patrick D. McCarthy.). “First and foremost, Nordstrom has built a strategy built around the customer- not around the price, process, brand, technology or any other buzzword you can think of” (Spector, Robert, and Patrick D. McCarthy.). The in-person retail store has created core values that include; creating a customer-first mentality, honest and ethical way of doing business, delivering compelling value, treating people with the utter-most respect, rewarding hard-work and results, and choosing to err on the customers behalf” (Spector, Robert, and Patrick D. McCarthy.) Which makes reader ponder the question, would the online store have the same core values? Nordstrom creates an emotional experience of shopping through personal service, special customer focused events, a loyalty rewards program, and a virtually unconditional return policy. Robert Spector and Patrick McCarthy believe that Nordstrom has created such an unbelievable personal service tactic that the in person revenue would be much more than online. They have perfected the way that customers want to be treated and the customers find it enjoyable and excited to have to visit the store, something the online store would not be able to achieve (Spector, Robert, and Patrick D. McCarthy.).
Business Insider Analyst says Nordstrom has become a ‘victim of its own success’ as customers ditch stores to shop on its website instead. “In our view, one of the main issues is the cannibalization of store sales by the online operation. Nordstrom’s full line .com business has traditionally performed well, however, a lot of the growth has come from existing consumers who, because they shop online, end up visiting stores less,” Neil Saunders, managing director of Global Data Retail, wrote in a note to clients on Thursday. He continued: “This reduces impulse buying and the exposure to new parts of the offer. In a sense, Nordstrom is a victim of its own success and needs to explore ways of driving more visits to stores.” “This balancing out is important not only to counteract the rise of online but also to protect market and customer share as other department stores like Macy’s improve their offers,” he wrote.
Also in Business Insider, they talked about Cyber Monday which is strictly an online shopping day after the Holidays, “Nordstrom’s Cyber Monday sale is huge this year”, and one of the biggest in history. You can get up to 60% off thousands of items, from big discounts on women’s, men’s, and kids’ clothing, to major savings on home and kitchen essentials and beauty and skincare products. Also, when you spend $250 or more online or in-store, you’ll earn a $50 promotional gift card to use from January 11 to February 2. More benefits include free shipping, free return policies if damaged or wrong size, and the comfort of shopping for yourself and for others in the comfort of your own home. The opportunity cost of shopping in-person is gas money, the time taken out of your day to go to the physical store, and the efforts it takes to shop and try on in-person.
A Digital Commerce article stated, (Staff and Bloomberg)—Online sales at Nordstrom Inc. are a bright spot for the retailer. Digitally enabled sales—including online sales, buy online pick up in store and its reserve online, try on in store offering—accounted for 29% of the company’s revenue, up from 25% during the same quarter last year. First-quarter web sales grew 18% year over year to about $1 billion leaving Nordstrom at number 16 in the Internet Retailer 2018 Top 1000. Digital sales are picking up where store sales are falling, according to co-president Blake Nordstrom in a conference call transcribed by Seeking Alpha. Nordstrom Rack and Haute Look both saw “softness” for first-quarter sales in stores, but online sales picked up for those brands confirming the overall success of online shopping.
According to Puget Sound Business Journal, Nordstrom will no longer report its online and in-store sales separately. Nordstrom said reporting the sales figures as one allows it to more closely represent the company’s focus on brands rather than channels, Chief Financial Officer Anne Bramman said. The change is part of a larger shift away from the legacy store view of its business to an Omni-channel view that combines the physical and digital experiences, she said. In-store sales are not faring as well as online, which is a common theme in the retail industry as shopping habits change. For Rack stores, comparable sales declined by almost 2 percent while online sales for the off-price brand increased by nearly 26 percent.
A recent Fortune article by Phil Wahba states, “Nordstrom Thinks Half Its Business Could Be Online Within 5 Years.” Nordstrom’s (JWN, +0.12%) big investments in e-commerce in the last two decades have paid off handsomely, making the upscale department store a leader in the digital realm among brick-and-mortar retailers. “It’s reasonable to assume that we could probably be doing half of our business online in the next five years or so,” Nordstrom said at WWD’s Apparel and Retail CEO Summit in New York. At the same time, physical stores have to be more interesting places than ever. (Nordstrom joked about how long it took the company to figure out people like drinking before adding bars at some stores.) And the Manhattan store will be Nordstrom’s flagship, not merely a store in a major market. “You can’t just be the best on the block, you’ve got to be the best in the world,” he said. More broadly, Nordstrom said, retailers have to avoid trying to force shoppers’ habits and instead adapt to them. So called “channel coercion,” or trying to steer shoppers to one avenue for shopping or other, “doesn’t work.” “We knew it going to happen, it’s just happened faster than we thought,” Nordstrom said. Keeping the customers wants and needs vs. the companies wants and comfort zone is the most important aspect of Nordstrom success.

Findings

When it comes to deciding whether Nordstrom’s business thrives more online or in store, it definitely comes to show their online business is a prospering success! From the findings and observations that were made, Nordstrom sales are higher online than they ever were in the store. The digital sales now represent 30% of the retailer’s total sales, through the years that number keeps growing and it will continue to grow as does the technological advances. The reason to believe Nordstrom has done so well in the online market is because of the perks they offer to consumers when visiting their online website. The company offers free shipping and free returns, which no one can turn down, because it’s free. This allows the consumer to purchase whatever they desire online without the worry of having to pay for shipping or return, or even having to go to the store and return the item. Digital sales growth is up to 20% year to date, including their off-price chain, Nordstrom Rack. Due to the growth of online shopping, this causes some of the consumers to visit the stores less. Thus, the decrease of compulsive buying and the exposure to new parts of the offers. Although the growth of online sales is great, Nordstrom has to balance out both the retail and digital market in order keep rising at a successful rate and not fall short of one and shine in the other. This is because if they protect both markets, they will still be able to share customers with other department stores like Macy’s and Bloomingdales.
Also when analyzing and observing Nordstrom, as by now they show their online market success, when it comes to Black Friday, Nordstrom takes the lead online on Cyber Monday. In addition to the perks of having free shipping and free returns, Nordstrom also has great deals on cyber Monday, one a consumer cannot resist, especially when in the comfort of their own home. This company makes it easier for a consumer to shop online during the crazy sales of the holiday weekend. Although the consumer will not get to experience of the rush and urge to buy with all the deals in store, they will also have exclusive deals online that cannot be turned down from thousands of styles. The online business aspect of the company seems to be more successful rather than the retail part of the company because of the rise in revenues and the rise in technological uses. As one may assume, since Nordstrom is doing so well online, some of their retail stores are closing across the country in 2019. In our opinion, Nordstrom is a billion dollar company that has a lot to offer a consumer by being a department store. In a department store, you can touch, feel, try-on, have that escape that a computer just does not fully provide. Most importantly, Nordstrom is known for their amazing customer service experiences and making shopping in their store, a joyful event. With their online market success, they are sure not going away anytime soon whether unbalanced or not, even if it means closing a couple stores here and there, their online database will always be up and running. They have a loyal consumer basis that will always shop at Nordstrom, whether it is online or in store, this company will keep thriving.

Conclusion

In conclusion, although times are changing and the habits of shopping in-person is no longer the most important aspect of a consumer’s overall shopping experience, Nordstrom has one thing that has not changed, their mission to keep their customers first. Since the statistics and cash flow shows that the future customer wants more availability online, Nordstrom doesn’t want to force them to change their wants and needs for the company, but to benefit them by giving them an amazing experience with both, online and in-person. Nordstrom believes that in the next five years they will be mainly online, but they are still actively seeking in-person customers by putting stores in new places, and putting new things of interest in those stores that cannot be found in the online store. Although keeping an open-mind with the recent success stories with online retail, the company wants to keep its honorable, in-store, core values and keep it’s companies reputation at an all-time high. Nordstrom is a victim of its own success, but will not let the rise of online activity vs. in-person retailing affect their overall goal, to be successful, not for the brand or for the money, but for the customer.

Graphs of Net Sales & Growth Rate

Graph 1

Graph 2

Works Cited
“Nordstrom History.” Nordstrom,
https://shop.nordstrom.com/content/company-history

Hanbury, Mary. “Analyst Says Nordstrom Has Become a ‘Victim of Its Own Success’ as Customers Ditch Stores to Shop on Its Website.” Business Insider, Business Insider, 16 Nov. 2018,
www.businessinsider.com/nordstrom-online-success-hurts-physical-stores-2018-11
.

Ismael, Amir. “Nordstrom’s Cyber Monday Sale Is Huge This Year – We Cherry-Picked the Best Deals on Coats, Boots, and More for Men and Women.” Business Insider, Business Insider, 26 Nov. 2018,
www.businessinsider.com/nordstrom-black-friday-cyber-monday-sale-men-women-2018-11
.

Hanbury, Mary. “Department Stores Are Shutting down across the Country – Here’s the List of Macy’s, Nordstrom, and Kohl’s Stores That Will Close This Year.” Business Insider, Business Insider, 28 Jan. 2019,
www.businessinsider.com/macys-nordstrom-kohls-jcpenney-stores-closing-list-2019-1
.

“Nordstrom Family.” Forbes, Forbes Magazine,
www.forbes.com/profile/nordstrom/#14ced2c828db

Lindner, Matt, et al. “Nordstrom’s Online Sales Grow 18% in Q1.” Digital Commerce 360, 18
May 2018,
www.digitalcommerce360.com/2018/05/18/nordstroms-online-sales-grow-18-in-q1/
.
“Online/ In-Store Breakdowns.” Bizjournals.com,

www.bizjournals.com/seattle/news/2018/03/01/nordstrom-online-in-store-sales-breakout-earnings.html
.
Wahba, Phil. “Nordstrom Thinks Half Its Business Could Be Online Within 5 Years.” Fortune,

http://fortune.com/2017/10/24/nordstrom-online/

Spector, Robert, and Patrick D. McCarthy. The Nordstrom Way to Customer Service Excellence: the Handbook for Becoming the “Nordstrom” of Your Industry. Wiley, 2012.

Graph 1

Google Search, Google,

www.google.com/search?q=nordstrom+revenue+online+and+in+person&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjUieyYktXhAhXwY98KHf1eC1sQ_AUIESgE&biw=1920&bih=1105#imgrc=hb9CyLWWjaz-TM:&spf=1555435882113

Graph 2

Google Search, Google,
www.google.com/search?q=nordstrom+revenue+online+and+in+person&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjUieyYktXhAhXwY98KHf1eC1sQ_AUIESgE&biw=1920&bih=1105#imgrc=vPDC437sDzsOxM:&spf=1555435882116

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