Nordstrom’s Strategy for Success, 6 Key Elements
Nordstrom has been in business for over 100 years, since 1901. That’s a long time, almost an eternity in the fickle retail sector. Ask Sears. After many decades of success Sears struggled to stay on top only to fall out of favour. Nordstrom on the other hand has weathered many tests of time and was able to generate revenues of $15.5 billion in 2023. Not bad considering JCPenny along with Neiman Marcus filed for bankruptcy in 2020.
Nordstrom has built a solid retail business over a number of years and has implemented many initiatives which any retailer hoping to succeed should emulate. If you want to know how Nordstrom has managed to stay relevant for so many years consider these six keys to Nordstrom’s success.
1. A strong integration between online and offline channels. It’s no longer a secret that the key to boosting online sales is having a strong offline presence. Nordstrom has worked on integrating its online and offline channels for a number of years. It was one of the first retailers to offer curbside pickup, long before the pandemic forced many retailers to do so. In 2019 Nordstrom also began testing accepting returns of online orders from competitors such as Kohl’s and Macy’s. This was Nordstrom’s way of thinking more holistically about its customers’ needs and in return customers often shop after dropping off a return.
These initiatives have paid off for Nordstrom with 36% of its sales generated from digital in the second quarter of this year. In contrast in the second quarter of 2023 eCommerce only represented 15.4% of retail sales in the United States. Nordstrom’s CEO, Erik B. Nordstrom spoke about the benefits of having a strong eCommerce business on Nordstrom’s 2020 first quarter earnings call, when he said: “roughly 30% of our customers are shopping across more than one of these [digital] touch points. And as a result of this engagement, we know these customers spend four to 11 times more on average.”
2. Innovative store formats. In September of 2017 Nordstrom launched a new store concept called Nordstrom Local. Nordstrom Local stores are small. They are around 3,000 square feet and they do not carry dedicated inventory. These stores are focused on service and providing a great experience. Some of the services offered at Nordstrom Local stores include personal stylists, free of charge, pickup for eCommerce orders (including curbside pickup), returns, alterations, gift wrapping, dry cleanings, charity drop-offs for used items and complimentary refreshments. One of the key drivers of the popularity of these locations is the ability to easily return and pick up online orders.
These stores have performed very well for Nordstrom with Nordstrom reporting in the past that on average a Nordstrom Local customer spends 2.5 times the amount of a regular Nordstrom customer. Speaking about Nordstrom Local Shea Jensen, Nordstrom’s former senior vice president of customer experience said: “we want to use this as a way to complement our footprint, not double down, where we know we have customers.”
3. Partnerships with on trend brands. When beauty brand Glossier wanted to increase its sales by exposing its fragrance Glossier You to more consumers the digitally native brand chose Nordstrom as its partner. The brand set up popup shops in Nordstrom stores around the United States. Department stores are often seen as stodgy but partnerships like these are an effective way of keeping Nordstrom relevant within a younger demographic since a brand like Glossier already has a young base of customers that can be introduced to Nordstrom when they travel to the store to look for merchandise from one of Nordstrom’s partnerships.
Nordstrom’s partnership with Glossier is not a one off. Other digitally native brands that have sold their merchandise inside of Nordstrom include ballet-flats maker Birdies, clothing retailers Reformation , Everlane and SKIMS, jeweller Kendra Scott, health-focused beverage company Dirty Lemon, and luggage retailer Away.
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4. Personalized products and services. Personalization matters. So much so that the majority of shoppers say they are likely to make a purchase as a result of personalized content. Nordstrom has offered several personalized services including at one time a Levi’s Tailor Shop in its men’s store in New York City. Nordstrom called the Levi’s Tailor Shop a one-of-a-kind partnership where customers could have their denim jeans or jackets distressed, hemmed, repaired or elevated with studs and decals. Customers could also have their denim monogramed. Nordstrom now has a personalization studio in its New York store where almost anything sold at Nordstrom can be personalized.
5. Services that hit the mark. In 2002 retailers selling goods comprised 53.2% of the retail space in the United States. By 2020, service retailers took up 52.6% of space and those selling products (i.e. Gap or a Victoria’s Secret) comprised 47.4% of space. This shift is not surprising since “our experiences are a bigger part of ourselves than our material goods,” says Thomas Gilovich, a professor at Cornell University who has studied the link between money and happiness. “You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are part of you. We are the sum total of our experiences.”
Nordstrom has capitalized on the trend of offering more experiences by providing customers with services that enhance their shopping experience. Nordstrom’s first ever men’s store in New York City had a liquor license so that customers could walk around with a drink in their hand while they shop. Nordstrom’s flagship men’s and women’s store in New York has several dining options which can draw in customers whether they are interested in shopping or not. Services at that store also include gift wrapping, a dry hair bar, denim alterations, bra fitting and shoe and leather repair. “We also see increased spending through engagement with our services. For example, customers who use alterations or styling services spend three to five times more on average.” said Erik Nordstrom.
6. Best in class customer service. A key differentiator between Nordstrom and other retailers is its customer service. Nordstrom empowers its employees to use their best judgement in all situations. Employees are also given the flexibility to determine the best way to solve a customer's problem.
In a classic story of great customer service, a Nordstrom employee noticed that a customer left their luggage and flight itinerary in the parking lot of a Nordstrom store. The employee jumped into their car and drove the customer’s luggage to the airport and found the customer before her flight left. Without an engaged employee base most employees are unlikely to go the distance to surprise and delight a customer.
Nordstrom’s excellence in customer service is also demonstrated by its focus on offering so many customer facing services. Nordstrom has thought about all of the key steps along the customer journey and has implemented services that reduce friction in the shopping process by offering things like personal stylists.