Digital Forbes

Nordstrom — Using Technology to Fight for Growth

Author

Walter Loeb, Contributor

May 27, 2014

Nordstrom remains focused on its defining organizational characteristic—service.  Recognizing technology is changing the definition of what good service is, Nordstrom is focused on harnessing technology to drive growth. The company is striving to pay even greater attention to the customer experience whether the customer is shopping at stores or on-line.

Nordstrom management determined, for instance, that 25% of all on-line shopping was done by mobile phones in 2013, so it has quickly prioritized enhancing mobile service for 2014.  Moving forward mobile phone apps will be enhanced to make shopping easier and more exciting. If the mobile phone – which is really a miniature computer – is so important now, there is no doubt it will grow even more important in the future.  More business can be achieved with better graphics, more impressive three dimensional photos, and better product descriptions.

It is conceivable that mobile phone sales will reach 2014 30% of total Internet sales in 2014, and reach 40% in the next five years.  That changes the outlook on the retail business. Certainly customers will order on the phone and pick up merchandise in stores.  This will cause retailers like Nordstrom, Macy’s, J.C.Penney, Kohl’s Target and even Walmart the set new priorities for investment and service.

Nordstrom’s is putting its money where its mouth is; allocating more operating and capital expense to its on-line strategy.  In the five years from 2009 to 2013 the company spent $500,000 on on-line technology.  In the coming five years, 2014 to 2018, the company allocated $1,200,000. That certainly shows the urgency placed on the Internet business and its potential growth.  Part of this investment is to ensure Nordstrom’s full line store customers receive information quickly about new events and specials. This is particularly important for customers who shop at HauteLook and The Rack where certain items sell out quickly. These customers will now have a powerful site to shop on-line for merchandise they like.

Nordstrom’s prioritization of on-lie shopping is clear in their management moves. Erik Nordstrom and Jamie Nordstrom have switched jobs. Erik was President of stores while Jamie was President of Nordstrom direct. In the role reversal they  switched titles and responsibilities. On the surface it is a surprise, but if one looks at the history of Nordstrom’s family management culture one understands that this exchange of roles insures that each of the men have a better understanding of total store functions. They each bring to their new assignment unique experiences that can enhance customer srevie. It can also bring new perspectives to their assignment at a time when on-line business is gathering strength and importance,

In its recent 1Q14 earnings report, Nordstrom recorded one of the best first quarter 2014 results of all retailers. despite the tough winter. Comparable sales increased 2.9%, after a 2.7% increase in the first quarter of the previous year. Comparable sales were driven by particularly strong direct sales which increased 33% on top of last year’s 25%. The Rack increased 6.4% and HauteLook increased 10.3%. Only full line stores decreased 1.9% despite the fact that the Southwest and Southern California had strong results.

Earnings were impacted by planned technology investments to improve the service experience across all channels, infrastructure costs relating to the upcoming entry into Canada, ad the opening in three years of a major New York City headquarter store. Earnings per share dropped 1.4% from $0.73 to $0.72 per share in the first quarter of 2014.

Everything points to Nordstrom capturing more young costumers willing to buy quickly on their mobile phones, who have confidence in the care, service and quality of the products the company is selling in all channels.

ook and The Rack where certain items sell out quickly.  These customers will now have a powerful site to shop online for the merchandise they like.

Nordstrom’s prioritization of on-line shopping is clear in their management moves.   Erik Nordstrom and Jamie Nordstrom have switched jobs. Erik was President of stores while Jamie was President of Nordstrom direct.  In the role reversal they switched titles and responsibilities. On the surface it is a surprise, but if one looks at the history of Nordstrom’s family management culture one understands that this exchange of roles insures that each of the men have a better understanding of total store functions.  They each bring to their new assignment unique experiences that can enhance customer service.  It can also bring new perspectives to their assignments at a time when on-line business is gathering strength and importance.

In its recent 1Q14 earnings report, Nordstrom recorded one of the best first quarter 2014 results of all retailers, despite the tough winter. Comparable sales increase 3.9%, after a 2.7% increase in the first quarter of the previous year. Comparable store sales were driven by particularly strong direct sales which increased 33% on top of last year’s 25%. The Rack increased 6.4% and HauteLook increased 10.3%.  Only full lines stores decreased 1.9% despite the fact at that the Southwest and Southern California had strong results.

Earnings were impacted by planned technology investments to improve the service experience across all channels, infrastructure costs relating to the upcoming entry into Canada, and the opening in three years of a major New York City headquarter store. Earnings per share dropped 1.4% from $0.73 to $0.72 per share in the first quarter of 2014.

Everything points to Nordstrom capturing more young customers willing to buy quickly on their mobile phones, who have confidence in the care, service, and quality of the products the company is selling in all channels.

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