Nordstrom, Inc.

views updated May 18 2018

Nordstrom, Inc.

1501 Fifth Avenue
Seattle, Washington 98101
U.S.A.
(206) 628-2111

Public Company
Incorporated: 1901 as Wallin & Nordstrom
Employees: 30,000
Sales: $2.89 billion
Stock Exchange: NASDAQ

Nordstrom, Inc., was started in 1901 as a single shoe store in Seattle, Washington, that was opened by two Swedish immigrants. From those origins, the family-owned enterprise has expanded into a 68-outlet chain, which tallied $2.89 billion in sales in 1990. Carefully supervised expansion, tight family management, wide selection, and attentive customer service have long been the hallmarks of Seattle-based Nordstrom.

John Nordstrom, a 16-year-old Swede, arrived in Minnesota in 1887 with $5 to his name and, after working his way across the United States, settled briefly in Seattle. In 1897 he headed north to Alaska in search of gold. He found it. In 1899, $13,000 richer, Nordstrom moved back to Seattle, where he opened a shoe store with Carl Wallin, a shoemaker he had met in Alaska. On its first day of business in 1901, their store, Wallin & Nordstrom, sold $12.50 in shoes.

Business quickly picked up. By 1905 sales increased to $80,000. The business continued to grow, and in 1923 the partners opened a second store in Seattle. By 1928, however, 57-year-old John Nordstrom had decided to retire from the shoe business, and passed on his share to his sons Everett and Elmer. Carl Wallin retired soon after and likewise sold his share to the next generation of Nordstroms. In 1933 John Nordstrom’s youngest son, Lloyd, joined the partnership.

The business that John Nordstrom left was substantially larger than the one he started back in 1901. It was up to the next generation of Nordstroms, however, to build on their father’s success. In 1929 the Nordstrom brothers doubled the size of their downtown Seattle store. In 1930, despite the onset of the Great Depression, the two stores made $250,000 in sales. The shoe stores survived the depression, but faced another severe threat during World War II, when leather rationing prohibited U.S. consumers from buying more than three pairs of shoes per year. The Nordstrom brothers had to search nationwide for supplies of shoes.

In the postwar decades, the Nordstrom brothers built the company into the largest independent shoe chain in the United States. In 1950 the Nordstroms opened two new shoe stores: one in Portland, Oregon, and one in a Seattle suburb. Nine years later, Nordstrom remodeled its Seattle flagship store, and stocked it with 100,000 pairs of shoes—the biggest inventory in the country. By 1961 Nordstrom operated 8 shoe stores and 13 leased shoe departments in Washington, Oregon, and California. That year, the firm grossed $12 million in sales and had 600 employees on its payroll.

In the early 1960s, the Nordstrom brothers came to a crossroads of sorts. Spurred by their success, they were convinced that their business could expand. The brothers were unsure whether they should simply expand their shoe business to the East and South or branch out into other areas of retailing. The brothers chose to diversify, and purchased Best Apparel, a Seattle-based women’s clothing store. With the addition of apparel outlets, the company expanded rapidly. In 1965 the Nordstroms opened a new Best Apparel store adjacent to a Nordstrom shoe store in suburban Seattle. In 1966 the company acquired a Portland retail fashion outlet, Nicholas Ungar, and merged it with the Nordstrom shoe store in Portland.

In the late 1960s, the modern Nordstrom department store began to take shape. Between 1965 and 1968, the company opened five stores that combined apparel and shoes. In 1967, when annual sales had reached $40 million, the chain’s name was changed to Nordstrom Best. The firm diversified further in these years, as Nordstrom Best began to sell men’s and children’s clothing as well.

In 1968 Everett Nordstrom turned 65, and he and his two brothers decided to turn over the reins of the company to the next generation of Nordstroms. Five men—Everett’s son Bruce, Elmer’s sons James and John, Lloyd’s son-in-law John A. McMillan, and family friend Robert E. Bender—took control of the company in 1970.

In August 1971 the company went public, offering Nordstrom Best stock on the over-the-counter market. Family members retained a majority of the stock, however, and as of the early 1990s they continued to hold a significant interest. In 1971 Nordstrom earned $3.5 million on sales of $80 million. In 1973 when sales first topped $100 million, the company changed its name to Nordstrom, Inc.

The firm continued to grow steadily throughout the 1970s by opening new stores and increasing volume in existing stores, and diversifying. In 1974 annual sales hit $130 million. The following year, Nordstrom bought three stores in Alaska. In 1976 the firm launched a new division, Place Two, which features, in smaller stores, a selected offering of men’s and women’s apparel and shoes. By 1977 Nordstrom operated 24 stores, which generated sales of $246 million.

In 1978 Nordstrom expanded into the southern California market, opening an outlet in Orange County. That year, the firm reaped $13.5 million in earnings on nearly $300 million in sales. Buoyed by the success, Nordstrom’s executives charted an aggressive expansion program, and began to open bigger stores in California. Their late-1970s confidence presaged a decade of phenomenal, but controlled, growth.

By 1980 Nordstrom was the third-largest specialty retailer in the country, ranking behind only Saks Fifth Avenue and Lord & Taylor. That year, the firm operated 31 stores in California, Washington, Oregon, Utah, Montana, and Alaska. In 1980 a new expansion plan called for 25 new stores to be added in the 1980s, and the Nordstroms projected that both earnings and total square footage would double by 1985.

The projection was not sufficiently optimistic. In 1980 sales hit $407 million, and in the next few years, sales and earnings continued to rise substantially. Between 1980 and 1983, when sales jumped to $787 million, earnings more than doubled, going from $19.7 million to $40.2 million. In 1982 Nordstrom launched a third division, Nordstrom Rack—a string of outlet stores that the firm used to move old inventories at discount prices. The chain’s biggest growth area, however, was in the huge California market. By 1984 there were seven Nordstrom stores in that state. Five years later, Nordstrom had 22 full-size stores in California.

Nordstrom increasingly came to be recognized as an efficient, upscale, full-service department store. Its aggressive customer service plainly brought results. The firm has consistently maintained the highest sales per square foot of retail space ratios in the industry, nearly twice those of other department stores.

Nordstrom’s success has been due to a variety of factors. Throughout its existence, shoes have accounted for a good deal of the firm’s sales—about 18% in 1989. In most fashion and apparel stores, shoes constitute a smaller percentage of sales. In addition Nordstrom has consistently maintained huge inventories and selection, which were usually twice the size those of other department stores. In the mid-1980s, a typical outlet stocked 75,000 pairs of shoes, 5,000 men’s dress shirts, and 7,000 ties. Moreover, a decentralized corporate structure has allowed local buyers, who knew their customers’ needs, to make inventory selections.

Most significantly, though, Nordstrom’s management has encouraged the development of an aggressive sales force. The vast majority of Nordstrom clerks work on commission, and the average salesperson earns $24,000 annually. Managers are generally promoted from within the ranks of salespeople, which intensifies the desire to sell.

In the 1980s the firm’s customer service became legendary, as tales of heroic efforts by salespeople became legion: clerks were known to pay shoppers’ parking tickets, rush deliveries to offices, unquestioningly accept returns, lend cash to strapped customers, and to send tailors to customers’ homes. Salespeople receive constant pep talks from management, and motivational exercises are a routine part of life at Nordstrom. Nordstrom also has created an environment that is extremely customer-friendly. Many stores have free coat check service, concierges, and piano players who serenade shoppers.

As the economy boomed in the 1980s, Nordstrom’s figures climbed apace. In 1985 sales first topped $1 billion, as they jumped to $1.3 billion. In 1987 the firm reaped profits of $92.7 million on sales of $1.92 billion.

Nordstrom’s growth in the latter half of the 1980s stemmed from a combination of expansion into new territories and the creation of larger stores in existing Nordstrom territory. In 1986, when the firm operated 53 stores in six western states, Nordstrom began to turn its sights to the East. In March of 1988, Nordstrom opened its first store on the East Coast, a 238,000-square-foot facility in McLean, Virginia, just outside Washington, D.C. On its first day, the store racked up more than $1 million in sales. Over the first year, the store brought in $100 million in sales.

The same year, Nordstrom expanded on the West Coast as well, opening its biggest store, a 350,000-square-foot facility, in downtown San Francisco. The lavish San Francisco store featured 103 different brands of champagne, 16 varieties of chilled vodka, and a health spa, among other luxurious amenities.

By the end of 1988, Nordstrom had 21,000 employees toiling in its 58 stores. Together they convinced customers to buy $2.3 billion worth of goods in 1988, and earned profits of $123 million for the corporation.

Expansion in other areas of the East continued in the late 1980s. In 1989 Nordstrom opened a second store in the Washington, D.C, area—in the Pentagon City Mall. The firm also opened outlets in Sacramento and Brea, California, in 1989.

In 1989, when the company won the National Retail Merchants Association’s Gold Medal, Nordstrom had become a paragon of retailing success. Envious of its market share and sales figures, many competitors began to imitate its strategies of large inventory and lavish customer service.

Nordstrom continues to rely on its aggressive sales staff, but, the corporate policy of encouraging clerks to go out of their way to make sales has caused the company some grief. The employees’ union has complained about the pressure on employees to sell. In late 1989 a group of unionized employees charged that they were not being paid for performing extra services to customers.

In February of 1990, after a three-month investigation, the Washington State Department of Labor & Industries alleged that the company had systematically violated state laws by failing to pay employees for a variety of duties, such as delivering merchandise and doing inventory work. The agency ordered Nordstrom to change its compensation and record-keeping procedures, and to pay back wages to some of Nordstrom’s 30,000 employees. Soon after, the firm created a $15-million reserve to pay back-wage claims. The company, however, remained a target of class-action lawsuits on these matters, still pending in the early 1990s.

Other unforeseen events in 1989 and 1990 hit the company as well. The San Francisco earthquake of 1989 took a significant bite out of retail sales in the San Francisco Bay area. The general nationwide downturn in retailing hurt the company more, however. In September of 1990, Nordstrom, then a 61-store company, announced it would cut costs by 3% to 12% and laid off some personnel. In the fourth quarter of 1989, Nordstrom’s earnings dropped 34% from the previous year. Earnings fell about 7% for the entire year, falling from $123.3 million in 1988 to $115 million in 1989; however, sales increased nearly 15% in that year, from $2.33 billion to $2.67 billion.

Although Nordstrom suffered from the recession of the early 1990s, it continued to expand and open new stores in the East and Midwest. In September of 1990, Nordstrom opened its first store in the metropolitan New York area, in Paramus, New Jersey. In April of 1991 Nordstrom opened its 64th store—and first Midwest store—in Oak Brook, Illinois, a Chicago suburb. In typical Nordstrom style, the store opened featuring 125,000 pairs of shoes, a concierge, an espresso bar, and a wood-paneled English-style pub. In 1991 the company also opened stores in Riverside, California; Edison, New Jersey; and Bethesda, Maryland.

Sales and earnings rebounded a fraction in 1990. Sales rose 8% to $2.89 billion, and profits rose a miniscule 0.7% to $115.8 million. In 1990 women’s apparel and accessories accounted for 59% of Nordstrom’s total sales; men’s apparel accounted for 16%; and shoes—still a company mainstay— constituted 19% of all sales.

Bruce, James, and John Nordstrom; John McMillian; and Robert Bender continued to maintain tight control of the company, and still owned a 40% stock interest in the early 1990s. As of late 1991, Nordstrom operated 50 large specialty stores, 5 smaller stores, 13 clearance stores, and leased shoe departments in 11 department stores in Hawaii. Unburdened by debt, Nordstrom expected to continue to grow in the 1990s, although the firm will be hard-pressed to reproduce the huge gains it achieved in the 1980s.

Long-term corporate strategy called for several stores to be opened in the next few years in New Jersey, Minnesota, Colorado, Maryland, and New York. Chastened somewhat by labor difficulties and sluggish sales, this self-proclaimed “company of entrepreneurs” should continue to spread its brand of upscale, customer-oriented retailing.

Principal Subsidiaries

Place Two; Nordstrom Rack.

Nordstrom, Inc.

views updated May 14 2018

Nordstrom, Inc.

1617 Sixth Avenue
Seattle, Washington 98101-1742
U.S.A.
Telephone: (206) 628-2111
Toll Free: (888) 282-6060
Fax: (206) 628-1795
Web site: http://www.nordstorm.com

Public Company
Incorporated: 1901 as Wallin & Nordstrom
Employees: 46,000
Sales: $6.49 billion (2003)
Stock Exchanges: New York
Ticker Symbol: JWN
NAIC: 452110 Department Stores; 448140 Family Clothing Stores; 448210 Shoe Stores; 454110 Electronic Shopping and Mail-Order Houses

Nordstrom, Inc. was started in 1901 as a single shoe store in Seattle, Washington, that was opened by two Swedish immigrants. From those origins, the family-run enterprise expanded into a 180-outlet, 27-state chain, which tallied $6.49 billion in sales in 2003. In addition to more than 90 flagship Nordstrom department stores, the company also operates about 50 Nordstrom Rack outlet stores in the United States and around 35 Façonnable boutiques, most of which are located in Europe. Catalog and Internet sales are generated through the Nordstrom Direct unit. Carefully supervised expansion, tight family management, wide selection, and attentive customer service have long been the hallmarks of Seattle-based Nordstrom, one of the largest independent fashion specialty retailers in the United States. Members of the founding Nordstrom family continue to own about 20 percent of the company's stock.

Opening of Small Shoe Store in 1901

John W. Nordstrom, a 16-year-old Swede, arrived in Minnesota in 1887 with $5 to his name and, after working his way across the United States, settled briefly in Seattle. In 1897 he headed north to Alaska in search of gold. He found it. In 1899, $13,000 richer, Nordstrom moved back to Seattle, where he opened a shoe store with Carl Wallin, a shoemaker he had met in Alaska. On its first day of business in 1901, Wallin & Nordstrom sold $12.50 in shoes.

Business quickly picked up. By 1905 annual sales increased to $80,000. The business continued to grow, and in 1923 the partners opened a second store in Seattle. By 1928, however, 57-year-old John Nordstrom had decided to retire from the shoe business, and passed on his share to his sons Everett and Elmer. Carl Wallin retired the following year and likewise sold his share to the next generation of Nordstroms. In 1930 the shoe stores were renamed Nordstrom's. In 1933 John Nordstrom's youngest son, Lloyd, joined the partnership.

The business that John Nordstrom left was substantially larger than the one he started back in 1901. It was up to the next generation of Nordstroms, however, to build on their father's success. In 1929 the Nordstrom brothers doubled the size of their downtown Seattle store. In 1930, despite the onset of the Great Depression, the two stores made $250,000 in sales. The shoe stores survived the Depression, but faced another severe threat during World War II, when leather rationing prohibited U.S. consumers from buying more than three pairs of shoes per year. The Nordstrom brothers had to search nationwide for supplies of shoes.

Expansion and Diversification in the 1950s and 1960s

In the postwar decades, the Nordstrom brothers built the company into the largest independent shoe chain in the United States. In 1950 the Nordstroms opened two new shoe stores: one in Portland, Oregon, and one in a Seattle suburb—the latter located at Northgate Mall, the nation's first shopping mall. Nine years later, Nordstrom remodeled its Seattle flagship store, and stocked it with 100,000 pairs of shoes—the biggest inventory in the country. By 1961 Nordstrom operated eight shoe stores and 13 leased shoe departments in Washington, Oregon, and California. That year, the firm grossed $12 million in sales and had 600 employees on its payroll.

In the early 1960s, the Nordstrom brothers came to a crossroads of sorts. Spurred by their success, they were convinced that their business could expand. The brothers were unsure whether they should simply expand their shoe business to the East and South or branch out into other areas of retailing. The brothers chose to diversify, and purchased Best Apparel, a Seattle-based women's clothing store, in 1963. With the addition of apparel outlets, the company expanded rapidly. In 1965 the Nordstroms opened a new Best Apparel store adjacent to a Nordstrom shoe store in suburban Seattle. In 1966 the company acquired a Portland retail fashion outlet, Nicholas Ungar, and merged it with the Nordstrom shoe store in Portland, which was renamed Nordstrom Best.

In the late 1960s, the modern Nordstrom department store began to take shape. Between 1965 and 1968, the company opened five stores that combined apparel and shoes. In 1967, when annual sales had reached $40 million, the chain's name was changed to Nordstrom Best. The firm diversified further in these years, as Nordstrom Best began to sell men's and children's clothing as well.

Third Generation Took Control in 1970

In 1968 Everett Nordstrom turned 65, and he and his two brothers decided to turn over the reins of the company to the next generation of Nordstroms. Five men—Everett's son Bruce, Elmer's sons James and John, Lloyd's son-in-law John A. McMillan, and family friend Robert E. Bender—took control of the company.

In August 1971 the company went public, offering Nordstrom Best stock on the over-the-counter market. Family members retained a majority of the stock, however. In 1971 Nordstrom earned $3.5 million on sales of $80 million. In 1973, when sales first topped $100 million, the company changed its name to Nordstrom, Inc. That same year saw the opening of the first Nordstrom Rack, an outlet store used to move old inventories at discount prices. It was located in the basement of the downtown Seattle store.

The firm continued to grow steadily throughout the 1970s by opening new stores, increasing volume in existing stores, and diversifying. In 1974 annual sales hit $130 million. The following year, Nordstrom bought three stores in Alaska. In 1976 the firm launched a new division, Place Two, which featured, in smaller stores, a selected offering of men's and women's apparel and shoes. By 1977 Nordstrom operated 24 stores, which generated sales of $246 million.

In 1978 Nordstrom expanded into the southern California market, opening an outlet in Orange County. That year, the firm reaped $13.5 million in earnings on nearly $300 million in sales. Buoyed by the success, Nordstrom's executives charted an aggressive expansion program, and began to open bigger stores in California. Their late 1970s confidence presaged a decade of phenomenal, but controlled, growth.

Rapid Growth in Early 1980s Fueled by Legendary Customer Service

By 1980 Nordstrom was the third largest specialty retailer in the country, ranking behind only Saks Fifth Avenue and Lord & Taylor. That year, the firm operated 31 stores in California, Washington, Oregon, Utah, Montana, and Alaska. In 1980 a new expansion plan called for 25 new stores to be added in the 1980s, and the Nordstroms projected that both earnings and total square footage would double by 1985.

The projection was not sufficiently optimistic. In 1980 sales hit $407 million, and in the next few years, sales and earnings continued to rise substantially. Between 1980 and 1983, when sales jumped to $787 million, earnings more than doubled, going from $19.7 million to $40.2 million. In 1982 Nordstrom established Nordstrom Rack as its third division, now consisting of a string of outlet stores. The chain's biggest growth area, however, was in the huge California market. By 1984 there were seven Nordstrom stores in that state. Five years later, Nordstrom had 22 full-size stores in California.

Nordstrom increasingly came to be recognized as an efficient, upscale, full-service department store. Its aggressive customer service plainly brought results. The firm consistently maintained the highest sales per square foot of retail space ratios in the industry, nearly twice those of other department stores.

Nordstrom's success was due to a variety of factors. Throughout its existence, shoes accounted for a good deal of the firm's sales—about 18 percent in 1989. In most fashion and apparel stores, shoes constitute a smaller percentage of sales. In addition Nordstrom consistently maintained huge inventories and selection, which were usually twice the size of other department stores. In the mid-1980s, a typical outlet stocked 75,000 pairs of shoes, 5,000 men's dress shirts, and 7,000 ties. Moreover, a decentralized corporate structure allowed local buyers, who knew their customers' needs, to make inventory selections.

Most significantly, though, Nordstrom's management encouraged the development of an aggressive sales force. The vast majority of Nordstrom clerks worked on commission, and the average salesperson earned $24,000 annually. Managers generally promoted from within the ranks of salespeople, which intensified the desire to sell.

Company Perspectives:

In 1901, John W. Nordstrom used his stake from the Alaska gold rush to open a small shoe store in Seattle, Washington. Over the years, the Nordstrom family of employees built a thriving business on the principles of quality, value, selection and service.

Today, Nordstrom is one of the nation's leading fashion retailers, offering a wide variety of fine quality apparel, shoes and accessories for men, women and children at stores across the country. We remain committed to the simple idea our company was founded on, earning the trust of our customers, one at a time.

In the 1980s the firm's customer service became legendary, as tales of heroic efforts by salespeople became legion: clerks were known to pay shoppers' parking tickets, rush deliveries to offices, unquestioningly accept returns, lend cash to strapped customers, and to send tailors to customers' homes. Salespeople received constant pep talks from management, and motivational exercises were a routine part of life at Nordstrom. Nordstrom also created an extremely customer-friendly environment. Many stores had free coat check service, concierges, and piano players who serenaded shoppers.

As the economy boomed in the 1980s, Nordstrom's figures climbed apace. In 1985 sales first topped $1 billion, as they jumped to $1.3 billion. In 1987 the firm reaped profits of $92.7 million on sales of $1.92 billion.

Began Eastward Expansion in the Mid-1980s

Nordstrom's growth in the latter half of the 1980s stemmed from a combination of expansion into new territories and the creation of larger stores in existing Nordstrom territory. In 1986, when the firm operated 53 stores in six western states, Nordstrom began to turn its sights to the East. In March 1988, Nordstrom opened its first store on the East Coast, a 238,000-square-foot facility in McLean, Virginia, just outside Washington, D.C. On its first day, the store racked up more than $1 million in sales. Over the first year, the store brought in $100 million in sales.

The same year, Nordstrom expanded on the West Coast as well, opening its biggest store, a 350,000-square-foot facility in downtown San Francisco. The lavish San Francisco store featured 103 different brands of champagne, 16 varieties of chilled vodka, and a health spa, among other luxurious amenities.

By the end of 1988, Nordstrom had 21,000 employees toiling in its 58 stores. Together they persuaded customers to buy $2.3 billion worth of goods in 1988, and earned profits of $123 million for the corporation.

Expansion in other areas of the East continued in the late 1980s. In 1989 Nordstrom opened a second store in the Washington, D.C., area—in the Pentagon City Mall. That same year the firm also opened outlets in Sacramento and Brea, California. Capping the decade, the company won the National Retail Merchants Association's Gold Medal. Clearly, Nordstrom had become a paragon of retailing success. Envious of its market share and sales figures, many competitors began to imitate its strategies of large inventory and lavish customer service.

Nordstrom continued to rely on its aggressive sales staff, but the corporate policy of encouraging clerks to go out of their way to make sales caused the company some grief. The employees' union (which was later decertified) complained about the pressure on employees to sell. In late 1989 a group of unionized employees charged that they were not being paid for performing extra services to customers.

In February 1990, after a three-month investigation, the Washington State Department of Labor & Industries alleged that the company had systematically violated state laws by failing to pay employees for a variety of duties, such as delivering merchandise and doing inventory work. The agency ordered Nordstrom to change its compensation and record-keeping procedures, and to pay back wages to some of Nordstrom's 30,000 employees. Soon after, the firm created a $15 million reserve to pay back-wage claims. The company, however, remained a target of class-action lawsuits on these matters, which were finally settled out of court in early 1993 when Nordstrom agreed to pay a set percentage of compensation to employees who worked at Nordstrom from 1987 to 1990. The settlement cost the company between $20 million and $30 million.

Other unforeseen events in 1989 and 1990 hit the company as well. The San Francisco earthquake of 1989 took a significant bite out of retail sales in the San Francisco Bay area. The general nationwide downturn in retailing hurt the company more, however. In September 1990, Nordstrom, then a 61-store company, announced it would cut costs by 3 to 12 percent and laid off some personnel. In the fourth quarter of 1989, Nordstrom's earnings dropped 34 percent from the previous year. Earnings fell about 7 percent for the entire year, from $123.3 million in 1988 to $115 million in 1989; sales, however, increased nearly 15 percent in that year, from $2.33 billion to $2.67 billion.

Key Dates:

1901:: John W. Nordstrom opens a shoe store in Seattle with Carl Wallin, called Wallin & Nordstrom.
1923:: Second store is opened in Seattle.
1928:: Nordstrom retires and sells his share in the firm to his sons Everett and Elmer.
1929:: Wallin retires and also sells his shares to the Nordstrom sons.
1930:: The shoe stores are renamed Nordstrom's.
1933:: A third son, Lloyd, joins the firm.
1950:: Two new shoe stores are opened, one in Portland, Oregon, and one in a Seattle suburb.
1963:: Best Apparel, a Seattle-based women's clothing store, is acquired.
1966:: The Nordstrom's shoe store in Portland begins selling clothing as well, adopting the name Nordstrom Best, which is soon the name of the company and all of its outlets.
1968:: Third generation of Nordstroms take over management command.
1971:: Nordstrom Best goes public.
1973:: Company changes its name to Nordstrom, Inc.; first Nordstrom Rack opens.
1978:: Opening of a store in Orange County, California, marks the first move outside the Northwest.
1985:: Revenues surpass the $1 billion mark.
1988:: First East Coast store opens in McLean, Virginia.
1991:: First Midwest store opens in the Chicago suburb of Oak Brook, Illinois.
1995:: The third-generation Nordstrom managers retire; non-family-member John Whitacre becomes chairman, while six fourth-generation family members become copresidents.
2000:: Whitacre is ousted; Bruce Nordstrom is named chairman, Blake Nordstrom, president; Nordstrom acquires Façonnable S.A.

Slower Growth in the 1990s

In the early 1990s, Bruce, James, and John Nordstrom, John McMillan, and Robert Bender collectively still owned a 40 percent stock interest and continued to maintain tight control of the company. Although Nordstrom suffered from the recession of the early 1990s, it continued to expand and open new stores in the East and Midwest. In September 1990, Nordstrom launched its first store in the metropolitan New York area, in Paramus, New Jersey. In April 1991 Nordstrom debuted its first Midwest store—in Oak Brook, Illinois, a Chicago suburb. In typical Nordstrom style, the store unveiled featuring 125,000 pairs of shoes, a concierge, an espresso bar, and a wood-paneled English-style pub. In 1991 the company also opened stores in Riverside, California; Edison, New Jersey; and Bethesda, Maryland.

Sales and earnings rebounded a fraction in 1990. Sales rose 8 percent to $2.89 billion, and profits rose a minuscule 0.7 percent to $115.8 million. In 1990 women's apparel and accessories accounted for 59 percent of Nordstrom's total sales; men's apparel accounted for 16 percent; and shoes—still a company mainstay—constituted 19 percent of all sales.

Such single-digit growth became the norm for Nordstrom throughout the early and mid-1990s, as sales grew sluggish thanks in large part to fluctuations in demand for women's apparel and the severe recession in southern California, where more than half of the company's total store square footage was located in the early years of the decade. The double-digit growth of the 1980s was gone—in fact, the sales increases of the 1990s were largely attributable to new store openings, with same-store sales (that is, sales at stores open more than a year) flat.

Largely shying away from the troubled California market, Nordstrom increasingly sought out new territory for expansion, particularly in the Midwest, South, and Northeast. In 1996 alone, the Philadelphia, Dallas, Denver, and Detroit metropolitan areas were added to the Nordstrom empire through new store openings. While it continued its steady expansion, Nordstrom also made a number of moves indicative of a company in something of a transition. Nordstrom produced its first mail-order catalog in the early 1990s, opened the first Nordstrom Factory Direct store near Philadelphia in 1993, and launched a proprietary Visa card in 1994. Also in 1993, the company opened a men's boutique in New York called Façonnable (pronounced fa-so-na-bleh) in partnership with the French firm Façonnable S.A. Nordstrom had been the exclusive U.S. distributor of Façonnable's line of upscale men's and women's apparel and accessories since 1989.

Meanwhile, with net earnings slipping somewhat (from 5.3 percent in 1988 to 3.91 percent in 1993), Nordstrom sought to cut costs, in particular its selling, general, and administrative costs, which accounted for 26.4 percent of sales in 1992. This relatively high figure resulted from Nordstrom's generous employee incentive program that fueled the company's reputation for customer service. By 1995, however, these costs had actually increased to 27.2 percent of sales, while net earnings improved only slightly to 4.01 percent.

Although considered innovative in many areas, Nordstrom had stayed away from large investments in systems technology prior to the mid-1990s. In 1995 a new information system was installed, along with a new system for personnel, payroll, and benefits processing. Most importantly, Nordstrom's first inventory control system rolled out that same year in southern California, with companywide rollout the following year. Although the status of an item throughout all stores could be checked using the system, Nordstrom maintained its traditional decentralized buying, bucking an industry trend toward centralization.

Perhaps the most significant transition took place in the management arena late in 1995, when Nordstrom's four cochairmen—Bruce, James, and John Nordstrom and John McMillan—retired. This third generation of Nordstroms to lead the company were replaced by former copresidents Ray Johnson and John Whitacre, who became the new cochairmen (although Johnson subsequently retired in September 1996), and were in turn replaced in the copresidency by six fourth-generation family members—Bill, Blake, Dan, Erik, Jim A., and Pete Nordstrom—all in their early 30s. The new management team faced the difficult task of taking over in the hypercompetitive and sluggish sales environment of the mid-1990s as well as attempting to maintain Nordstrom's position as one of the top upscale retailers in the country.

Between 1997 and 1999 the company opened another ten new Nordstrom stores, adding 3.7 million square feet to the chain total. Among these was a new flagship store in downtown Seattle, which opened in August 1998 as a renovation of the historic Frederick & Nelson building, the flagship location for the Frederick & Nelson department store chain, founded in 1890. The states receiving their first Nordstrom store during the late 1990s were Arizona, Connecticut, Georgia, Kansas, Ohio, and Rhode Island. By 2000, there were 77 full-line Nordstrom stores, 38 Nordstrom Racks, and 23 Façonnable boutiques. Late in 1998 the company launched its online store at nordstrom.com. Nordstrom stock began trading on the New York Stock Exchange in June 1999.

Unfortunately, Nordstrom's struggles continued during this period. Many customers began viewing its merchandise as being too formal and neither keeping up with the latest lifestyle changes nor offering pacesetting fashions. In addition the unwieldy six-person copresidency inhibited rapid decision-making, and Nordstrom was well behind its competitors in making full use of information technology systems. In February 2000 Whitacre dismantled the copresidency, reassigning five of the Nordstrom cousins to line-management jobs. On the merchandise front, the company introduced new high-margin, private-label fashion lines for women, and centralized purchasing was instituted in order to provide a consistent chainwide merchandise look and to increase leverage with vendors. Along the same lines, regionally created advertising was replaced with the firm's first national television campaign to create a consistent Nordstrom image. Finally, the company's outdated computer systems began to be upgraded to more easily track merchandise and collect data on customer trends.

Return of Family Management, Early 2000s

The merchandising changes, however, quickly backfired. The overhaul, backed by an advertising campaign with the tag line "Reinvent Yourself," emphasized more youthful fashions that were appealing to 20-somethings but that alienated Nordstrom's core baby-boomer shoppers. Sales remained lackluster and earnings were down, leading to Whitacre's ouster in an August 2000 management shakeup. Bruce Nordstrom came out of retirement to take over the chairman's position, while his son Blake assumed the day-to-day reins as president. Blake Nordstrom, one of the former copresidents, had most recently been in charge of Nordstrom Rack. These developments occurred during one of Nordstrom's least profitable years in some time, as net income for fiscal 2000 totaled just $101.9 million on sales of $5.53 billion. Same-store sales increased just 0.3 percent over the previous year's sales. Also in 2000, Nordstrom acquired Façonnable S.A. for about $170 million, gaining full control of the Façonnable brand and the 53 Façonnable boutiques located around the world, mainly in Europe.

The new management team, attempting to turn the retailer's fortunes around, had the further problem of an economic downturn to deal with. After a brief upturn, same-store sales began falling in August 2001, leading the company to lay off as many as 2,500 employees late in the year as part of a cost-cutting initiative. Nordstrom also held its first-ever fall clearance sale to try to reduce excess inventories (unlike most competitors, who conducted regular sales, Nordstrom had traditionally held few promotions: two half-yearly sales for men and women, and an anniversary sale in July). Same-store sales fell 2.9 percent for the year, while net sales increased just 1.2 percent, despite the opening of four Nordstrom department stores and eight Nordstrom Racks. During the early 2000s, new store openings for the Nordstrom flagship centered on the Sun Belt, including the first locations in Florida and several additional ones in Texas. The number of store openings, however, was cut back from what had been perceived as an overly aggressive plan during the Whitacre era.

By 2003 Nordstrom appeared to have regained its lost luster through cost containment, technology initiatives, and a refocusing on its niche: luxury goods at affordable prices. Some analysts considered technology to be the key component, particularly a new state-of-the-art merchandising system, which began to be rolled out in 2002. The system could track sales minute by minute throughout its stores, enabling Nordstrom to reduce mark-downs and better target its offerings to customers. On the merchandise side, the retailer began introducing edgier fashion offerings in a department called "via C," in an attempt to leverage its core customer base, which was younger and had a wider age range than its main competitors, Neiman-Marcus Co. and Saks Incorporated. Nordstrom enjoyed its most profitable year ever in 2003: $242.8 million in net income on record revenues of $6.49 billion. Same-store sales rose 4.3 percent, Nordstrom's best performance in ten years. Nordstrom hoped to maintain this forward momentum by continuing to roll out its technology initiatives, keeping a tight rein on expenses, and eschewing large investments in new real estate—only 11 new stores were slated for opening from 2004 through 2008—in favor of sprucing up existing stores and maximizing sales per square foot. The latter was already on the rise, increasing from $319 a square foot in 2002 to $327 in 2003, but were a far cry from industry leader Neiman Marcus's figure of $466 a square foot.

Principal Subsidiaries

Nordstrom fsb; Nordstrom Credit Card Receivables, LLC; Nordstrom Credit, Inc.; Nordstrom Private Label Receivables, LLC; Nordstrom Distribution, Inc.; N2HC, Inc.; Nordstrom International Limited; Nordstrom European Capital Group (France).

Principal Competitors

Saks Incorporated; Neiman-Marcus Co.; Dillard's, Inc.; The May Department Stores Company; Federated Department Stores, Inc.; J.C. Penney Corporation, Inc.; Sears, Roebuck and Co.

Nordstrom, Inc.

views updated Jun 08 2018

Nordstrom, Inc.

MAKE ROOM FOR SHOES CAMPAIGN
REINVENT YOURSELF CAMPAIGN

1617 Sixth Avenue
Seattle, Washington 98101-1742
USA
Telephone: (206) 628-2111
Fax: (206) 628-1795
Web site: www.nordstrom.com

MAKE ROOM FOR SHOES CAMPAIGN

OVERVIEW

According to Forbes magazine, Internet and catalog shoe shopping was a $2 billion business in 1999. Clothing retailer Nordstrom, Inc., which had launched an Internet subsidiary—Nordstrom.com—in 1998, quickly discovered that selling shoes online could be big business. By the end of that year shoes accounted for 30 percent of all Nordstrom's online sales. In response to growing consumer interest in shopping online for shoes, and armed with its history as a shoe store and its reputation for offering a wide selection of footwear, Nordstrom.com spun off a new website, Nordstromshoes.com. The site's inventory included 20 million pairs of shoes from some of Nordstrom's most popular brands and promised consumers that it was the world's biggest online shoe store.

Nordstrom enlisted ad agency Fallon McElligott Minneapolis to create a marketing campaign, estimated to have a budget between $15 million and $17 million, to support the launch of the shoes-only website. Although the new site offered a selection of shoes for women, men, and children, the campaign, titled "Make Room for Shoes," targeted women, who were most likely to be passionate about footwear. It began in November 1999, ran for 60 days, and included television spots, billboards in selected markets, and print ads in fashion, business, and entertainment magazines.

"Make Room for Shoes" was well received by the advertising industry and consumers. Among the awards presented to Fallon for its efforts were two Bronze Clios and multiple Cannes Lion awards for the print ads and an MPA/Kelly Award for the fact that the campaign exceeded all expectations and drove consumer traffic to the new website. In addition, Fortune magazine rated the shopping experience on the Nordstromshoes.com website above par compared with other Internet shopping sites. The Gunn Report, which listed results of all the major advertising award contests each year to establish a worldwide guide of top-winning ads for the advertising industry, ranked the Nordstromshoes.com print ads among the year's most awarded. Nordstrom also reported that its July 2000 online sales increased 700 percent compared to the same period the previous year.

HISTORICAL CONTEXT

When John W. Nordstrom opened his first store in 1901 in Seattle, Washington, the only merchandise he offered was shoes. The business grew, becoming the largest independent shoe-store chain in the United States by 1960. In the mid-1960s the retailer expanded its offerings to include women's clothing. Men's and children's apparel were added to the product mix in 1966. The chain eventually grew to 103 stores in 23 states. For people who were unable to shop in one of its stores, Nordstrom offered a mail-order-catalog business. In 1998, responding to growing consumer interest in Internet and online shopping, Nordstrom launched Nordstrom.com as a subsidiary of the company. The company's new e-commerce presence was focused on expanding its retail business both online and in catalog sales.

Nordstrom.com and its merchandise selection appealed to consumers. Following the launch of its website in 1998 the company reported that Internet sales, along with catalog purchases, accounted for $200 million of the company's $5 billion in overall sales. And shoes were a big seller. According to company records, 30 percent of its Internet sales were shoes, with footwear accounting for 7 of the top 20 best-selling items online. Based on the success of shoe sales through its website, in 1999 the company launched Nordstromshoes.com. The new site was a subsidiary of Nordstrom.com and focused entirely on shoes. It offered a selection of 20 million pairs of shoes and featured products from 40 of Nordstrom's top shoe brands for everyone in the family, including Cole-Haan, Dr. Martens, and Stride Rite, as well as its private-label brands Classique and Preview. Nordstromshoes.com also returned to the retailer's roots as the largest independent shoe-store chain in the United States, but now Nordstrom tagged its new website as the largest shoe store in the world. At the time of Nordstromshoes.com's launch, company copresident Dan Nordstrom told Business Wire that Nordstrom's 100-year history as a shoe retailer combined with the technological skills of the team behind Nordstrom.com would help develop "one of the most exciting fashion destinations on the Internet."

TARGET MARKET

Fallon's research prior to the creation of its "Make Room for Shoes" campaign indicated that, while not all women were passionate about shoes, many women considered it impossible to own too many pairs of them. That idea became the basis for the campaign to introduce Nordstromshoes.com. Although the site offered shoes for men and children as well as women, the campaign took a humorous approach to the passion that a large cross section of the female population had for shoes. It targeted busy professional women who wanted to buy shoes but who had little time to shop in traditional brick-and-mortar stores. It was also aimed at younger, hipper consumers who perceived Nordstrom as a store for more mature shoppers. In addition, Fallon hoped to convince consumers that it was possible to purchase shoes without trying them on first and that buying them online was a good alternative to buying them in a traditional store.

COMPETITION

In 1999 Nordstrom was not the only company venturing into the online shoe business. A long list of retailers—both brick-and-mortar ones such as Nordstrom as well as businesses specifically created for the Internet—were selling shoes on their websites. Among the sites were bluefly.com, which offered discounts on Prada stilettos, Dr. Scholl's sandals, and everything in between; candies.com, which sold its own brand of footwear for teens; 81shoes.com for kids or preteens; MVP.com, offering athletic shoes for everyone; magnumboots.com, with a selection of work boots designed for men and women with jobs in construction, law enforcement, and the postal service; and kennethcole.com for fashion-minded women. Two online stores that went head-to-head with Nordstromshoes.com were Zappos.com and onlineshoes.com.

Zappos.com shared two things in common with Nordstromshoes.com: it was launched in 1999, and it billed itself at the world's largest online shoe store. The company competed with Nordstromshoes.com by allowing consumers to shop for shoes using a variety of criteria, such style, size, and price, and it offered a selection of shoes from 125 brand names as well as a personal-shopper service. It also reportedly had 90,000 styles and 2 million pairs of shoes in stock. By July 2000, one year after its launch, Zappos.com was named the highest-ranking footwear e-tailer by PC Data Online, ahead of Nordstromshoes.com.

WIN SHOES FOR LIFE CONTEST INTRODUCES SHOPPERS TO NEW NORDSTROM WEBSITE

To attract shoppers to its new website, Nordstromshoes.com, Nordstrom launched its Make Room for Shoes contest, in which five grand-prize winners would receive new shoes for life. The prize had an estimated retail value of $15,000. In addition, 25 first-prize winners would each receive new shoes for one year, with a retail value of up to $1,000. The contest ran from November 1 through November 30, 1999, with a winner drawn weekly beginning November 7. Winners selected their prizes from the Nordstromshoes.com inventory of more than 20 million pairs of men's, women's, and children's shoes.

Onlineshoes.com was an old-timer by Internet retailer standards. The company had been selling shoes online since 1996, and like Nordstromshoes.com, it was an Internet spin-off of its brick-and-mortar parent company, the shoe-store chain Gerler & Son, based in Seattle, Washington. Its website promised, "All the Shoes, All the Sizes, All the Time." According to the company, its Internet business plan followed the model of a traditional retail company. It also stated that it planned to promote its business primarily through advertising on the Internet, supplemented by ads in magazines and newspapers. To encourage consumers to shop for shoes at its site, onlineshoes.com offered a 30-day money-back guarantee on all of its merchandise.

MARKETING STRATEGY

When Nordstrom decided to launch an online shoe store, the company enlisted Fallon McElligott Minneapolis to create a marketing campaign that would introduce the new website to consumers. According to Peter McHugh, Fallon's group creative director, consumer research—which included interviews with women who seemed to agree that a woman could never have too many shoes—led to the idea for the campaign's theme, "Make Room for Shoes." Working from the original idea, Fallon developed three television spots that showed women making room for their shoes. The $15 to $17 million, 60-day campaign also included print and outdoor advertisements.

The "Make Room for Shoes" television spots, titled "Moving Van," "Crush," and "Doorstep," used humor to portray the passion many women had for shoes and the extremes they might go to in their attempt to make sure they had plenty of room for new additions to their footwear. Spots appeared during prime time on network and cable channels and aired during some of television's most popular programs aimed at women, including Ally McBeal, The Practice, and Frasier. In "Moving Van" a young couple was shown driving down a highway in a moving van loaded with their possessions. Suddenly struck by the need to make room for more shoes, the woman began throwing their belongings from the van. Lamps, a sofa, and her husband's motorcycle were all tossed out onto the highway. "Crush" depicted a middle-aged woman arriving at a junkyard in a shiny, fully restored 1957 red Cadillac. After a brief conversation with the junkyard's owner, the woman watched as the car was lifted onto a crushing machine and flattened. A scene shift then showed the woman's husband at home opening the garage, ready to wash his prized Cadillac, only to find the flat car propped against the wall. His wife, too, had made room for more shoes. The final spot, "Doorstep," pictured a woman stopping her car in front of a moonlit home. She got out of the car and struggled to carry her sleeping husband, dressed only in his boxers, to the home's front door. She quietly set the still-sleeping man down on the porch and attached a note to him that read, "Please take care of my husband." This woman had thus also made more room for her shoes.

Print ads appeared in newspapers that were typically read by women professionals, such as the Los Angeles Times, USA Today, and the Wall Street Journal. Print ads also ran in fashion, entertainment, and business magazines, including Allure, W, InStyle, Entertainment Weekly, and Fast Company. Billboard ads were strategically placed in Chicago, New York, and San Francisco to target women commuting to and from work. One print ad showed a picture of a smiling couple in which the man had been ripped out. Another pictured a child's bedroom with everything removed except the curtains and a pink mylar balloon floating near the ceiling in one corner. The text read, "Make room for shoes. Get rid of everything else. Nordstrom has the world's biggest shoe store."

OUTCOME

Fallon's "Make Room for Shoes" campaign was well received by both the advertising industry and consumers. Following the campaign's 1999 launch, the 2000 Gunn Report, an annual industry publication that listed the award-winning campaigns from the top international and national creative competitions, named Fallon the third-most-awarded advertising agency in the world. The report also placed Nordstromshoes.com at number 18 on the list of most-awarded print ads.

Among the awards given in 2000 that led to Fallon's ranking in The Gunn Report were two Clios for the Nordstromshoes.com print ads "Public Transportation" and "Kid's Room," Bronze Cannes Lions awards for the print ads "Kid's Room," "Closet," and "Screw Cooking," and a Magazine Publishers of America (MPA) Kelly Award for the entire campaign. The MPA/Kelly Award noted that the campaign exceeded expectations in encouraging consumers to visit the Nordstromshoes.com website and in showing that the retailer understood women's passion for shoes. In addition, the Advertising Women of New York, which recognized agencies and clients for their positive or negative portrayals of women in advertising, honored the campaign. During the organization's annual "The Good, the Bad, and the Ugly" awards event Fallon received several Good awards, including the Grand Good for the Nordstromshoes.com television spot "Moving Van."

As consumers faced the hectic holiday season, one of the websites they turned to for shopping was Nordstromshoes.com, which opened for business in November 1999. A review of 50 shopping websites conducted during the holidays for Fortune magazine by Columbus, Ohio-based Resource Marketing rated the shopping experience at Nordstromshoes.com above par. Rating criteria included the ease with which orders were placed, on-time delivery of orders, and the helpfulness of each site's customer-service staff. Further, according to Nordstrom officials, July 2000 sales at the company's online sites Nordstrom.com and subsidiary Nordstromshoes.com increased 700 percent over July 1999 sales.

REINVENT YOURSELF CAMPAIGN

OVERVIEW

In 2000 Nordstrom was an aging retailer with an identity crisis. Its core customers—baby boomers—continued to rely on the chain's classic merchandise and top-of-the-line customer service that often included employees writing thank-you notes following a purchase and staffers willing to carry an overloaded customer's packages to her car. Younger consumers, however, considered the department store, which typically served as an anchor in a suburban mall, as a place where their grandmothers shopped. In 1998 Nordstrom undertook a series of surveys and focus-group studies of customers and noncustomers, employees, and stockholders. The results indicated that Nordstrom's steadily declining sales, particularly in women's apparel, were due in part to the perception that its stores were stuffy and its fashions boring and outdated.

In 2000 Nordstrom began the process of reinventing itself, including opening new stores with more contemporary decor—such as one on Chicago's Michigan Avenue—remodeling existing stores, and stocking trendier merchandise. At the same time, with the help of its Minneapolis-based advertising agency, Fallon Worldwide, Nordstrom launched a national marketing campaign encouraging customers to reinvent themselves as well. The $40 million campaign, appropriately themed "Reinvent Yourself," began in early 2000 and included spots aired during hit television shows such as Friends and Ally McBeal. Print ads appeared in major magazines, and billboards ads were placed in key markets, including New York City's Times Square. The print ads depicted new takes on traditional stereotypes; for instance, the girl next door, who was expected to be dressed in a dotted dress and pigtails, was instead showed dressed in non-stereotypical orange spike-heeled boots paired with red slacks.

Despite earning accolades and awards from the Advertising Women of New York for the campaign's positive portrayal of women, and although the campaign resonated with younger consumers, it alienated the baby boomers that made up Nordstrom's core customer base. Nordstrom's sales continued to drop following the campaign's launch, slipping 24 percent in the first quarter of 2001. In response, the chain pulled the campaign and backpedaled on its merchandising strategy.

HISTORICAL CONTEXT

Nordstrom opened for business in 1901 in Seattle, Washington, as a shoe store. Over the years the company built a devoted customer base on its business philosophy of providing exceptional service, selection, quality, and value. Eventually the company grew to eight stores, and by 1960 it was the largest independent shoe-store chain in the United States. Its offerings gradually expanded to include apparel. The company went public in 1971 and by 1973 had passed the $100 million sales mark.

In 1998 Nordstrom expanded its six-year-old catalog business and ventured onto the Internet. It launched Nordstrom.com with the goal of building its flagship business and focusing on what had given the chain its start: selling shoes. Breaking from its tradition of using regional marketing with a focus on newspaper print ads, in 1999 the chain launched its first-ever national advertising campaign. The $15 million campaign, developed by Fallon McElligott, was designed to promote Nordstrom's subsidiary, www.Nordstrom.com, and it especially emphasized the company's wide selection of high-quality shoes, sold on the new site www.NordstromShoes.com, which was touted as the "world's biggest shoe store." Tagged "Make Room for Shoes," the campaign included print and television advertising as well as a national sweepstakes with a grand prize of a lifetime supply of shoes (valued at $15,000). But despite shifting to a national approach for its marketing, in 2000 the aging retailer found itself on a downward slide. To try and reverse the trend and to entice younger consumers away from the middle-of-the-mall boutique-style shops and into its department stores, Nordstrom decided to run another national marketing campaign and enlisted Fallon to develop it. The resulting "Reinvent Yourself" campaign was launched in 2000.

TARGET MARKET

With its high-quality, classic clothing offerings and reputation for catering to customers' needs, Nordstrom was a shopping haven for baby boomers, both men and women. But in an effort to shake its stodgy image and lure younger customers into its stores, Nordstrom updated its merchandise and aimed its advertising at younger urban consumers. Not wanting to alienate the older suburban shoppers who were used to the chain's informal, easygoing approach to customer service, Nordstrom also wanted to aim the advertising at middle-aged, middle-income, suburban women. Additionally, the company hoped to shatter cultural stereotypes such as soccer moms, women who shuttled their kids from one activity to another, the girl-next-door, and high-energy career women. All women were encouraged to reinvent themselves and their way of thinking about how they expressed their individuality. Nordstrom did not neglect men with the "Reinvent Yourself" campaign, either. The campaign encouraged men—from recent college graduates starting their careers to experienced professionals—to rethink everything from business suits to casual wear.

COMPETITION

While Nordstrom worked to reinvent its stores and update its merchandise to attract new, younger customers while keeping its core customers, Federated Department Stores, Inc., the largest upscale department-store retailer in the United States, was facing similar challenges. Although Federated, which owned the department-store chains Bloomingdale's and Macy's, reported record-high profits in 1999, in 2000 its goal was to attract younger customers, who perceived department stores as places where their grandmothers shopped. With a reported annual employee turnover rate of 60 percent in some stores, another concern for Federated was hiring and keeping staff. Federated's strategy included testing several revamped junior departments in its California and Florida stores, introducing a private-label brand of apparel and accessory items for kids and teens, and increasing efforts to hire young talent through its recruitment website for college students, www.retailology.com.

The number three department-store chain in the United States—behind Federated and Saint Louis, Missouri-based May Department Stores Company—was Dillard's, headquartered in Little Rock, Arkansas. It faced its own unique problems in 2000. Dillard's reported that earnings for its second quarter in 2000 were down 74 percent from 1999, and adding insult to injury was an article published in Forbes magazine that questioned every aspect of the company's management, from the Dillard family's iron-fisted rule to its refusal to provide business-related information to investors, analysts, and the media. The article stated that, while Dillard's had once been a first-class retailer, it had fallen to perhaps the nation's worst. Looking for ways to improve its profit margins, Dillard's turned to one of Federated's tactics: private label brands. But problems, including negative press, continued to hinder Dillard's. In 2001 the company pulled its commercials from CBS television affiliates following a 60 Minutes segment alleging that Dillard's practiced racial profiling to target shoplifters. According to a report in Advertising Age, Dillard's stated that 60 Minutes had treated the chain unfairly in its broadcast, allowing it only a few seconds of a 13-minute story for a response.

MARKETING STRATEGY

Nordstrom's $40 million national marketing campaign, "Reinvent Yourself," was reportedly the biggest ever undertaken by the company. The campaign was based on extensive consumer research conducted by Nordstrom that made it clear that Nordstrom's reputation for offering classic clothing in a prim and proper shopping environment no longer resonated with shoppers. Instead there was a strong preference for searching for trendy merchandise in a hip environment. In addition, customers perceived the stores as outdated and difficult to shop in. Nordstrom took the surveys to heart and began a major remodeling project at its stores and revamped its merchandise offerings. To support the effort Nordstrom launched its "Reinvent Yourself" campaign. Developed by Minneapolis-based agency Fallon Worldwide, it featured ads in print and on billboards as well as television spots. The campaign was designed to convince consumers that Nordstrom was listening to what customers were saying and that the company was determined to meet their needs by updating its stores and restructuring its women's apparel divisions, among other efforts.

"Reinvent Yourself" kicked off in February 2000 with TV spots that ran during network shows, including Friends, Ally McBeal, and The Practice, as well as on cable channels such as VH-1 and A&E. The spots suggested a variety of ways that viewers could reinvent themselves or aspects of their lives, much as Nordstrom was reinventing itself. One black-and-white TV spot, titled "Doorway," portrayed a young man standing outside a closed door under an umbrella in the rain, waiting to meet his date. When the beautiful woman opened the door, it was clear from the man's expression that he was impressed. The spot closed with the tagline "Reinvent the compliment."

TEENS ON NORDSTROM'S MARKETING RADAR

Using computers and software technology, Nordstrom launched a marketing campaign in 2000 designed to attract teen shoppers. The retailer partnered with Teen People magazine to produce an interactive CD, called "BP-ROM," that promoted Nordstrom's junior department, the Brass Plum. Featured on the CD were spring fashions, accessories, and beauty products, clips from music videos, and select scenes from WB Network television shows. Selling to Kids magazine stated that the campaign fit with the high-tech lives most teens lived and that the promotion meshed perfectly with Nordstrom's "Reinvent Yourself" campaign, which was developed to dispel common stereotypes about the high-end retail department store, including that the store was out of sync with contemporary shoppers.

In a break from Nordstrom's tradition of running its ads in newspapers, print ads for the campaign appeared in glossy national magazines, including Elle and Vanity Fair. Ads published in the magazines Essence and Latina reached out to minority shoppers. The marketing also encouraged consumers to think outside of the box and used humor to address cultural stereotypes. One print ad portrayed a middle-aged woman dressed in glittery red slacks and a black cardigan along with the slogan "Reinvent soccer mom," and another suggested "Reinventing the heirloom" and pictured a shapely young woman's abdomen with a diamond stud in her navel. Ads aimed at men included one that pictured a businessman lounging in a reclining chair with a legal pad and pencil in hand but dressed in an unbuttoned oxford shirt and khaki shorts. The slogan exclaimed, "Reinvent the power suit."

OUTCOME

Evidence that the company seemed to be reaching its target audience of younger consumers was revealed in comments made by shoppers in a Detroit-area Nordstrom. A 30-year-old, stay-at-home mother referred to the store's designer fashions department when she told the Detroit Free Press, "This section used to be so grand-mothery, and now it's fun." A 23-year-old college student said of the updated store and merchandise, "I love it. I've noticed there's a lot better selection for my age group. The prices appealed to me, too." The "Reinvent Yourself" campaign was also recognized by the Advertising Women of New York for its positive portrayal of women in its television spots. During its "The Good, the Bad, and the Ugly" awards ceremony the organization presented two of the spots with "Good" honors.

Despite the company's "Reinvent Yourself" campaign and Nordstrom's efforts to update stores and push more trendy merchandise, many customers and industry insiders still perceived the aging department store as old fashioned and dull. An unidentified retailer told Women's Wear Daily, "Generally the merchandise has become boring. They've been flat for too long." Others noted that the campaign seemed to cater to 20-something consumers, resulting in the loss of the store's core customers: baby boomers.

Further, while Nordstrom's "Reinvent Yourself" campaign achieved some of its goals, it was not enough to produce positive results. In the first quarter of 2001 Nordstrom reported that its profits had dipped 24 percent and that same-store sales had fallen 3.7 percent. Following the continued drop in sales, a complete shakeup at the upper levels of the chain—including pushing out company chairman and chief executive Jack Whitacer—eventually returned full control of the business to Nordstrom family members. Additionally, because the "Reinvent Yourself" campaign had alienated the company's core customers, Nordstrom reversed itself and pulled the campaign. By July 2001 Nordstrom appeared to be back on track, reporting that sales were up 1.8 percent from the same month in 2000. The company also reported that sales in the women's category, the one that attracted baby-boomer shoppers and that accounted for 36 percent of total sales, had shown increases for the previous six months.

Nordstrom, Inc.

views updated May 11 2018

Nordstrom, Inc.

1501 Fifth Avenue
Seattle, Washington 98101-1603
U.S.A.
(206) 628-2111
Fax: (206) 628-1795

Public Company
Incorporated: 1901 as Wallin & Nordstrom
Employees: 37,000
Sales: $4.11 billion (1995)
Stock Exchanges: NASDAQ
SICs: 5311 Department Stores; 5651 Family Clothing Stores; 5661 Shoe Stores

Nordstrom, Inc. was started in 1901 as a single shoe store in Seattle, Washington, that was opened by two Swedish immigrants. From those origins, the family-owned enterprise expanded into a 90-outlet, 18-state chain, which tallied $4.11 billion in sales in 1995. Carefully supervised expansion, tight family management, wide selection, and attentive customer service have long been the hallmarks of Seattle-based Nordstrom, the largest independent fashion specialty retailer in the United States.

Small Shoe Store Opened in 1901

John Nordstrom, a 16-year-old Swede, arrived in Minnesota in 1887 with $5 to his name and, after working his way across the United States, settled briefly in Seattle. In 1897 he headed north to Alaska in search of gold. He found it. In 1899, $13,000 richer, Nordstrom moved back to Seattle, where he opened a shoe store with Carl Wallin, a shoemaker he had met in Alaska. On its first day of business in 1901, Wallin & Nordstrom, sold $12.50 in shoes.

Business quickly picked up. By 1905 sales increased to $80,000. The business continued to grow, and in 1923 the partners opened a second store in Seattle. By 1928, however, 57-year-old John Nordstrom had decided to retire from the shoe business, and passed on his share to his sons Everett and Elmer. Carl Wallin retired soon after and likewise sold his share to the next generation of Nordstroms. In 1933 John Nordstrom’s youngest son, Lloyd, joined the partnership.

The business that John Nordstrom left was substantially larger than the one he started back in 1901. It was up to the next generation of Nordstroms, however, to build on their father’s success. In 1929 the Nordstrom brothers doubled the size of their downtown Seattle store. In 1930, despite the onset of the Great Depression, the two stores made $250,000 in sales. The shoe stores survived the Depression, but faced another severe threat during World War II, when leather rationing prohibited U.S. consumers from buying more than three pairs of shoes per year. The Nordstrom brothers had to search nationwide for supplies of shoes.

Expansion and Diversification in the 1950s and 1960s

In the postwar decades, the Nordstrom brothers built the company into the largest independent shoe chain in the United States. In 1950 the Nordstroms opened two new shoe stores: one in Portland, Oregon, and one in a Seattle suburb. Nine years later, Nordstrom remodeled its Seattle flagship store, and stocked it with 100,000 pairs of shoes—the biggest inventory in the country. By 1961 Nordstrom operated 8 shoe stores and 13 leased shoe departments in Washington, Oregon, and California. That year, the firm grossed $12 million in sales and had 600 employees on its payroll.

In the early 1960s, the Nordstrom brothers came to a crossroads of sorts. Spurred by their success, they were convinced that their business could expand. The brothers were unsure whether they should simply expand their shoe business to the East and South or branch out into other areas of retailing. The brothers chose to diversify, and purchased Best Apparel, a Seattle-based women’s clothing store. With the addition of apparel outlets, the company expanded rapidly. In 1965 the Nordstroms opened a new Best Apparel store adjacent to a Nordstrom shoe store in suburban Seattle. In 1966 the company acquired a Portland retail fashion outlet, Nicholas Ungar, and merged it with the Nordstrom shoe store in Portland.

In the late 1960s, the modern Nordstrom department store began to take shape. Between 1965 and 1968, the company opened five stores that combined apparel and shoes. In 1967, when annual sales had reached $40 million, the chain’s name was changed to Nordstrom Best. The firm diversified further in these years, as Nordstrom Best began to sell men’s and children’s clothing as well.

Third Generation Took Control in 1970

In 1968 Everett Nordstrom turned 65, and he and his two brothers decided to turn over the reins of the company to the next generation of Nordstroms. Five men—Everett’s son Bruce, Elmer’s sons James and John, Lloyd’s son-in-law John A. McMillan, and family friend Robert E. Bender—took control of the company in 1970.

In August 1971 the company went public, offering Nordstrom Best stock on the over-the-counter market. Family members retained a majority of the stock, however, and as of the mid-1990s they continued to hold a significant interest. In 1971 Nordstrom earned $3.5 million on sales of $80 million. In 1973, when sales first topped $100 million, the company changed its name to Nordstrom, Inc.

The firm continued to grow steadily throughout the 1970s by opening new stores, increasing volume in existing stores, and diversifying. In 1974 annual sales hit $130 million. The following year, Nordstrom bought three stores in Alaska. In 1976 the firm launched a new division, Place Two, which featured, in smaller stores, a selected offering of men’s and women’s apparel and shoes. By 1977 Nordstrom operated 24 stores, which generated sales of $246 million.

In 1978 Nordstrom expanded into the southern California market, opening an outlet in Orange County. That year, the firm reaped $13.5 million in earnings on nearly $300 million in sales. Buoyed by the success, Nordstrom’s executives charted an aggressive expansion program, and began to open bigger stores in California. Their late-1970s confidence presaged a decade of phenomenal, but controlled, growth.

Rapid Growth in Early 1980s Fueled by Legendary Customer Service

By 1980 Nordstrom was the third-largest specialty retailer in the country, ranking behind only Saks Fifth Avenue and Lord & Taylor. That year, the firm operated 31 stores in California, Washington, Oregon, Utah, Montana, and Alaska. In 1980 a new expansion plan called for 25 new stores to be added in the 1980s, and the Nordstroms projected that both earnings and total square footage would double by 1985.

The projection was not sufficiently optimistic. In 1980 sales hit $407 million, and in the next few years, sales and earnings continued to rise substantially. Between 1980 and 1983, when sales jumped to $787 million, earnings more than doubled, going from $19.7 million to $40.2 million. In 1982 Nordstrom launched a third division, Nordstrom Rack—a string of outlet stores that the firm used to move old inventories at discount prices. The chain’s biggest growth area, however, was in the huge California market. By 1984 there were seven Nordstrom stores in that state. Five years later, Nordstrom had 22 full-size stores in California.

Nordstrom increasingly came to be recognized as an efficient, upscale, full-service department store. Its aggressive customer service plainly brought results. The firm consistently maintained the highest sales per square foot of retail space ratios in the industry, nearly twice those of other department stores.

Nordstrom’s success was due to a variety of factors. Throughout its existence, shoes accounted for a good deal of the firm’s sales—about 18 percent in 1989. In most fashion and apparel stores, shoes constitute a smaller percentage of sales. In addition Nordstrom consistently maintained huge inventories and selection, which were usually twice the size of other department stores. In the mid-1980s, a typical outlet stocked 75,000 pairs of shoes, 5,000 men’s dress shirts, and 7,000 ties. Moreover, a decentralized corporate structure allowed local buyers, who knew their customers’ needs, to make inventory selections.

Most significantly, though, Nordstrom’s management encouraged the development of an aggressive sales force. The vast majority of Nordstrom clerks worked on commission, and the average salesperson earned $24,000 annually. Managers generally promoted from within the ranks of salespeople, which intensified the desire to sell.

In the 1980s the firm’s customer service became legendary, as tales of heroic efforts by salespeople became legion: clerks were known to pay shoppers’ parking tickets, rush deliveries to offices, unquestioningly accept returns, lend cash to strapped customers, and to send tailors to customers’ homes. Salespeople received constant pep talks from management, and motivational exercises were a routine part of life at Nordstrom. Nordstrom also created an extremely customer-friendly environment. Many stores had free coat check service, concierges, and piano players who serenaded shoppers.

As the economy boomed in the 1980s, Nordstrom’s figures climbed apace. In 1985 sales first topped $1 billion, as they jumped to $1.3 billion. In 1987 the firm reaped profits of $92.7 million on sales of $1.92 billion.

Company Perspectives:

Since 1901, Nordstrom has been guided by its founder’s philosophy: offer the customer the best possible service, selection, quality, and value.

Began Eastward Expansion in the Mid-1980s

Nordstrom’s growth in the latter half of the 1980s stemmed from a combination of expansion into new territories and the creation of larger stores in existing Nordstrom territory. In 1986, when the firm operated 53 stores in six western states, Nordstrom began to turn its sights to the East. In March 1988, Nordstrom opened its first store on the East Coast, a 238,000-square-foot facility in McLean, Virginia, just outside Washington, D.C. On its first day, the store racked up more than $1 million in sales. Over the first year, the store brought in $100 million in sales.

The same year, Nordstrom expanded on the West Coast as well, opening its biggest store, a 350,000-square-foot facility in downtown San Francisco. The lavish San Francisco store featured 103 different brands of champagne, 16 varieties of chilled vodka, and a health spa, among other luxurious amenities.

By the end of 1988, Nordstrom had 21,000 employees toiling in its 58 stores. Together they convinced customers to buy $2.3 billion worth of goods in 1988, and earned profits of $123 million for the corporation.

Expansion in other areas of the East continued in the late 1980s. In 1989 Nordstrom opened a second store in the Washington, D.C., area—in the Pentagon City Mall. That same year the firm also opened outlets in Sacramento and Brea, California. Capping the decade, the company won the National Retail Merchants Association’s Gold Medal. Clearly, Nordstrom had become a paragon of retailing success. Envious of its market share and sales figures, many competitors began to imitate its strategies of large inventory and lavish customer service.

Nordstrom continued to rely on its aggressive sales staff, but the corporate policy of encouraging clerks to go out of their way to make sales caused the company some grief. The employees’ union (which was later decertified) complained about the pressure on employees to sell. In late 1989 a group of unionized employees charged that they were not being paid for performing extra services to customers.

In February 1990, after a three-month investigation, the Washington State Department of Labor & Industries alleged that the company had systematically violated state laws by failing to pay employees for a variety of duties, such as delivering merchandise and doing inventory work. The agency ordered Nordstrom to change its compensation and record-keeping procedures, and to pay back wages to some of Nordstrom’s 30,000 employees. Soon after, the firm created a $15-million reserve to pay back-wage claims. The company, however, remained a target of class-action lawsuits on these matters, which were finally settled out of court in early 1993 when Nordstrom agreed to pay a set percentage of compensation to employees who worked at Nordstrom from 1987 to 1990. The settlement cost the company between $20 and $30 million.

Other unforeseen events in 1989 and 1990 hit the company as well. The San Francisco earthquake of 1989 took a significant bite out of retail sales in the San Francisco Bay area. The general nationwide downturn in retailing hurt the company more, however. In September 1990, Nordstrom, then a 61-store company, announced it would cut costs by 3 to 12 percent and laid off some personnel. In the fourth quarter of 1989, Nordstrom’s earnings dropped 34 percent from the previous year. Earnings fell about 7 percent for the entire year, from $123.3 million in 1988 to $115 million in 1989; sales, however, increased nearly 15 percent in that year, from $2.33 billion to $2.67 billion.

Slower Growth in the 1990s

In the early 1990s, Bruce, James, and John Nordstrom, John McMillan, and Robert Bender collectively still owned a 40 percent stock interest and continued to maintain tight control of the company. Although Nordstrom suffered from the recession of the early 1990s, it continued to expand and open new stores in the East and Midwest. In September 1990, Nordstrom launched its first store in the metropolitan New York area, in Paramus, New Jersey. In April 1991 Nordstrom debuted its first Midwest store—in Oak Brook, Illinois, a Chicago suburb. In typical Nordstrom style, the store unveiled featuring 125,000 pairs of shoes, a concierge, an espresso bar, and a wood-paneled English-style pub. In 1991 the company also opened stores in Riverside, California; Edison, New Jersey; and Bethesda, Maryland.

Sales and earnings rebounded a fraction in 1990. Sales rose 8 percent to $2.89 billion, and profits rose a miniscule 0.7 percent to $115.8 million. In 1990 women’s apparel and accessories accounted for 59 percent of Nordstrom’s total sales; men’s apparel accounted for 16 percent; and shoes—still a company mainstay—constituted 19 percent of all sales.

Such single-digit growth became the norm for Nordstrom throughout the early and mid-1990s, as sales grew sluggish thanks in large part to fluctuations in demand for women’s apparel and the severe recession in southern California, where more than half of the company’s total store square footage was located in the early years of the decade. The double-digit growth of the 1980s was gone—in fact, the sales increases of the 1990s were largely attributable to new store openings, with same-store sales flat.

Largely shying away from the troubled California market, Nordstrom increasingly sought out new territory for expansion, particularly in the Midwest, South, and Northeast. In 1996 alone, the Philadelphia, Dallas, Denver, and Detroit metropolitan areas were added to the Nordstrom empire through new store openings. From 1996 to 1999, the company planned to open 15 Nordstrom stores, adding 3.6 million square feet to the chain total, an increase of one-third. Connecticut, Ohio, Georgia, and Kansas were among the states slated to receive their first Nordstrom store.

While it continued its steady expansion, Nordstrom also made a number of moves indicative of a company in something of a transition. Nordstrom produced its first mail-order catalog in the early 1990s, opened the first Nordstrom Factory Direct store near Philadelphia in 1993, and launched a proprietary Visa card in 1994. Also in 1994, Nordstrom began testing an interactive home shopping channel, in partnership with US West Inc. and J.C. Penney Co. In keeping with its reputation for customer service, Nordstrom envisioned a system in which a customer could not only view merchandise but also interact with a sales clerk who would be visible on the screen. Such high-tech marketing fit well with the profile of a typical Nordstrom customer, generally considered to be early adopters when it came to new technology.

Meanwhile, with net earnings slipping somewhat (from 5.3 percent in 1988 to 3.91 percent in 1993), Nordstrom sought to cut costs, in particular its selling, general, and administrative costs, which accounted for 26.4 percent of sales in 1992. This relatively high figure resulted from Nordstrom’s generous employee incentive program that fueled the company’s reputation for customer service. By 1995, however, these costs had actually increased to 27.2 percent of sales, while net earnings improved only slightly to 4.01 percent.

Although considered innovative in many areas, Nordstrom had stayed away from large investments in systems technology prior to the mid-1990s. In 1995 a new information system was installed, along with a new system for personnel, payroll, and benefits processing. Most importantly, Nordstrom’s first inventory control system rolled out that same year in southern California, with companywide rollout the following year. Although the status of an item throughout all stores could be checked using the system, Nordstrom maintained its traditional decentralized buying, bucking an industry trend toward centralization.

Perhaps the most significant transition took place in the management arena late in 1995, when Nordstrom’s four co-chairmen—Bruce, James, and John Nordstrom and John McMillan—retired. This third generation of Nordstroms to lead the company were replaced by former co-presidents Ray Johnson and John Whitacre, who became the new co-chairmen (although Johnson subsequently retired in September 1996), and were in turn replaced in the co-presidency by six fourth-generation family members—Bill, Blake, Dan, Erik, Jim A., and Pete Nordstrom—all in their early thirties. The new management team faced the difficult task of taking over in the hypercompetitive and sluggish sales environment of the mid-1990s as well as attempting to maintain Nordstrom’s position as one of the top upscale retailers in the country.

Principal Subsidiaries

Nordstrom Credit, Inc.; Nordstrom Distribution, Inc.; Nordstrom National Credit Bank.

Nordstrom, Inc.

views updated May 11 2018

Nordstrom, Inc.

Contact Information:

headquarters: 1501 5th ave.
seattle, wa 98101 phone: (206)628-2111 fax: (206)628-1795 url: http://www.nordstrom-pta.com

OVERVIEW

Nordstrom, Inc. is an upscale retail fashion chain whose merchandise includes apparel, shoes, and accessories for men, women, and children. Nordstrom operates 92 stores including 65 full-line stores, 21 Nordstrom Racks outlet stores, 3 Faconnable boutiques, 2 free-standing shoe stores in Hawaii, and 1 clearance store. Unlike traditional department stores, Nordstrom does not carry home furnishings. Along with its stores, outlets, and boutiques, Nordstrom leases 12 shoe departments in Hawaii and Guam.

Nordstrom is renowned for providing excellent customer service. The company's employees, known as "Nordies," are noted for being enthusiastic about their jobs and their customers. Members of the Nordstrom family continue to be extremely influential in the decisions regarding the store and its merchandise. The company has been passed down through several generations, and in 1995 it had six Nordstrom co-presidents. In 1998, the Nordstrom family owned approximately 36 percent of the company's outstanding shares.

COMPANY FINANCES

In 1997 women's apparel and accessories accounted for 55 percent of Nordstrom's total sales. Twenty-three percent of sales came from shoes, 18 percent from men's apparel and furnishings, and 4 percent from children's apparel and accessories. Over the three years from 1995 to 1997, Nordstrom's net revenues grew from $4.11 to $4.45 to $4.85 billion, but from 1995 to 1996, net earnings slipped from $165.0 to $147.5 million. Some say this was due to Nordstrom's failure to recognize Americans' enthusiasm for brand names and logos. This enthusiasm apparently caused some consumers to shop elsewhere while Nordstrom scrambled to obtain the latest most popular labels.

The slide in earnings caused a fall in stock price, from almost $53.00 in May 1996 to less than $38.00 a share in March 1997. Nonetheless, in 1997 Nordstrom rallied, with net earnings reaching $186 million. From 1996 to 1997, Nordstrom stock had an earnings per share (EPS) increase of 32 percent from $1.82 to $2.40 on a 9-percent increase in sales. From April 1997 to April 1998, stock prices steadily increased from $39.25 to $65.44 with an annual dividend increase from $.50 to $.53 per share.

HISTORY

In 1887, 16-year-old John Nordstrom arrived in Minnesota from Sweden with $5 and almost no ability to speak English. Nordstrom worked his way across the United States as a lumberjack, a miner, and a general laborer, until he reached Seattle where he resided until 1897. After reading a newspaper headline proclaiming a gold strike in Alaska, Nordstrom decided to head north and try his luck mining for gold. Two years later, he returned to Seattle with $13,000 from gold mining, and in 1901 he opened a shoe store with Carl Wallin, a shoemaker he had met in Alaska. Appropriately, the store was called Wallin & Nordstrom.

The first day, the store had $12.50 in sales. But business quickly grew and, by 1923, Wallin and Nordstrom opened a second store in Seattle. Five years later, at the age of 57, Nordstrom retired and passed along his half of the business to his sons Everett and Elmer. At this time there was also a second store in operation. The following year, Wallin sold his portion to the Nordstrom sons. In 1930, the two Seattle stores made $250,000 in shoe sales, in spite of the onset of the Depression, and in 1933, a third son, Lloyd, joined the company. Due to leather rationing in World War II, however, the Nordstroms were forced to expand nationwide in search of supplies of shoes. In 1946, Wallin & Nordstrom was incorporated as Nordstrom, Inc., and in the decades following World War II, the Nordstroms built their company and it thrived. In 1961 Nordstrom employed 600 workers and grossed $12 million in sales in its 8 shoe stores and 13 leased shoe departments in California, Oregon, and Washington. By 1963 the company was the largest independent shoe store chain in the country.

At this time, the Nordstrom brothers decided it was time to expand their business and decided to diversify. In 1963, they acquired Seattle-based women's clothing store, Best Apparel, which had locations in Seattle and Portland. In 1965, the Nordstroms opened another Best Apparel adjacent to one of their shoe stores in the suburbs of Seattle. The following year, Nordstrom purchased Nicholas Ungar, a Portland fashion outlet, and merged it with its Portland shoe store. This was the beginning of the modern Nordstrom department store of the late twentieth century. Between 1965 and 1968, Nordstrom opened five apparel-and-shoe stores. In 1967, the company changed its name to Nordstrom Best and, at about this time, also began selling men's and children's clothing.

In 1968, the three Nordstrom brothers then running the company—Everett, Elmer, and Lloyd—decided to pass the company along to the next generation of Nordstrom men. In 1970 one of Everett's sons, two of Elmer's sons, Lloyd's son-in-law, and a family friend, took control of the business. The following year the company went public, offering Nordstrom Best stock on the over-the-counter market. In 1973, when Nordstrom Best's sales first exceeded $100 million, the company changed its name again to Nordstrom, Inc.

Through the 1970s Nordstrom continued to grow by opening new stores, increasing sales, and continuing to diversify their merchandise. Annual sales reached $130 million in 1974 and the following year, the company acquired three stores in Alaska. In 1976, Nordstrom launched Place Two, a series of smaller stores offering select men's and women's apparel and shoes. In 1978 Nordstrom opened an outlet in Orange County, California, and that year, sales reached almost $300 million and the company netted $13.5 million in earnings. At that time executives began planning an aggressive expansion that would call for adding 25 stores during the 1980s. By 1980 Nordstrom was the third-largest specialty retailer in the United States, operating 31 stores in 6 states, with sales of $407.0 million and earnings of $19.7 million. Between 1980 and 1983, sales rose to $787.0 million and earnings more than doubled, reaching $40.2 million. Nordstrom began a third division in 1982—a series of outlet stores the company could use to move old merchandise at discounted prices; the company called the stores Nordstrom Rack. At this time, the company grew most rapidly in California, where by 1984, Nordstrom had 7 stores. Before 1990 that number would reach 22.

It was in the 1980s that Nordstrom's customer service became famous, almost mythical. Tales were spread about Nordstrom's clerks—some loaned money to strapped customers, accepted receipt-less returns without question, paid parking tickets customers unwittingly incurred while shopping, and sent tailors to customers' homes. Nordstrom's sales force worked on commission and received constant pep talks and motivational reinforcement from management. In 1985, Nordstrom's sales first exceeded $1 billion. Two years later, the company's sales reached almost $2 billion ($1.92 billion) with profits of $92.7 million. In the late 1980s, Nordstrom began developing the reputation of being a top-of-the-line, full-service department store.

In 1986 Nordstrom had 53 stores in 6 western states and the company began to look eastward; two years later, in March 1988, Nordstrom opened its first East Coast store just outside Washington, D.C. in McLean, Virginia. Opening day sales at the store reached more than $1 million, a record for opening-day sales in the company's history. That year, the Virginia store accumulated $100 million in sales. The same year, Nordstrom opened its largest store yet, a luxurious 350,000 square-foot facility in San Francisco. By 1988, Nordstrom had 58 stores and 21,000 employees. At the end of decade, the company's expansion continued: Nordstrom opened another store in the Washington, D.C. area and two outlets in California.

Settlements from employee lawsuits regarding under compensation for their services in the late 1980s and the early 1990s cost the company tens of millions of dollars. The company was also hurt by the San Francisco earthquake in 1989, which significantly deflated retail sales in that area, and by a general decline in sales nationwide. Earnings in 1989 fell 7 percent from the previous year, from $123.3 million in 1988 to $115.0 million in 1989, despite a 15 percent sales increase. In September 1990, the company announced it would trim costs by 3 to 12 percent and it promptly laid off personnel.

FAST FACTS: About Nordstrom, Inc.

Ownership: Nordstrom is a publicly owned company traded on NASDAQ.

Ticker symbol: NOBE

Officers: John J. Whitacre, Chmn., 45, 1997 pay $350,000; Blake W. Nordstrom, 37, Co-Pres.; Erik B. Nordstrom, 34, Co-Pres.; J. Daniel Nordstrom, 35, Co-Pres.; James A. Nordstrom, 36, Co-Pres.; Peter E. Nordstrom, 35, Co-Pres.; William E. Nordstrom, 34, Co-Pres.

Employees: 39,600

Principal Subsidiary Companies: Nordstrom's subsidiary companies include: Faconnable New York, Nordstrom Credit Inc., Nordstrom Inc., Nordstrom Factory Direct, and Nordstrom Rack.

Chief Competitors: As an upscale independent fashion specialty department store, Nordstrom's competitors include: Saks; Neiman Marcus; May Department Stores; Lord & Taylor; Foley's; Robinsons-May; Federated Department Stores; Bloomingdale's; Bon Marche; and Macy's.

In spite of the recession of the early 1990s, Nordstrom opened new stores in the East and the Midwest: in Paramus, New Jersey, in September 1990 and in Oak-brook, Illinois; Riverside, California; Edison, New Jersey; and Bethesda, Maryland, in 1991. In 1990 sales rebounded slightly—8 percent—and profits rose less than 1 percent. Slow growth continued for Nordstrom in the early to mid-1990s, due in part to a serious recession in southern California where much of the store's square-footage was located. Sales increases in the 1990s were mainly due to new store openings; existing store sales were flat.

Nordstrom continued to expand through the late 1990s, adding more full-line stores, more Rack stores, and more boutiques—in California, Colorado, Connecticut, Michigan, New York, Ohio, Pennsylvania, Rhode Island, Washington, and Texas. In the early 1990s, Nordstrom introduced its first mail-order catalog, opened the first Nordstrom Factory Direct store in 1993 outside Philadelphia, and offered a proprietary Visa card in 1994. That same year, Nordstrom joined U.S. West and J.C. Penney Co. to begin testing an interactive home shopping channel. Nordstrom also turned to technology to help improve customer service, increase sales, and monitor inventory, personnel, payroll, and benefits processing.

In the second half of the 1990s, the company again changed hands when, in 1995, the third generation of Nordstroms handed the business over to former Nordstrom co-presidents Ray Johnson and John Whitacre who, in turn, were replaced by six fourth-generation Nordstroms in June of that year. This new generation of Nordstroms was now faced with the task of running their enormous family business at a time when sales were sluggish and competition fierce.

In the 1990s, Nordstrom expanded rapidly. In 1996, the company opened stores in the Philadelphia, Dallas, Denver, and Detroit areas. The following year, it added stores in Garden City, New York; Farmington, Connecticut; and Beachwood, Ohio. That same year, Nordstrom also opened two Rack stores (one in Bellevue, Washington and one in Hempstead, New York), two Faconnable boutiques in California (one in Beverly Hills and one in Costa Mesa) and a shoe store in Honolulu, and it expanded two already-existing California Rack stores. In 1998, Nordstrom planned to open three more full-line stores (in Georgia, Kansas, and Arizona) and four Rack stores (in Oregon, Minnesota, California, and Colorado) and, the following year, it planned another four full-line stores (in Virginia, Rhode Island, California, and Maryland) and another Rack store in Los Angeles.

STRATEGY

Nordstrom has consistently maintained enormous inventories, usually twice that of other department stores, with great variety. This contributes significantly to Nordstrom's ability to provide excellent customer service. Personal service has been a hallmark of Nordstrom since early in the company's history. The company tells of how on opening day of the Wallin & Nordstrom shoe store in Seattle in 1901, Nordstrom was unable to locate the shoe a woman desired in his stock. Not to be deterred, Nordstrom grabbed the pair from the display window and made the company's first sale.

In the 1980s, Nordstrom's customer service included free coat check service, concierges, and piano players entertaining customers while they shopped. This policy also caused the company some problems with the employees' union. In 1989 a group of unionized employees complained that they were not being compensated for performing company-required, extra services for customers. Early in 1990, the Washington State Department of Labor and Industries found that the company had consistently broken state laws by failing to compensate employees for a variety of duties and ordered Nordstrom to change its procedures for compensation and record-keeping and to compensate about 30,000 of its employees for back wages. In spite of the settlement, over the next three years, the company was the target of several class-action lawsuits involving these issues. The company finally settled the suits out of court for between $20 to $30 million.

CHRONOLOGY: Key Dates for Nordstrom, Inc.

1901:: The Wallin and Nordstrom shoe store opens in Seattle, Washington
1928:: John Nordstrom retires and passes his shares to his sons
1963:: Nordstrom acquires Best Apparel
1965:: The company begins to build its stores as combined shoe and apparel stores
1967:: The company becomes Nordstrom Best
1971:: Goes public
1973:: Nordstrom Best becomes Nordstrom, Inc.
1982:: Nordstrom Rack opens
1988:: Opens its first East Coast store outside of Washington, DC
1994:: The company joins U.S. West and J.C. Penney to create an interactive home shopping channel; Nordstrom, "The Catalogue" debuts
1998:: Nordstrom launches a second catalogue called "Nordstrom 2nd Nature"

A key to Nordstrom's excellent, legendary customer service has been the company's aggressive, enthusiastic sales force from which managers have generally been chosen. Managers routinely give pep talks to salespeople, and motivational exercises have been routine at Nordstrom. But Nordstrom's generous employee incentive program, which helped fuel the company's reputation for extraordinary customer service, and the company's nationwide expansion have contributed to a fall in earnings from 5.3 percent in 1988, to 3.91 percent in 1993, to 3.8 percent in 1998.

INFLUENCES

Extending its personal customer service to reach customers in their homes has been a goal of Nordstrom's. In 1994, as cable giants began experimenting with the possibilities of interactive televison, Nordstrom partnered with U.S. West Inc. and J.C. Penney Co. to begin testing an interactive home shopping channel. Nordstrom hoped to be able to provide a service allowing customers to view merchandise on their home television sets and, at the same time, to view a sales associate on the screen with whom they could interact.

The Internet and the World Wide Web has influenced many retailers, including Nordstrom, who see the advantage of reaching customers by computer. In the late 1990s, Nordstrom developed an Internet shopping program called "Nordstrom Personal Touch America." This program enables customers to shop from their computers and offers the service of a personal shopper. The personal shopper provides the customer with information on apparel, shoes, accessories, and name brands and alerts the customer to pending sales and the arrival of new merchandise that might suit the customer's tastes.

CURRENT TRENDS

In 1994 Nordstrom launched its first catalog, "Nordstrom, The Catalogue," entering the $9 billion direct-mail portion of the women's apparel industry. In 1997 Nordstrom catalog sales increased 50 percent, and the company found that customers receiving Nordstrom's catalog spent 15 percent more in-store than customers not receiving the catalog. At the end of March 1998, Nordstrom launched its second catalogue, "Nordstrom 2nd Nature," featuring casual, moderately priced apparel, shoes, and accessories geared toward young women.

Nordstrom has maintained and extended its policy of excellent customer service, most recently by keeping pace with technological innovations including the development of detailed sales floor information available in all full-line stores; by using automatic merchandise replenishment systems directly linked to vendors, operative in about 16 percent of the company by the end of 1998; and by merging various database systems to improve customer service. Through the use of software from Infosys Technologies based in Bangalore, India, Nordstrom has been able to decentralize its buying so stores' inventories match the tastes of local consumers. According to Forbes Magazine, custom inventory and financial software has saved Nordstrom millions of dollars.

PRODUCTS

Nordstrom's manufacturing division, Nordstrom Product Group (NPG), designs, makes, and markets clothing, shoes, and accessories under the brand names Classiques Entiers, Evergreen, Callaway Golf by Nordstrom, and the Greta Garbo Collection. NPG also manufactures lower priced lines including its Preview Collection, Career Essentials, N Kids, and Baby N. Nordstrom's own brand of men's dress shirts accounts for over 75 percent of the volume of dress shirts in its men's furnishings department. All told, NPG accounts for over 20 percent of Nordstrom's total sales. Moreover, NPG is about the twentieth largest U.S. apparel importer and the forty-ninth largest footwear importer.

CORPORATE CITIZENSHIP

Nordstrom opened on-site mammography centers in their stores in California, Illinois, and Washington in 1995 and 1996 to encourage women to get examinations for early detection of breast cancer. Women were able to walk in to the centers for the test and then had the option to either have the results sent to their doctor or directly to their homes. In California the fee for the test was $90, which was common in that state. Some locations offered a lower price of $50 as an incentive for women to come in. Company officials made it known that they would not receive any profit from the screenings.

Unfortunately, reactions were not all positive. Some, like Dr. McClure Hall of Seattle, suspected Nordstrom was promoting the mammograms to stimulate public relations. Hall said, "They are doing the best job they can, but I think they are misleading American women to think it can be done as well at Nordstrom as at their traditional (health care) place." Others, like Dr. Kevin Kelly, director of mammography for the Hill Medical Group, supported Nordstrom's initiative, expressing hope that such efforts would reach women who have busy schedules and fail to make the appointment for an annual exam, as well as those who are afraid to be around doctors. Nordstrom planned to expand this service to continue the fight against breast cancer.

EMPLOYMENT

In spite of the lawsuits brought against Nordstrom by its employees for under-compensation in the 1980s, a

SHOPPING BY LIFESTYLE

Nordstrom's stores are distinctly organized into a variety of different departments, each geared toward a particular lifestyle. This creates a look of separate boutiques within the store and appeals to a wide range of customers. Since the department store offers only clothing, shoes, and accessories, its main departments are women's, men's, and children's apparel. Not surprisingly, women's apparel offers the largest choice.

Women's apparel is divided into five main departments, each of which is presented to the customer in several sub-departments. The five departments are Women's Designer Apparel, Women's Bridge Apparel, Special Sizes, Moderate Apparel Department, and Women's Activewear. In Women's Designer Apparel, the customer can choose, for example, between the Collectors line, featuring contemporary collections of the most famous American and European designers; the Couture Boutique, where most customers shop by appointment; or the Special Occasion, which offers sophisticated evening-wear. All of these departments have restrooms and phones in the dressing rooms. Outside, weary husbands and children will find waiting rooms with couches, televisions, and videocassette players. Lunch is available in these departments to those customers who've worked up an appetite while shopping or browsing.

Women's Bridge Apparel, another of Nordstrom's main sections, is presented in four lifestyle departments: Savvy, Individualist, Gallery, and Studio 121. The Savvy Department offers progressive fashion collections of innovative, up-to-date styles by the world's leading designers, featuring advanced contemporary sportswear. Individualist is the largest department, made up of career and casual dress; whereas Gallery offers elegant designer dresses, suits, coats, and sportswear collections by designers exclusive to Nordstrom's. Studio 121 offers a collection of more traditional clothing and accessories of higher quality. The store's Moderate Apparel Department, finally, is geared towards women under age 30, featuring up-to-date and comfortable fashion at affordable prices.

Fortune Magazine survey has called Nordstrom one of the top 100 places to work in America and, from 1993 to 1997, Hispanic Magazine ranked Nordstrom among the top 100 companies in the United States offering the most opportunities to Hispanics. Nordstrom sales associates earn an average of $29,000 in base pay annually, much higher than most in the industry. Sales associates are treated as entrepreneurs with their own clientele and are free to move throughout the store's departments with their clients.

SOURCES OF INFORMATION

Bibliography

1997 nordstrom annual report. seattle, wa: nordstrom inc., 1997.

"how we got our start." nordstrom home page, april 1998. available at http://www.nordstrom-pta.com.

mcdowell, jeanne, stacy perman, and jane van tassel. "business: losing its luster despite exquisite service nordstrom has suffered a profit slump. can the tony retailing chain get the magic back?" time, 24 march 1997.

moriwaki, lee. "nordstrom initiates mammography push in 3 states." the seattle times, 12 september 1996.

"nordstrom, inc." hoover's online, 21 april 1998. available at http://www.hoovers.com.

"nordstrom to launch new direct mail catalog." company press release, 26 march 1998.

pederson, jay p., ed. "nordstrom, inc." international directory of company histories, vol. 18. detroit, mi: st. james press, 1997.

rao, srikumar s. "silicon valley goes east—way east." forbes magazine, 17 november 1997.

"s&p description: nordstrom, inc." standard & poor's, 10 march 1998.

For an annual report:

on the internet at: http://www.nordstrom-pta.com/haveaquestion/_haveaquestion.htmlor write: investor relations, nordstrom, inc., po box 2737, seattle, wa 98111

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. nordstrom's primary sics are:

5137 women/children's clothing

5139 footwear

5311 department stores

5651 family clothing stores

5661 shoe stores

Company Profiles for Students

Nordstrom, Inc.

Nordstrom, Inc.

Principal Subsidiaries

Further Reading

Nordstrom, Inc.

Nordstrom, Inc.

Opening of Small Shoe Store in 1901

Expansion and Diversification in the 1950s and 1960s

Third Generation Took Control in 1970

Rapid Growth in Early 1980s Fueled by Legendary Customer Service

Company Perspectives:

Began Eastward Expansion in the Mid-1980s

Key Dates:

Slower Growth in the 1990s

Return of Family Management, Early 2000s

Principal Subsidiaries

Principal Competitors

Further Reading

Nordstrom, Inc.

Nordstrom, Inc.

MAKE ROOM FOR SHOES CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

WIN SHOES FOR LIFE CONTEST INTRODUCES SHOPPERS TO NEW NORDSTROM WEBSITE

MARKETING STRATEGY

OUTCOME

FURTHER READING

REINVENT YOURSELF CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

MARKETING STRATEGY

TEENS ON NORDSTROM'S MARKETING RADAR

OUTCOME

FURTHER READING

Nordstrom, Inc.

Nordstrom, Inc.

Small Shoe Store Opened in 1901

Expansion and Diversification in the 1950s and 1960s

Third Generation Took Control in 1970

Rapid Growth in Early 1980s Fueled by Legendary Customer Service

Company Perspectives:

Began Eastward Expansion in the Mid-1980s

Slower Growth in the 1990s

Principal Subsidiaries

Further Reading

Nordstrom, Inc.

Nordstrom, Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

HISTORY

FAST FACTS: About Nordstrom, Inc.

STRATEGY

CHRONOLOGY: Key Dates for Nordstrom, Inc.

INFLUENCES

CURRENT TRENDS

PRODUCTS

CORPORATE CITIZENSHIP

EMPLOYMENT

SHOPPING BY LIFESTYLE

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

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Nordstrom Inc

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