Nordstrom – Innovating to Stay Relevant

Nordstrom has found a way to seamlessly integrate the shopping experience online and offline to maintain customer loyalty.

The move to digital has been detrimental to the brick and mortar retail world. Many stores that we used to frequent during the early 2000’s including Blockbuster, Circuit City, and Radio Shack have now disappeared. In spite of the on going threat from the shift to digital, I have found that Nordstrom has done a good job innovating to stay relevant. Nordstrom has committed to allocating a sizeable portion of annual capital spend (~35% in 2014) to technology indicating that it recognizes the need to shift focus in the “new retail” world.

In-store, the compmobileany has invested in new mobile POS systems for a more collaborative and easy checkout process. There has also been a rollout of tablets in dressing rooms to allow shoppers to conveniently peruse relevant items (other sizes, similar styles and colors).

Online, the company acquired Trunk Club in 2014 to create a Warby Parker/Rent the Runway type of shopping experience for men. Trunk Club is an online service that gives customers shopping advice and sends them premium clothes to try on and choose from. Additionally, Nordstrom has been investing heavily into its warehouses and fulfillment centers to deliver online orders faster and compete with the likes of Amazon.

Nordstrom’s has also invested in creating a user-friendly mobile app to engage customers on the go. It is easy to find personalized items on the app and locate the nearest store for purchase. Additionally, the app allows you to scan tags while in store to see online reviews on items. There is also the functionality to easily track and redeem loyalty points. The transparency helps encourage customer loyalty

Value creation: Nordstrom has always prided itself on putting the customer first. Its investment in digital has helped the company stay true to its mission. The company has used its shift to digital to provide customers with faster and more personalized service. For instance, the company has created a seamless transition from online to offline. Customers can now order items online and do a curbside pick-up at the closest Nordstrom store. This reduces delivery wait time and creates instant gratification. It also saves customers time scouring the sales racks in store.

Value capture: By using technology to engage with customers online and offline, Nordstrom has maintained customer loyalty despite fierce competition. For example, by using tablets in the dressing room, the company can deliver personalized recommendations and generate new sales. The company has been able to maintain its status as a high-end retailer, avoiding the need for frequent discounts that is currently straining the margins of some of its competitors.

Nordstrom has stood out to me as an example of a retailer who has successfully figure out the hybrid retail model combining brick and mortar with digital. Interestingly, we are starting to see online retailers, such as Rent the Runway, start to embrace this. Purely online retailers have started to recognize that allowing customers to try on and see items helps drive sales both online and offline. It will be interesting to see how this transition to digital in the retail space continues to evolve over the next few years.

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4 thoughts on “Nordstrom – Innovating to Stay Relevant

  1. I really enjoyed this post and agree that Nordstrom’s focus on excellent customer service, as well as its more recent forays into digital offerings, has helped it to stay somewhat relevant. However, I am still concerned by its hybrid digital/brick and mortar strategy. While I see value to having some brick and mortar retail locations, I worry about the higher cost structure of Nordstrom versus online retailers. Without brick and mortar locations, these online retailers can offer discounts that Nordstrom’s cost structure cannot support. Moreover, while I see the value of retail stores in allowing customers to try on clothing, I fear that Nordstrom’s profitability will suffer from “show-rooming”, where customers try on clothes at the store and then find the best deal online. Do you think Nordstrom can offer the most competitive prices while still maintaining this full level of service? Do you think customer loyalty to Nordstrom is so strong that higher prices won’t matter?

  2. Nordstrom has a history of innovation. They started as a shoe store in Seattle for miners going up to Alaska and in need of the appropriate equipment. They are also known for their commitment to customer service and it will be interesting to see how they integrate this into their digital space.

  3. The Nordstrom app and website offer a great UX experience. This is probably why it is one of the most visited sites for online shoppers. However, I wonder if Nordstrom these investments in digital can translate into sales and can continue to fend off other retailers from low-end disruption. For example, numerous low cost retailers are flooding the market with inexpensive fast fashion pieces(e.g. Asos and Primark). These brands often have pieces that imitate more expensive brand’s styles but offer them to customers at a deep discount. Nordstrom may prefer customers with deeper pockets, but market has more consumers who make the average household income. While users may spend their time browsing on Nordy’s, it will be interesting to see if the lower price competitors can continue to pick off customers that Nordstrom doesn’t want.

  4. Great article!

    Working in retail for the past few years, I have heard Nordstrom being mentioned as the golden child of customer service. It’s great to see Nordstrom embracing technology and using it to improve customer experience. I think the company has done a great job of creating a useful app and integrating luxury and ease into the shopping experience. However, I still witness discrepancies between online and in-store availability (sizes or choices). In addition, perhaps due to the rapid supply chain / fulfillment center expansion, shoppers are experiencing more online cancelled orders (when an item appears to be in stock online but is actually out of stock). It is no doubt Nordstrom is a pioneer in digital technology, particularly in fashion. But it still has ways to go before the Nordstrom experience is truly seamless.

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