Nordstrom SWOT Essay
Representing people with disabilities in their catalogs since 1997, which is rare. This is a strength because it represents all customers of Nordstrom, not leaving out certain groups because of industry ‘norms’. This speaks volumes to all customers that Nordstrom recognizes them as individuals, but also, as O’Connell mentioned in an interview, “people with disabilities represent a significant marketing opportunity with $225 billion in discretionary income… and companies that understand this will have a competitive advantage.” Has a customer first attitude to differentiate Nordstrom from other high-end retailers and department stores and build customer loyalty. They are in a highly competitive market involving high fashion, quality items at a premium price, but their service is what drives their business in. They invest in high quality staff, greet customers by name, write personal thank you notes, make follow up calls about satisfaction with products, have large well lit stores and fitting rooms, have a price match system, as well as a very lenient no questions return policy, all combined to keep their customers as satisfied as they can.
Find a study that talks about service driving in customers, customer surveys, reports, etc. Nordstrom has different brands and product lines to reach different market segments and keep up with trends. These include: Rack, Haute Look, Treasure & Bond, and Trunk Club. This offers mid price markets opportunities to join with regular high price markets, online exclusive shoppers to join the Nordstrom network and fashions, appeal to “give-back” shoppers, and gives men a new online shopping experienced linked to the perks of Nordstrom’s inventories and in store tailors. This is a strength of the company because it creates a larger customer base to represent and build markets in, allowing the company growth in a variety of areas that competitors are not hitting. Compared to retail apparel competitors, “Nordstrom Inc. reported Total Revenue increase in the 2 quarter 2014 by 6.13 % year on year. The sales growth was above Nordstrom Inc.’s competitors average revenue growth of 0.99 %, recorded in the same quarter. With net margin of 5.4 % company achieved higher profitability than its competitors.”
The Nordstrom Brand name and size are also strengths of the company. The Nordstrom brand has been around long enough to build relationships with suppliers and attain exclusive brands to carry, and establish lines of distribution, which puts them above new entrants because it is difficult to gain licensing for exclusive brands when you are not already established as well as establish your distribution system. They also have a size advantage having 118 original Nordstrom stores, 162 Nordstrom Rack locations, 2 Jeffrey boutiques, 1 clearance store and they also reach customers online in 96 countries through Nordstrom.com and reaching customers online through HauteLook and NordstromRack.com as well. The high brand awareness, and availability is what competes in department and apparel retail. The company carries unique products; exceptional, high quality brands that are not going to be found at discount retailers to create the exclusive feel for customers. They also new experiences and brands within the company through their Spa and Restaurants within some of the Nordstrom front-line stores.
These differentiate Nordstrom from direct competitors, but also from restaurants competition by using quality, sustainability, and responsibility as their guide to the best experience. (http://wwwiebe.com/nordstrom-customer-service-first/) Find article about competitors with restaurants and spas, and how this makes a difference compared to their revenues and restaurants too. Has established online presence in 96 countries and built network through their multiple websites for each store brand, built their own app to shop from your phone, and gotten involved in social media, more specifically Instagram with their “Instalog” while keeping all of this integrated with their mortar stores. They also understand that “when you stop evolving with your customer, you die,” as Jamie Nordstrom, president of stores, has said. They are building fulfillment centers to accommodate online shopping more quickly, use RFID chips to keep their perpetual inventory system for stores and online to share, and invested more into online growth than brick and mortar stores, knowing that this is where their growth is coming from.
“Over the next several years Nordstrom expects to derive half of its sales from the Rack and from its online units, versus 38 percent today,” and that’s because “the U.S. Commerce Department estimates that electronic commerce amounted to 6.2 percent of total retail sales in the first quarter of 2014.” Analysts have also been saying Nordstrom has thrived compared to competitors because it is a pioneer in perks like free shipping and also having the unique diversity of products online. Their expansion into Canada this year also gives them an advantage against competitors who have not branched out internationally yet. This opens their market up to Calgary shoppers, Canada’s strong economy, an area underserved of luxury items, shoppers who are familiar with the brand, and expectation to grow to a total of 5 Canadian stores within 2 years. If their expansion continues in a positive way like their first opening, they will continue to have this strength over their competitors.
Because Nordstrom focuses mainly on their customer service and does price matching on their items, they are at risk to be directly affected by price fluctuations and economic trends. The fluctuations in the market are out of Nordstrom’s control, but their choice of pricing strategy to match prices are internal choices that they are choosing to be vulnerable to. If they don’t want this as a weakness they would try to reinvent their pricing strategy to keep competitive pricing without matching competition because that is directly relative to the market. Offering free shipping does improve their customer loyalty, but it also comes with a high cost for the company. This is a weakness because they internally chose to make this sacrifice for the greater good of the company and take the hit on spending, but is hard to measure the direct effects of customer loyalty because of free shipping. Nordstrom has the opportunity to invest more into their credit business because many of their competitors have more resources in this area giving them an advantage. Their competition is external but the choice to not invest highly in their credit business is a weakness of Nordstrom. The company would have to look into how they allocate their resources to see if there is room to invest additionally into this sector of business and if it would bring sufficient benefit to them. Opportunities:
Already reaching 96 countries with their online retailing, Nordstrom continues to have room for growth in this area. New technology is keeping the market on their toes with ideas to expand and take advantage sooner than competitors, which is why Nordstrom is spending to grow fulfillment of network for direct sales channels to make delivery faster, and improve mobile app and in store personalized experience. They already have an app that was revealed earlier this year, Instagram, and multiple online stores with Nordstrom.com, NordstromRack.com and HauteLook.com, with plans to introduce Canadian Nordstrom Rack soon. The company plans to invest $150 million into its’ online retailing. They plan to hire up to 400 people for their e-commerce group, including Kirk Beardsley, the former director of business development at Amazon. Their acquisition of HauteLook changed their ecommerce capabilities, and they continue to look for integration opportunities to grow expansion further. They need to continually understand new markets such as the discount merchandising market, which they have recently made their footprint grow Rack sales by 20% in the first quarter of the year, compared to comparable stores that only grew 6.4%. The reason their growth opportunities online and in different markets remain an opportunity is because technology, online trends, and consumer preferences are always changing.
They need to continue to stay on their toes with the online retail market since growth is higher than physical stores currently. Currently Nordstrom is “developing a strategy to secure their supply chain in a resource constrained world will enable them to leverage their customer service brand image” by investing in recycling, transportation, paper and packaging, energy, water, human rights, organic food, and community support. They have the opportunity to continue this path of enhancing social and environmental sustainability, corporate social responsibility, and supply chain management to appeal to environmental supporting markets.
The Canada debut of stores is their first branch into international markets, which says the company is in a stable enough spot to take on these new complex roles in the market. They have a good economy with a high median family income at $90,000 in the areas they plan to continue growth in. According to government data, this is the highest in metropolitan areas in Canada, giving the company the opportunity to expand and capture their market. There are not current plans to expand beyond Canada, but if they succeed there then that again leaves open an entire new box of options for the company to move overseas. Nordstrom will also be opening up Nordstrom Rack locations in Canada once they accomplish their mission with front-line stores, opening up opportunities to reach the middle class Canadian consumers who want designer brands at a bargain. Continuing to be an innovative brand will be an opportunity for Nordstrom to take advantage of. They launched their “first time private-label brand that will give 5 percent of its earnings to Girls Inc. and other nonprofits that seek to empower women and young girls. The move comes amid the increasing popularity of “give-back” fashion.” The charitable boutique Nordstrom opened in New York’s SoHo neighborhood in 2011, Treasure&Bond, will be available at 86 stores around the country and online as well to promote their “give-back” persona. There will be constant opportunity to follow trends and compete in the market with things such as these, and Nordstrom has the opportunity to continue its’ successful planning to meet them and conquer.
Disposable incomes in the US are rising, for instance June 2014 were at an all time high at 13021.20 billion versus the previous month at 12969.70 billion. What this means for Nordstrom and all retailers is that spending will begin/continue to increase and they need to be the brand/company that captures those sales. Their expansion, online presence, and quality need to continue to improve, and there marketing strategy relying heavily on word of mouth may need re-evaluation to determine if this is the best way to promote the brand while maintaining their high image. Sales per square foot vary company to company and your ability to stock, merchandise, and turnover quicker than your competitor is an opportunity to capitalize on. Maintaining highest sales per square foot is a competitive tool in the retail industry and in 2013 Nordstrom had the highest sales per square foot at $400 in comparison to direct competitors Macy’s at $173 and Saks Fifth Ave at $350. Their ability to stock more into a space and turnover that merchandise faster than competition is a strength of Nordstrom in the external market.
The department store and apparel industries are highly competitive, with direct competitors of Nordstrom being: Bloomingdale’s, Macy’s, Dillard’s, Saks Fifth Ave, and Neiman Marcus. As consumer preference continues to shift, and incomes continue to rise the market will only continue to be more and more competitive, leveraging many opportunities for each company. There is also a lot of indirect competition of Nordstrom including food service, spas, boutiques, discount retailers, online retailers, and specialty stores. This creates significant competitive areas and factors in position including their customer service, unique fashion trends, selection, quality, environment, location, and convenience. Further threats for the company to consider while making decisions also include plans for growth, market share, pricing, supply chains, brand image and much more. There is also indirect competition for Nordstrom’s credit business like banks, credit card companies, and other stores that offer a store card such as JCP, Saks, Dillard’s, Macy’s and Dillard’s. Because some of the competitors in this area have more financial marketing and resources to dedicate to their credit business, it makes it a huge threat to Nordstrom
The economy will continue to be a threat not only in the US but also in their new Canadian expansion. The US economy and Americans spending is going up, as listed in the opportunities column, but because the past decade has been rough its effects may still linger and possibly shift into Canada’s economy as well. The threat of an economic downturn is something that all businesses face though, so to be safe Nordstrom should continually set realistic expectations and plans for what they would do in that situation. Price changes and increasing costs also threaten Nordstrom’s supply chain of designer and high-end brands. Because of the global climate changes and shortages in resources, the market for material, labor, and transportation are not as stable. This threatens Nordstrom because higher costs for them are not good if they’re not producing higher sales or profits, and the environmental effects on their business is completely out of their control. Online expansion of all retailers especially a dominator like Amazon has put up many obstacles for Nordstrom. It is difficult and expensive to constantly and quickly transition to new technological changes. Nordstrom is threatened by these changes to see if it can successfully invest and continually update to the markets demands. Their repositioning online and through social media with the wave of technology seems to be going well so far, but time will tell if they are able to continue on top or if they will fall behind the industry.
In Canadian market they just entered there is a battle for the luxury market, which is not sufficiently claimed yet. Hudson’s Bay Company has Canadian roots and just bought Saks, with plans to move them up to Canada as well. This will harshly threaten Nordstrom’s pull on luxury market share in Canada. There is also the 177-year-old brand Holt Renfrew that announced expansion in its Calgary luxury store, which is in the same place as the first Canadian Nordstrom. This is again a direct threat to their business in Canada and how their expansion will determine if they can grab and hold onto market share. There are also not many to choose from talent wise in Canada because the luxury market is not prominent so there is little experience to find. There is also a higher average wage in the area they are stationed because of the oil-fueled jobs in the Calgary area, so they will have higher labor costs demanded as well.