Nordstrom Competitor Analysis

With over a century of experience in the retail industry, is it essential to understand the history behind Nordstrom and how they have built their strong presence and bond with their consumers. Originally established as an independent shoe retailer, Nordstrom Inc. was founded in 1901 by John W. Nordstrom in Seattle, Washington. The company’s primary objective was “to provide exceptional service, selection, quality and value” (Nordstrom). This core belief established one of the strongest building blocks for the company. Their keen focus on delivering quality products and exceptional customer service has made Nordstrom stand out amongst its competitors. After gaining popularity, they decided to offer women’s, men’s, and children’s clothing. By

1999, Nordstrom created an online website to reach their consumers, while continuing to provide their unique and friendly in-store shopping experience. Adding to the company’s portfolio, they acquired Hautelook in 2011 and Trunk Club in 2014. Today, Nordstrom is considered a U.S. leading specialty store that offers a broad assortment of Men’s, Women’s, and Children’s clothing, along with shoes, accessories, cosmetics, and home furnishings. Having built this strong foundation, Nordstrom continues to dominate the marketplace and has proved their potential for growth through their business operations and market capitalization. Nordstrom maximizes profit by operating through two business segments, which are retail and credit. Under the retail segment, they have their total sales from full-line stores, off-price stores, and e-commerce sites. According to Malcolm Gledhill from Hoover’s online, Nordstrom’s “credit segment (3% of sales) owns a federal savings bank, Nordstrom fsb, through which it offers a private-label credit card, two co-branded Nordstrom VISA cards, and a debit card for Nordstrom purchases”(Hoover’s). This demonstrates how Nordstrom takes full advantage of their sales capabilities, by discovering supplementary outlets for making profit. In addition to their strategic business segments, they also operate through a multi-channel distribution. In a business overview from vault.com, they explain that “Nordstrom's full-line stores generated nearly 53% of its net sales in FY2016, while its Nordstrom Rack stores contributed another roughly 25%. Its fast-growing Nordstrom.com channel generated 16% of net sales, while its Nordstromrack.com and Hautelook channels combined made up nearly 4%.” (Vault) Exemplifying their tactical efforts, Nordstrom is dedicated to optimizing their channels of distribution, due to changes in consumer behavior.

Through an analysis report on yahoo finance, the current market capitalization for Nordstrom (JWN) is $8.99B. This represents the total dollar market value for the company’s outstanding shares. Nordstrom’s has one of the biggest market capitalizations next to Macy’s $11.65B, where competitors such as J.C. Penney are at $2.55B and Dillard’s at $2.11B. Nordstrom has continued to grow, “as of October 21, 2016, the company operated 346 stores in 40 states, including 123 full-line stores in the United States and Canada; 213 Nordstrom Rack stores; 2 Jeffrey boutiques; and 2 clearance stores. Nordstrom, Inc. also sells its products through catalogs.” (Yahoo Finance) Nordstrom’s ongoing development and expansion make it a stable company. Altogether, Nordstrom’s company reputation, current assets, and market size create a solid foundation for potential investors, as well as how it conquers its current

problems.
Currently, Nordstrom is experiencing some setbacks; nonetheless, the company’s approach to dealing with the situation provides reassurance for growth. Nordstrom’s decline of earnings for FY16 has created opportunity for sales in their off-price stores, such as Nordstrom Rack, to prosper. According to Dan Maskowitz from Investopedia, “Second-quarter comps for full-line stores slumped 2.3% year over year while comps for Nordstrom Rack jumped 5.3% year-over-year. Overall, comps slipped 1.2% which beat analyst expectations.” Although Nordstrom’s earnings are declining, their growth potential appears to lie in a more price-point driven market. Off-price retailers are becoming increasingly popular, because they offer higher value to their consumers, with their budget driven merchandise, which expands beyond their typical target consumer. In addition, Nordstrom is dealing with the drastic increase of e-commerce corporations who are disrupting the marketplace. In particular, WWD announced that Nordstrom’s net earnings were down by 64 percent in the first quarter of 2016, similar to other department stores such as Macy’s Inc., Kohl’s Corp. and Dillard’s Inc., as a result of the increase in popularity of Amazon (WWD). However, Nordstrom plans to combat this “Amazon Effect” by decreasing the amount of inventory, reducing $60 million in expenses, expanding upon their rewards programs, continuing global expansion, and opening of their flagship in New York by 2019. Comparing this information back to the Q2 report, Nordstrom’s efforts have allowed them to increase 2016’s net profit and propel the company forward to meet their goals.Through an analysis of Nordstrom’s current stage in their growth lifecycle, it is clear that their earnings remain lower than expected, but their strategic efforts help strengthen their possibility for growth. Ultimately, Nordstrom’s knowledge of the marketplace allows them to overcome issues to help propel them forward and reach company milestones.
Nordstrom’s sustainability for growth and profit is derived from their highlights and their hospitable service.Through recent milestones, the Nordstrom has shown their willingness to move forward, while continuing to hold onto their key principles, to which the company was founded upon.

Recent news of Nordstrom’s implementation strategies towards expansion alludes to success for both their retail and credit business segments. Nordstrom has recently expanded internationally by opening stores in Canada. Diving into a new marketplace will help increase revenue and increase their market capitalization. In May 2016, they claimed to have achieved their milestone through development of their rewards program, which allows customers to earn benefits no matter how they choose to pay. As a result, Nordstrom claimed, “the company has approximately 6 million active Rewards customers, up nearly 30 percent from 4.7 million in the prior quarter.” (Nordstrom) Some of the primary reasons that people shop at Nordstrom are for great customer service, their no questions asked return policy, personal stylists, ambience, in-store amenities, and free alterations. Through a recent posting of a previous Nordstrom employee, Mike Schoultz, explains, “the Nordstrom marketing strategy uses customer experience design as a key difference maker. The company is perhaps as known as much for its experience design as it is for the merchandise it sells.” Nordstrom has a way of making their customers feel

catered to, as employees take care of their every shopping dilemma. In order to sustain growth and profit, the company must continue to leverage this unique quality to grow. In combination with great service, they must minimize controversy over their ethics, as employees feel incentivized to work hard, which ultimately affects how smoothly the business operations run. In another review from Glassdoor the previous employee admitted, “any issues I've ever had (and there have not been many) have been taken care of promptly and fairly by either management or HR. They also have a no-retaliation policy.” This offers personal insight into Nordstrom’s ability to maintain their employee base and stay true to their founding principles. In conclusion, this has organized Nordstrom’s ability to sustain growth and profitability.