HOW TO SUCCEED BY SELLING JUST ONE SHOE Upscale retailer Nordstrom has been famous for superior customer service for over 100 years. Robert Spector, coauthor of The Nordstrom Way, says his favorite story is of a woman with one leg who jokingly bet a Nordstrom salesperson that he wouldn't sell her just one shoe. He was more than happy to split up the pair, though, to her surprise, and Nordstrom gained a life-long customer in the process. "Who knows how many times she's told that story?" Spector asks. "Do you think that that's worth the price of a shoe? I do." This kind of word-of-mouth publicity means that Nordstrom spends much less on traditional advertising than its competitors do.
And the stories told by satisfied customers are much more persuasive than an ad in the Sunday paper. Patrick McCarthy, who was the first salesperson to generate $1 million, cites an example of a customer who was traveling and accidentally left his plane tickets in the store. An employee who found them paid for a cab to the airport with her own money so that the customer wouldn't miss his plane. This, McCarthy says, is an example of "heroic service," and at Nordstrom they expect nothing less. Industry observer Lior Arussy calls Nordstrom's business strategy "greed through love." They have perfected the art of focusing on the right customers and giving them undivided attention. A salesperson will often continue the relationship with a customer for years. They may exchange business cards, set future shopping dates, and call customers when new merchandise comes in. "It's a heart experience," says McCarthy, who kept handwritten notes on all 12,000 of his personal customers over the years.
"Most companies are head experiences-bean counters are running them. When the heart is running them, it becomes exciting." Nordstrom is also known for its generous exchange policy. In a familiar story that has been forwarded around the Internet for years, a man claims he was allowed to return snow tires, even though the store never sold auto parts. It may be an urban myth, but it reinforces the company's reputation for putting customers first. Even though the company loses some money on returns, they believe it's worth it to keep customers coming back. Nordstrom has 157 stores in 27 states, but they plan to open 19 more by 2010, expanding into Boston, Ohio, and other untapped U.S. markets.
Eric Nordstrom, the company's president, visits each potential location himself before signing off on it. He says his gut instinct about a location is almost as important as the demographics and statistics they analyze. "Plenty of places look good on paper and we say no." Even though Nordstrom values the traditions that come with its long history, Nordstrom direct president Jamie Nordstrom says that they're not afraid to evolve with the times. "We see the way people shop changing very dramatically," he says. The company analyzed barriers between its sales channels and realized that it was limiting sales opportunities.
Customers who purchased Nordstrom merchandise online couldn't return it in the retail stores, for example, and customers who shopped in the stores couldn't always find the same products online. The company now aims for a "seamless" shopping experience across all sales channels, whether mail order, online, or in-store. The company has also benefited from a new computerized inventory system that gives buyers and salespeople the necessary data to make smarter decisions about what is needed in the stores-and what isn't. Choosing the right handbags to stock, for example, in the right styles, quantities, and colors, enabled them to sell more items at full price, which in turn improved the bottom line. Eric Nordstrom says that they want a customer's experience to be "aspirational and upscale, so people feel they are treating themselves."
Therefore, he says, the company refuses to hop on the price-promoting bandwagon. "We don't rely on promotions, be it one-day sales, coupons, or ‘friends of friends' sales. We think our regular pricing has to have integrity." In 2006 when many retailers were struggling, Nordstrom thrived, posting $8.6 billion in sales, a 10.8 percent increase from the year before. "We have momentum," Eric Nordstrom says, "but it's not easy sustaining it. Retailing is not for everybody. It's a competitive, high-energy business. Every day, you've got to open your doors and sell something." Even if it's just one shoe.
Questions
1. What type of retailer is Nordstrom? Describe the characteristics it shares with other retailers of this type.
2. How would you describe Nordstrom's level of service on the continuum from full service to self-service? Why? Give an example of a store that would be on the opposite end of the continuum and explain their differences.
3. Which of the six components of Nordstrom's retailing mix do you think have been the most important to the company's success? Why?
4. What are the primary challenges Nordstrom faces in the current retail climate? How has the competition changed in recent years, along with consumer expectations?