Business Strategy

Five Forces Model

Rivalry - Nordstrom's rivals are Bloomingdales, Macy's, Dillard's, Saks Fifth Ave, and Neiman Marcus.

Threat of New Entrants - Threats of new entrants is low. Many specialty retail stores have working relationships with their suppliers. Nordstrom also carries exclusive products made by Facconable. It would be hard for new entrants to gain licensing for exclusive products.

Threat of Substitute Products - Outlet malls and stores that sell "off-brand" items are threats. Buying directly from a designer, instead of Nordstrom, is also a threat of substitute products.

Bargaining Powers of Buyers - Power of Buyers is moderate because of brand image, and buyers are willing to pay what the price is set at for high-end products. As a conveinence to it's customer and to stay in competition, Nordstrom price matches with other retailers. 

Bargaining Power of Suppliers - Power of Suppliers is moderate because there are limited specialty retail stores. Department stores also need to carry certain brands. This gives the suppliers bargaining power for their products to sell at a reasonable price.

Competitive Strategy

Nordstrom's competitive strategy is differentiation through superior customer service, product quality, and continuous improvement. Erik Nordstrom, President of Stores, stated, “In simple terms, fashion is what sells. With compelling merchandise and unyielding commitment to customer service, we can be the retailer customer’s trust.” Nordstrom has personalized sales associates that research customers and assist them with their shopping. As soon as a customer walks into the store, the sales associate will know what type of clothes they prefer and they will guide them to a department that compliments their style. Nordstrom products are of the highest quality available, and they are presented in the most appealing way to customers. To have a competitive advantage, Nordstrom must continually keep up with the latest fashion trends, competitor activities and latest technological innovations.

Switching Costs

Nordstrom's switching costs are free shipping online; access to in store and online inventory;  superior customer service; a liberal return policy; and price matching.

Nordstrom has free shipping for it's online products. This costs them more money in the long run but it promotes customer loyalty.

Nordstrom has a perpetual inventory system that makes it possible to order items from other stores or warehouses if a certain store doesn't have an item.

Nordstrom focuses on customer service, if something goes wrong they are going to stand behind it. As stated above, they provide customer service by providing a personalized shopping experience. Nordstrom customer service can be contacted 7 days a week, 7 am to 1 am Eastern. They have U.S., Canada, and International hotlines. They even have seperate hotlines for beauty stylists, designer stylists and wedding stylists.

They have a liberal return policy, which means that practically any item can be returned with the receipt. If the customer doesn't have the receipt then employees can look at the customers purchase history in order to reimburse them.

Nordstrom is aggressive about price matching. They sell high end brands but prices are always comparable to other high end retail stores. Anything that is associated with the Nordstrom brand is going to be done right. 

Business Processes

Sales Process -  Turns finished goods into cash.

Information Systems

Nordstrom uses Personal Book,a computerized, company-wide directory, to store customer data like name, address, telephone numbers, e-mail address, interests, preferences, and purchase history. A customer profile can be created in order to log purchase history, which makes returns fast and easy. With the customer's information confidentially kept, future orders are done with ease. When email addresses are provided it becomes simple to keep up with Nordstrom's latest news and events.  Personal book used to be a paper book located in the store. It can be used for opportunities such as sending a personal note on a customer's birthday or thanking a customer for a past purchase. It is a product implementation and it is what salespersons use to enhance the customer's shopping experience. 

Accenture, a global management consulting and technology service company, helped Nordstrom implement a perpetual inventory system in 2002. Perpetual inventory enables employees to quickly find sizes, styles and colors at other Nordstrom stores by computer, providing customers with prompt answers and freeing salespeople to help other customers. Nordstrom utilizes RFID (Radio-Frequency Identification) chips in order to identify what items are in stores and what items can be found in warehouses or other stores. Before the perpetual inventory systems, employees had to call other stores in order to see if they had an item in store. It is a process implementation and it locks in customers because other retailers don't have Nordstrom's quality of customer service.