Nordstrom Industry Analysis Paper

Executive Summary The purpose of this paper is to present an in depth analysis of the luxury retail industry. This report will examine all pertinent aspects of Nordstrom Inc. and the highly competitive retail industry by focusing on the fashion specialty department stores. The U.S. economy has been hit hard due to soaring oil prices, the threat of inflation, and high unemployment rate, resulting in low consumer confidence. Consumers have been hit especially hard and are trading down in consumer staples and what they spend their discretionary funds on. Superior quality products with world class customer service and its new inventory system are the key reasons why Nordstrom is still a leader in the retail industry. Through an analysis
of internal and the external environment, the report identifies eight key result areas that can be strategically addressed to improve Nordstrom’s competitive position and financial success. The key result areas are instrumental in the position of Nordstrom against competition in the market and are outlined below.
• World Class Customer Service – The extraordinary, legendary customer service of Nordstrom is its biggest strength and it is what differentiates itself from its competitors.

• Demand for E-Commerce and M-Commerce – The high demand for online and mobile channels represent a great opportunity for Nordstrom.

• Innovative Technology Development – The acquisition of HauteLook aided Nordstrom in its quest to be known as a technologically friendly retailer.

• Change in Consumer Buying Patterns – There is still a want for the luxurious apparel that Nordstrom provides, and Nordstrom plans to open 16 new Rack outlet stores by the end of 2012.

• Advertising – Nordstrom has made a commitment to make improvements to its loyalty program in 2012, by offering reward cards. Social Media and word of mouth advertising can be an extremely effective marketing channel at a very low price.

• Limited Geographic Presence – Nordstrom operates only in the US. Emerging countries such as the BRICs are showing growth opportunities in the luxury market and Nordstrom should look to expand in these areas. Nordstrom does plan to continue US expansion by opening some additional full line stores by the end of 2012.

• Improved Profitability –Nordstrom has the highest sales per square foot among its competitor in 2011 with $382 per Sq Ft compared to $154 per Sq Ft for Macy’s.

• Increased Personnel & Training –The rapid expansion of the stores and the new technology introduction result in demand for an increased workforce and training.

The following recommendations have been created to aid Nordstrom in its future success:
• To export unsold items from the Nordstrom Rack “second hand” stores into a new Nordstrom brand “third hand” store within the developing countries such as Latin America, Africa and South Asia.
• Adding this new inventory segment like crystal and china table settings or other high end kitchenware. It would allow Nordstrom to offer wedding registries and could even expand into event planning to their customers in the future.
• A mobile bus for shopping parties could also be used as a marketing strategy for the Nordstrom and Nordstrom Rack stores. Nordstrom could have specific inventory buses such as a jeans bus, a cocktail dress bus, or home shopping parties.

Introduction
The following report will provide the reader with a thorough look at the luxury retail industry and the challenges it is currently facing including an in-depth analysis of Nordstrom Inc. (JWN). An examination of Nordstrom’s current strengths and weaknesses will ultimately reveal opportunities of improvement, resulting in short and long term strategies that could be implemented to ensure a successful future for the company. The industry as a whole has faced challenging times due to the current state of the economy. The retail industry is a sector of the economy that is comprised of individuals and companies engaged in the selling of finished products to end user consumers. Multi-store retail chains in the U.S. are both publicly traded on the stock exchange and privately owned. An estimated two-thirds of the U.S. gross domestic product comes from retail consumption. Therefore, store closings and openings indicate how well the U.S. economy is recovering after the great recession in the late 2000 's (Farfan, 2010). Most major multi-store retail chains saw their sales decline in the first part of 2009. However, the retail industry has experienced steady growth over the past few years despite the economic downturn. This report will discuss in detail the highly competitive retail industry by focusing on the fashion specialty department stores market. This will be accomplished through the analysis of the external retail environment, which will evaluate the demographics, general economic conditions, the natural environment, political/legal/regulatory factors, socioculture trends, technology and global issues as they relate to the retail industry as a whole. In addition, the current rivalry between the main competitors within this segment, which are Nordstrom, Macy’s, Dillards, Saks and Gap will be analyzed; this will be coupled with the industry specific forces, such as supply power, buyer power, the threat of substitutes, the threat of new entrants. Finally, the key success factors will be evaluated in an effort to obtain a clear understanding of this highly competitive industry. Once the luxury retail industry as a whole has been examined, a detailed analysis will be provided to clearly demonstrate Nordstrom’s strengths and weaknesses. Superior quality products coupled with award winning customer service are two key reasons why Nordstrom is already differentiated within the industry. Nordstrom is constantly striving to increase their revenue, market share and ultimately their bottom line. In an effort to sustain and increase Nordstrom’s presence in the highly competitive retail industry, it is essential the company capitalizes on new opportunities through the implementation of current and new strategies. This will be accomplished by thoroughly analyzing Nordstrom’s tangible and intangible resources, capabilities, core competencies, strengths and value chain. Nordstrom’s strengths will then be utilized to build new strategies based on revealed weaknesses and opportunities within the industry. Similar to rivals, Nordstrom is currently looking for new ways to increase operation efficiency while reducing the associated costs, which will be incorporated in the strategies suggested within this report. Ultimately, insight will be provided into how Nordstrom has created a competitive advantage within in the luxury retail industry and what strategies should be implemented to sustain and grow their presence within the industry.

External Environment Analysis of the Retail Industry
GENERAL ENVIRONMENT
Demographic Segment The U.S. retail industry comprises of more than 1.6 million establishments and employs more than 24 million; on average, this is about 1 in 5 American workers (Miller & Washington, 2011). According to the Census Bureau of the U.S. Department of Commerce, total retail sales in the U.S. increased by 6.6% in 2010 from the prior year. Being the world’s third-largest country by size and population, the United States is a powerful player in the retail industry. The U.S. has the largest and most technologically powerful economy in the world. As of July 2011, The Central Intelligence Agency estimated that over 313 million people live in the U.S. and are categorized by the following age structures:
- 20.1% of the population in the U.S. are between the ages 0-14 (32.1 million males and 30.7 million females)
- 66.8% of the population in the U.S. are between the ages 15-64 (102.6 million males and 103.1 million females)
- 12.8% of the population in the U.S. are over the age of 65 (17.7 million males and 23.3 million females) (Central Intelligence Agency, 2011) The population in the U.S. has increased by 9.7% from 2000 to 2010. The growth rate recognized a slight slowdown, which is believed to have been caused by the recession and less immigration (Nasser & Overberg , 2011). Even so, with a population growth rate of 0.963%, the U.S. is the envy of most developed nations (Central Intelligence Agency, 2011). Trailing only China and India, the nation is expected to grow at least through the next generation because it is one of the few industrialized countries that have a fertility rate close to replacement level. The rate of births needed for a generation to replace itself is an average 2.1 per woman and the U.S. is at 2.06 (Nasser & Overberg, 2011).
General Economic Condition The U.S. economy has been hit hard due to soaring oil prices, the threat of inflation, high unemployment rates, the sub-prime mortgage crisis, investment bank failures, new regulations and falling home prices. The one common denominator is that all of these financial events affect the consumer, which in turn affects their spending and trickles down to businesses. Consumers have been hit especially hard and are trading down in consumer staples and what they spend their discretionary funds on. The retail industry’s sales are driven by consumer disposable income, which after declining for the past few months, grew by 0.3% in October resulting in its best performance since mid-year 2010 (Johnson, 2011). Being one of the most important indicators of economic growth, the GDP in the U.S. is driven by retail sales expenditures, government spending, exports and inventory levels and is negatively affected by rising imports . Current reports indicate that the GDP has increased by 2% in the third quarter of 2011 over the previous quarter . In addition to the GDP, it is important to review other trends such as personal and disposable income, as well as the unemployment rate as shown in table 1.0. The U.S. Department of Commerce has reported that personal income has increased by 0.5% and disposable income by 0.4% in December of 2011 (US Department of Commerce, 2012). The unemployment rate for January 2012 has declined from 8.5% in December to 8.3% (US Department of Labor, 2012). These trends are good indicators that the US economy is trending upwards, which is beneficial for the retail industry.

Table 1.0 (Source: United States Department of Labor, 2012)
The Natural Environment Environmental forces can directly and indirectly affect the retail industry. With harsh weather in locations such as in New England, retail stores can be directly affected from not being able to receive their merchandise due to delays from snow. The retail industry can also be indirectly affected by the natural disasters, such as when Hurricane Katrina caused extensive damage in the Gulf Coast region in 2005 or the earthquake in Japan in 2011. These disasters could affect retailers in a variety of ways from a decrease of the U.S. GDP to retailers not having access to their materials, labor, etc.

Political/Regulatory/Legal Factors China’s accession to the WTO in December 2001 has enabled the entrance of foreign entrants into their retail market, contributing to the average forecasted annual retail sales growth of 13.1% in local currency terms (Business Monitor International, 2011). Trade barriers, varying country regulations and labor costs are important variables that need to be considered prior to expansion into new countries. The U.S. Congress took action during the 2008 recession by injecting $700 billion into the economy to help stabilize the financial markets in an effort to prevent a collapse of the financial markets. The Troubled Asset Relief Program (TARP) followed up by the $787 billion fiscal stimulus in January 2009 were passed to create jobs and to help the economy recover. In order to successfully run a retail business, there are unique industry-specific labor laws and other regulations that must strictly be adhered to. These are regulations to ensure a safe working environment for retailers and their employees, among other requirements enforced by the Occupational Safety and Health Administration (OSHA) and the Fair Labor Standards Act (FLSA) (Labor Law Center, 2011).
Sociocultural Forces With consumer’s obsessed with staying in touch via Facebook, Twitter, Youtube, Blippy and other social networks, retailers must keep up with consumer trends. Many major online shops are now realizing that it is difficult to establishing their own social networks. Nonetheless, many will persist by integrating social networking directly into their main e-commerce resulting in a competitive advantage . Those currently using social media forums are utilizing them as an instrument to search for bad reviews, angry tweets and frustrated Facebook updates so that they can monitor and manage dissatisfied customers. It is advantageous for businesses to follow new social trends, which can either be short lived fads or permanent changes in the market. Short and long term social trends can be a great opportunity for businesses. In addition, high fashion and peer pressure also have a significant impact on consumer trends and ultimately dictate what retailers decide to sell (Shaughnessy, 2012).
Technological Factors The digital retailing revolution will undoubtedly affect how consumers shop through the use of e-commerce and m-commerce. With an abundance of information, near perfect price-transparency and a parade of special deals at shopper’s fingertips, consumers have many options. They compare products by finding the cheapest prices and research alternatives from trusted retailers with just a few clicks on their phone or computer. According to Forrester, it is estimated that sixty percent of U.S. adults shop on-line at least once every three months contributing to the $200 billion in revenue in the U.S. from e-commerce. Total retail sales make up 9%, which is up from 5% five years ago (Miller & Washington, 2011). E-commerce is also growing internationally, with 10% of the retail sales in the United Kingdom, 3% in Asia-Pacific, and 2% in Latin America. Globally, digital retailing is projected to reach approximately 15% to 20% of total sales (Rigby, 2011). With a five-year 17% return on investment, compared to traditional discount and department stores average return of 6.5%, Amazon is currently utilizing this technology to service their customers while increasing their competitive advantage. However, this technology is a nightmare for retailers who have not updated their e-commerce technology to stay in line with the current and upcoming consumer trends. Low consumer confidence coupled with less discretionary spending has forced businesses in increase their marketing efforts in order to retain and attract new customers. This has been accomplished through the use of coupons, special promotions for loyalty customers and sales. Some businesses have also aimed to increase customer loyalty by developing special relationships with their customers through targeted advertising campaigns (Laughlin, Hix, Lee, Florez, Holley & Kratzer, 2011).
Global Forces In the highly competitive retail industry, it is essential that companies continuously find new ways to increase their customer base, which are commonly accomplished by expanding into new markets all over the globe. To have a well-diversified portfolio of products and customers, international markets need to be evaluated for sales potential. Countries such as China and India are currently showing large potential due to their current consumer trends. Retail reports are forecasting a 67% growth (in local currency terms) of China’s total retail sales by the end of 2016 (Business Monitor International, 2011). This explosion of opportunity is mainly attributed to strong underlying economic trends, population growth and the increasing wealth of individuals. Coupled with an estimated population growth from 1.35 billion in 2011 to 1.37 billion in 2016 (Business Monitor International, 2011). This growth is supported by the forecasted 7.2% average annual growth of their GDP within the next 5 years.
Another possible market is in India where the forecasts are projecting an increase in retail sales from US$411.28 billion in 2011 to US$804.06 billion by 2015. The main reasons for this growth is attributed to strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organized retail infrastructure (Business Monitor International, 2011). India’s average annual GDP growth rate is forecasted to be 7.9% through 2015. With the expected population increase from 1.19 billion in 2011 to 1.25 billion by 2015, the GDP per capita is forecasted to rise a staggering 86.5 by the end of 2015 (Business Monitor International, 2011). India is an attractive global opportunity for the retail industry.

INDUSTRY ENVIRONMENT

Table 2.0 - Porter’s Five Forces Analysis
Competitive Force Magnitude of Force Conclusion
Intensity of Rivalry Relatively high Reduces profit potential of the industry
Supplier Power Relatively low Increases profit potential of the industry
Buyer Power Relatively high Reduces profit potential of the industry
Threat of Substitutes Moderately high Reduce the profit potential of the industry
Threat of New Entrants Relatively high Increases profit potential of the industry
Overall Conclusions Most of the forces are moderately high and should drive down the profit potential of the industry

Intensity of Rivalry Nordstrom is a leading apparel and fashion retailer that offers apparel, shoes, handbags, accessories, jewelry, and cosmetics for men and women. Globalization and new technologies have allowed consumers to have easier access to the retail industry. Companies are gaining market share by offering internet services for more marketing and sales growth. As a result, consumers are changing, competition is fierce, and companies are evolving to meet these demands (Craig, A. , Jones, C., & Nieto, M., 2004). Nordstrom Inc. holds a fair market share in this industry at 9.84 billion. The major competitors within their market cap in this industry are Macy’s--12.89 billion, Dillard’s—2.32 billion, Saks Fifth Avenue—1.39 billion, and Neiman Marcus—private retail department store (Yahoo! Finance, 2011). Recently, retailers have tried to reduce the cutthroat pricing competition by offering coupons, membership points, and special promotions to gain the customer loyalty. The retail industry is a highly competitive market; and firms in this industry must differentiate themselves in order to distinguish themselves (Laughlin, et al., 2006).
Supplier Power Generally suppliers in a retail industry have a moderately weak power. For example, a contract with a large retailer such as Macy’s, which holds 12.89 billion market cap, can make or break a small supplier. In addition, production of retail products is typically outsourced to third party contractors often in foreign countries where the cost of labor is less than the United States. However, suppliers for the high-end apparel and fashion industry may have a moderate amount of power because of the designer labels they carry. They need to keep a solid inventory of their most popular brands in order to meet customer demand (Laughlin, et al., 2006).

Buyer Power The current economic condition has a huge influence on consumer behavior. According to the data showing from Morningstar (2011), Nordstrom’s gross profit increased 19% in the last 5 years; however, Walmart increased 26%. Walmart chief executive, Michael T. Duke, said “Consumers are trading down to stretch their budgets, buying a lower-priced brand of detergent, moving from branded canned goods to private label and purchasing half gallons of milk instead of gallons (Clifford, 2011)”. To survive in today’s economic condition where consumers have been cutting their spending limit by moving from mid to top tier retailing to lower priced stores. Accordingly, customers have tons of choices when they are shopping; online stores, discount stores and department stores. This makes buyer power in fashion retail industry moderately strong.
Threat of Substitute Products Threat of substitute products is moderately strong. Many stores sell products that are cheaper than high-end stores to the average customers. The threat of substitution in this industry would be outlet malls, TJMaxx, Marshalls, or other stores that sells seemingly the same products. Customers that are value conscious may find a similar product at a cheaper price in the off season. In addition, some retail stores such as Macy’s and Dillard’s supply similar products at a lower price than high-end retailers such as Nordstrom (Laughlin, et al., 2006).
Threat of New Entrants Although there is the possibility of new entrants into the retail industry, it is unlikely as, the industry giants hold the majority of the market shares and merge with others to diversify product lines. Many companies in the retail industry already have relationships with many of their suppliers and specific designers and it is very hard for the new entrants to establish themselves as any sort of threat (Laughlin, et al., 2006). In addition, those companies in the industry already have a high reputation in the market and it also creates hard time for new entrants to gain any of market. The entry barriers suggest that new firms might difficult to enter, thus help increasing the industry’s profit potential.
COMPETITOR ENVIRONMENT
The fashion specialty retail industry is highly competitive and has experienced steady growth over the past few years. The principal competitive factors that influence this market today are customer service, fashion newness, quality of products, shopping experience across all channels, depth of selection, and store location, Nordstrom, Inc. competes with national, regional and local retail establishments that may carry similar lines of merchandise, including department stores, specialty stores, boutiques and Internet businesses. (Nordstrom, Inc.,2011a).
Nordstrom 's competitors in the mid-tier department store industry include Macy 's Inc. and Dillard’s that are companies that provide near-luxury full-price items but also have discount stores as well. Mid-tier department stores are usually the most affected by the economic downturn because they rely on aspiring middle income consumers to generate revenue. Middle income consumers typically cut back spending and look for discounts as a way to save money during tough economic times.
Nordstrom also competes with companies in the luxury retail industry which includes Saks Fifth Avenue, Bloomindales by Macy’s Inc. and Neiman Marcus. Nordstrom is positioned between discount and luxury department stores in terms of its merchandise prices.
The company credit segment faces competition from large banks and other credit card companies, some of which have considerable financial resources. Many of Nordstrom, Inc.’s competitors offer general-purpose credit card products with a variety of loyalty programs. In addition, there is intense competition for cardholders with “prime” credit ratings who make up a significant portion of the credit portfolio.
Future Objectives
Maintaining current stores and expanding into new locations is important to these premier department stores’ future growth in order to help gain better positioning in the market. Nordstrom plans to open more stores in the future and is projected to open six Nordstrom full-line stores and eighteen Nordstrom Rack stores by 2012 (Nordstrom, 2011). Saks also plans to expand by opening five additional stores by 2012, under the name of “OFF 5th”, that will be located in upscale outlets. In addition, Saks plans to expand internationally by opening stores in the Arabian Peninsula, Emirates and in Puerto Rico (PR Newswire, 2011).
On the other hand, Neiman Marcus, Macys and Bloomindales are focusing on the technological trend. Macys and Bloomingdales have the future objective of growing their reputation as a technology leader in retailing industry (Macy’s Inc., 2011). Neiman Marcus believes in the intersection of traditional retailing, e-commerce retailing and social networking. Its future objective is to develop the connection between these three aspects and increase its online sales (Panchuk, 2010). Nordstrom also has the same belief and already set the online standard very high by acquiring the website HauteLook for $180 million in early 2011. This acquisition was a huge success for the company and increased its online sales by 8% in less than one year (Hoovers, 2011). Nordstrom is stating that the majority of its sales growth over the next ten years will be online. The company is planning to make more investments in e-commerce and technology to enhance the customer experience (RIS, 2011). Dillard’s future objective is to move "up market" and position itself between Macy 's and high-end chains such as Nordstrom and Bloomingdale 's (Hoovers, 2011).
Currents strategies
Technology in this sector is seen as an important tool that will help to improve customers’ shopping experience. Nordstrom started to use in-store mobile devices such as iPads in order to help employees increase Customer Relationship Management (CRM). CRM is a strategy used to learn more about customers ' needs and behaviors in order to develop stronger relationships with them. These devices help to quickly and effectively help customers check-out and find products in-store. Also developed is an in store iPhone and iPad app that educates users about services and products through videos, reviews and comparisons, as well as serving as an in-store shopping assistant (Hutzler, 2011). Extending its reach to the private-sales arena is another strategy of Nordstrom. Nordstrom is placing increased emphasis on e-commerce, a channel known for pulling in profits that are not as restricted by overhead. The company took notice of HauteLook in the middle of the rising popularity of private-sale sites during the recession. This site is also known as a flash sale site. It advertises sudden discounts on name-brand merchandise for short periods of time, generally 24 to 48 hours (Hoovers, 2011).
Macy’s is using four primary strategies. The first one called My Macy’s strategy of localized merchandising. It is a long-term approach that will allow the company to continue to adapt to local customers and communities. The second strategy is the one of the distinctive and exclusive merchandise. Since Customers expect newness and unique ideas and products they don’t see in other places, Macy’s launched in early 2011 a new private brand called Bar III for women and men. In 2010, approximately 43 percent of Macy’s sales were in exclusive or limited distribution brands and labels. The third strategy is an in store growth strategy called Magic Selling. The company is focused of coaching associates on sales floor. The fourth strategy is an omnichannel integration strategy. It is the integration between channels blurring the line between stores, Internet and mobile technology (Macy’s, 2011). Bloomingdales is using the same last strategy.
Dillard is using a diversification strategy. The company starts selling high end merchandise and brands in order to escape from its numerous lower-end competitors such as Target and Walmart (Hoovers, 2011). Saks is entering the upscale outlet market in order to attract lower income consumers (PR Newswire, 2011). Neiman Marcus is investing in applications for mobile phones and tabs to better its customers’ shopping experience (Panchuk, 2010).
Assumptions
The recent economic downturn changed the luxury retail industry. Since the recession, U.S. luxury department stores are planning to open lower-price outlets in order to reach so-called "aspirational" shoppers with limited budgets who covet top name brands. Neiman Marcus and Nordstrom are focusing on low-price outlets in their new store openings. Saks operates fifty-seven outlets, compared to fourthly-six department stores. However luxury industry executives think that too much push into outlet stores risks hurting the attribute of exclusivity that is essential to their business (Wahba & Skariachan, 2011). Retailers are expanding to emerging markets. Specifically the Asia Pacific region and Brazil are becoming the focus for internationalization. Discount and outlet malls are on the rise due to consumer demand for lower prices. Also, the online channel is becoming increasingly important for luxury retailers. Luxury retailers are diversifying into new product categories and focusing on heritage. They are introducing dedicated menswear stores and developing children offerings. They continue to diversify to ensure they target all aspects of consumers ' lifestyles and designers continue to collaborate with high street retailers to get their designs to the masses. Luxury retailers are embracing technology to reach new customers. Finally, celebrity endorsement plays a key role in promotional activities (MarketPublishers, 2010).

Capabilities The Macy’s brand is one of its strongest assets. The Macy’s brand is supposed to be one of the most recognizable names in the retail department store industry. From the movie "Miracle on 34th Street" to the Macy’s Thanksgiving Day Parade, Macy’s has integrated itself into the cultural fabric of America. Size is also becoming an important competitive advantage. Out of the five competitors, Macy’s’ marketing skills are one of the strongest assets. The company implements marketing efficiencies through national marketing campaigns, to compete with pure play internet retailers. Macy’s is in a great position to be able to leverage the storefront and internet services. Finally, the use of technology as well as retaining and attracting talent are important factor of their success (Macy’s Inc, 2011). Competitors Saks’s and Neiman Marcus focus on strengths such as buying power, merchandising and quality of products. Nordstrom’s strongest attributes are its customer service and quality of products. The company continues to improve their customer service by adding personal shopping sales associates who reach out to customers and personally assist with their shopping needs. In comparison to its largest competitor, Macys, Nordstrom has implemented a distinct shopping experience to once again separate themselves from competition. The acquisition of HauteLook presents an opportunity for Nordstrom and helps to distinguish themselves from competitors (Nordstrom Inc, 2011).

DRIVING FORCES
State of the Economy The state of the economy is a key driver in the retail industry. Consumer confidence is low, the unemployment rate is high, and people are saving more than they have in the past. “With the tightening of consumer credit, and the loss of wages and personal wealth in the U.S., consumers began spending more consciously and making choices to purchase only what they really needed, and what they really wanted (Farfan, 2010).” That being said, retail stores are offering discounted and promotional prices to drive sales growth. “Consumer spending, which accounts for about 70% of GDP, is positive but shows no signs of driving a sustainable recovery (Kiplinger, 2011).” Consumers are out looking for value and the black Friday sales numbers prove that consumers are still very price conscious.
Emerging new technology Investment in IT represents more than 46% of all capital investment in the US economy, and the retail industry is a large contributor of this (Wamba, Lefebvre, Bendavid, & Lefebvre, 2008). Internet and e-business marketing tactics no longer differentiate retailers. Mobile Commerce (m-Commerce) is an emerging phenomenon and one that will help retailers find a competitive advantage in the coming years. This will be driven by the rapid evolution in wireless technologies and the rapid diffusion of mobile terminals. Radio Frequency Identification (RFID), which is a wireless automatic identification and data capture technology that includes bar coding, optical recognition, biometrics, and card technology that will allow retailers to integrate activities and automate some intra- and inter-organizational business processes (Koh, Hae & Young, 2006). Through the adoption of RFID technology, Wal-Mart has saved billions of dollars in out-of-stock supply chain cost reductions, improved tracking through warehousing and distribution centers, and reduced inventory holding and carrying costs (Wamba et al., 2008).
Global competition The retail industry in any country is no longer confined to its own borders. Retailing is a global endeavor, and company expansion overseas is imperative to the success of the company (Farfan, 2010). This can be a threat for companies that are expanding slower than their competitors, or not currently in countries that are already thriving. Being one the first companies to gain the market share in the new region is an advantage. Trade barriers, varying country regulations, and labor costs are all important in the decision to go global. The most successful retailers are already multinational companies, and it is that coverage over the globe that is causing these companies to remain leaders in the industry. The recent developments in Europe have slowed the expansion process from many fortune 500 retailers. Companies like Forever 21 and Limited brands were hoping to create a footprint in Europe following the success of other companies like Apple and Abercrombie & Fitch (Goh, 2011). However, with Europe’s debt crisis currently unresolved, many companies are changing their international strategies wondering if it is worth it in an already very competitive market.
Changes in consumer buying patterns The retail industry falls into the consumer discretionary sector. Most shoppers have limited discretionary income, which means that shoppers are looking for value. Most consumers are no longer loyal to brand names and are looking for the biggest bang for their buck. This has affected the retail industry for high end stores, as well as discount and outlet retail shopping stores. High end retailers are fighting to maintain market share from discount retailers and dollar stores. For example, the Family Dollar store in Miami increased sales by 20% due to a new tracking system that caused management to move best-selling items around the store (Lutz & Townsend, 2011). In addition stores are gaining market share and increasing sales through the use of surveillance cameras. They are no longer being used just to watch for shop lifters, they are now used to monitor shopping behaviors (Lutz & Townsend, 2011).
KEY SUCCESS FACTORS
Superior product differentiation The selection of products and brand recognition is still very important to some consumers. Inventory is a large investment for retail stores: having the right inventory at the right time. It is important to stay on top of trends and the demands of consumers. The inability to meet the needs of consumers during the height of demand can really affect sales numbers. Retail stores need an effective inventory management system in order to determine these trends effectively. This can differentiate a successful retailer from the rest.
Meeting customers’ needs precisely Product mix and price are both very important to the consumer. The retailer needs to identify the product wants and needs of the public, and price it right to create repeat consumers and build traffic in its stores. When consumers want to shop determines the store hours and location. They are looking for convenience, not only to get to the store, but also once inside. The layout needs to be attractive, well organized and enticing. The key is to find a way to keep consumers in the store longer. The longer they stay the more they may spend. Finally, in order to meet the consumer’s needs precisely is to have unbelievable customer service. One of the biggest factors that can drive a retail stores success is customer service. “Nothing is more important to growing a solid repeat customer base than excellent service (Valuadder, 2007).” It is also less expensive to bring customers back than get a new one, considering the costs of advertising and marketing (Wuorio, 2011). In more recent years, with the arrival of the internet, how retailers are putting products in front of customers has changed dramatically. As previously discussed, physical stores and the internet is not enough. Retailers need to think about m-commerce and on the go applications.
People capital Companies are only as successful as the employees that work for them. Customer service is necessary to enhance the consumer experience with in the retail industry. Companies like Nordstrom’s who empower their associates have repeated the benefits, by being named extraordinary and legendary for their customer service (Great Place to Work Institute, 2009). At Nordstrom’s most of the sales staff is paid on commission, reflecting a pay for performance plan. They believe this pay structure benefits the customer as well as the associate, as the employees are fully motivated to cater to their customer’s needs. They are taught to empathize with their clients and treat them as they would like to be treated (Great Place to Work Institute, 2009). This gives them the freedom to make their own decisions and the flexibility needed to satisfy customer expectations. When companies create this type of environment for associates and customers it is a key factor to their success. Word of mouth about the superior service and corporate commitment to staff spreads. Through the use of internet, blogs about the retail experience are posted. The people capital of a company is its most important asset.

STRATEGIC GROUP MAP
Table 3.0
Company Revenue in 2010 Store Numbers as of 12/31/2010
Nordstrom Inc. 10.53B 204
Macy 's Inc. 25.95B, 805
Saks Inc. 2.95B 103
Dillard 's Inc. 6.37B 308
Neiman Marcus Group 9.27B 44
(Nordstrom, 2011; Dillard 's, 2011; Saks Inc, 2011; Macy 's Inc, 2011; Neiman, 2011) (Source: Hoovers, 2011)

Chart Interpretation The strategic group map illustrates the competitive market share of the rivals in the Retail industry of America.
Also, it indicates that the four closet rivals of Nordstrom, which are Macy 's, Dillard 's, Saks Fifth Avenue, and Neiman Marcus. In addition, it represents the companies that are the strongest threat to stealing market share from Nordstrom. The circles proportions represent the revenue in 2010 of each rival. Macy 's has the biggest dimension of the circle which is due to the number of stores nationally. When compared to the competitors we can see that Macy’s has the largest number of stores. Bloomingdales which is owned by Macys Inc. generates the principal income of luxury products selling. The other competitors in this class have higher price and higher brand reputations than Macy 's. Nordstrom has the second largest dimension of the circle, which shows that it has 20% less stores than that of Macy 's however it generates 40% more revenue than Macy 's. In the map, companies are evaluated based on two variables: the Product Price and Geographical Locations. The Product Price reveals which companies are high-end stores and which are regular department stores. The Geographical location reveals the market share of companies, it indicated that Macy 's and Nordstrom have higher market share of the department store
market. For the fashion retail industry, these companies both have similar upscale brand and product that are the reason for fierce competition within the market. Therefore, the key success factors are providing intimate customer service and exclusive products. Also, an improved effective strategy is imperative to enhancing a company’s performance and continuing innovations. In addition, expanding the fashion retail market share on foreign countries could be a trend in future years. For example, China’s accession to the WTO in December 2001 has enabled the entrance of foreign entrants into their retail market (BMI, 2011), companies are developing globalization strategies to expand market share overseas. This will drive sales and determine the success of following years.

Internal Environmental Analysis of Nordstrom
NORDSTROM’S RESOURCES
Tangible Resources
Tangible resources are assets that have a physical existence and are quantifiable to a company. These resources also help a firm to utilize its business to make produce and earn profits. For Nordstrom, its strong tangible resources can be its financial and physical resources.
Financial Resources
According to Nordstrom 's fiscal year ending January 31, 2011 10K report, net sales were $8,258, which is up 12.7% as compared to the prior year, with same-store sales up 8.1%. The number of sales transactions increased in 2011 compared to 2010; while the average selling price of Nordstrom’s merchandise was approximately flat (Nordstrom Inc., 2011). Also, the company 's retail gross profit increased $504 million in 2011 compared to 2010 primarily due to higher sales and merchandise margin, partially offset by increases in occupancy costs for new Nordstrom full-line and Nordstrom Rack stores opened within the prior two years. The gross profit increased by 15.3% over the prior year, which was mainly attributed to improvements in Nordstrom 's merchandise margin, as well as leveraged buying and occupancy costs on higher net sales (Nordstrom Inc., 2011).
However, as of 2011, Nordstrom’s gross profit margin was 39.21% which is very similar to ’s Macy 's 39.45%; Dillard 's gross profit margin is 38.88%, but Saks Fifth Avenue’s ratio values is extremely high which is 46.17%, causing the industry’s average of 39.3% to be a slightly higher value than that of Nordstrom’s (Ycharts, 2011). During recessionary times, Nordstrom issued its own label credit and debit card products to strengthen customer relationships and increase retail sales. Customers increased their level of spending in order to receive additional benefits, including rewards, such as complimentary shipping, early access to sale events and unique fashion and shopping events. The cardholders prefer to visit stores more often and spend more than non-cardholders (Nordstrom Inc., 2011). This credit card Fashion Rewards program helps the company drive sales in the retail segment while deepening the relationship with its customers and leading to greater customer loyalty.
Organizational Resources Nordstrom was founded in 1901 as a shoe store in Seattle. Incorporated in 1946, today Nordstrom is one of the nation 's leading fashion specialty retailers in the US. Nordstrom generates its revenues from two segments: Retail and Credit (Nordstrom Inc., 2011).
As of March 18, 2011, retail segment of Nordstrom is include 115 full-line stores, the online store at www.nordstrom.com, 89 off-price Nordstrom Rack stores, two Jeffrey ' boutiques and one clearance store that operates under the title Last Chance, as of March 18 2011(Nordstrom Inc., 2011). Additionally, the company operates in the online private sale marketplace through its subsidiary HauteLook (Nordstrom Inc., 2011). The Nordstrom credit segment consists of a wholly-owned federal savings bank that offers Nordstrom VISA credit and debit card for Nordstrom purchases. The credit and debit cards feature a shopping-based loyalty program designed to increase customer visits and spending (Nordstrom Inc., 2011).
Physical Resources Nordstrom’s corporate offices are located in Seattle. Its distribution centers are found in Ontario, California, Portland, Oregon, Dubuque, Iowa, Marlboro, Maryland and Gainesville, Florida. Nordstrom 's Credit Inc. and Nordstrom Federal Savings Bank are located in Denver, Colorado (Hoovers, 2011b). As of March 18, 2011, Nordstrom maintains 207 stores located in 28 states in the U.S., the West Coast and East Coast stores were the largest presence in the areas where they were located (Nordstrom Inc., 2011). The clothing retail industries have a high level of competition. In order to attract customers come to store, Nordstrom provides high-quality clothing, shoes, cosmetics, and accessories to its customers. The company also offers customers the option to purchase items on Nordstrom website and pick them up in Nordstrom stores (Nordstrom Inc., 2011). These capabilities provide a flexible shopping experience to customers in order to improve the customer satisfaction and customer loyalty
Technological Resources Nordstrom has 119 trademarks, the most famous trademarks are included Nordstrom, Nordstrom Rack, Halogen, Caslon, Classiques Entier, John W. Nordstrom and BP (Nordstrom Inc., 2011). In addition, Nordstrom has a technology patent, called the RFID chips, which allow companies to link its online inventory to stores. This system has made it much easier for customers to shop online, and has even allowed customers to find items online and then request to try them on at stores. The change in inventory management has allowed Nordstrom provide intimate customer service, which has translated into higher sales (Price, 2011).
Intangible Resources
For Nordstrom, its strong intangible resources are innovation and reputational resources. The intangible resources are important assets that can push the company toward growth. Nordstrom’s intangible resources include human resources, innovation resources and reputational resources.
Human resources
As of October 2, 2010, Nordstrom employed approximately 52,000 employees on a full- or part-time basis (Nordstrom Inc, 2011).
Employees are aware of their prime objectives. They have freedom to think beyond limit and come up with new innovative ideas. The founders define Nordstrom as a great company to work for that empowers all associates. They understand the goal to provide outstanding customer service and take responsibility for their jobs (Nordstrom, 2011). Nordstrom is well known for their excellent treatment of employees. Employees are well-trained, enthusiastic, and motivated through good leadership. In addition, Nordstrom has developed an employee service program, which offers management and service classes for any employee to take (Nordstrom Inc, 2011).
Innovation Resources
Technical innovation has helped Nordstrom make a name for itself as a technologically friendly retailer. In 2009, it introduced a shared-inventory platform so that it can fulfill internet orders with merchandise from a store when its Cedar Rapids, Iowa warehouse is out of stock (Martinez, 2011). The warehouse management technology innovation helps the company manage its inventory
efficiently. During 2011, Nordstrom sales associates were equipped with iPod touches—that are enabled to accept credit card purchases and email customers their receipts (Price, 2011). Also, in February 2011, Nordstrom acquired HauteLook, Inc., A leader in the online private sale marketplace. This acquisition will enable Nordstrom to participate in the fast-growing online channel and provide a platform that will enable them to serve customers in a speedy way (Nordstrom Inc., 2011). In addition, all Nordstrom stores have implemented a company-wide ordering system (Price, 2011). If an item that a customer wants is not currently in stock at the local store, it can be ordered through a system in which the item can be shipped from any other store that has the item in stock. When customers make a system-wide order, their name, address, phone number and other personal information is entered into Nordstrom 's system, and this information aids Nordstrom in future advertisements and promotions (Ireland, 2011).
CAPABILITIES
Nordstrom currently has two distinct capabilities, its IT-upgrade operation and customer service. These two capabilities increased pre-tax earnings of 3.7% of sales in 2009 to 11.2% in 2010 (Nordstrom Inc., 2011). First, its IT-upgrade is called new POS system which can provide a speedier checkout. In addition, this upgrade allows Nordstrom store associates access to its web store, enabling them to place orders for out-stock items and have them shipped to the customer’s address. Most importantly, this system can provide a perpetual-inventory solution. The new POS system slashed direct cost labor cost by 45%, gave customers a level of visibility into location-specific and gave Nordstrom greater visibility into its inventory transfers (Price, 2011). Also, the high-efficiency inventory management system with multichannel capabilities provide an exclusive and high quality product to customers while provide top of the line service. In addition, personalized customer service is viewed as a fundamental part of Nordstrom’s value proposition. Nordstrom positions itself in the industry as a high end retailer by selling top of the line products with an excellent brand image that customers are willing to pay extra for. After a product is sold, the employees of Nordstrom will do almost anything to satisfy customers after the actual point of sale. This is included in the excellent customer service and service survey to track consumers shopping experience in order to keep customer with Nordstrom.
CORE COMPETENCIES Nordstrom’s competitive advantage is attributed to its product quality, customer service and continuous improvement. First, Nordstrom has structured different strategies and differentiates itself from other competitors in the industry. Competing with other high-end retail stores as well as traditional retail stores, it must employ qualities to distinguish itself from other stores through its product selection and quality. Erik Nordstrom, President of Stores, has illustrated "With compelling merchandise and an unyielding commitment to customer service, we can be the retailer customer’s trust.” Second, Nordstrom re-committed to its business strategy to ensure that it were second to none in terms of the service provided for customers. Nordstrom has maintained its unique reputation from its establishment in 1901 to the present day and beyond (Tice, 2010). The company regards its customers as extended family and treats them as such. In addition, Nordstrom utilizes dedicated sales associates for serving customers in a variety of fashions. Customers enjoy the most liberal return policy that is highly regarded among them (Nordstrom Inc., 2011). Third, Nordstrom effectively responds to the technological changes in the retail industry. To further enhance customer service, Nordstrom has focused on improving the customer in store shopping experience by using a POS device (Price, 2011). Nordstrom is also using web direct retailing to enhance customer’s online shopping experience. The company strives to provide the most effective multichannel relationship with its customers by offering the same in store benefits through online and catalog shopping.
FOUR CRITERIA TEST FOR SUSTAINABLE COMPETITIVE ADVANTAGE
Table 4.0
Resource or Capability Valuable Rare Costly to Imitate Non-substitutable Competitive
Consequences Performance
Implications

Distribution
(logistics)
Yes
Yes
Yes No Temporary competitive advantage Average to above return

Brand Image Yes
Yes
Yes No Temporary competitive advantage Average to above return

Innovation
Reputation

Yes
Yes
Yes
Yes Sustainable competitive advantage Above average return
Knowledge & Abilities
Yes
Yes
Yes
No Temporary competitive advantage Average to above return

Marketing
Yes
No
No
No Competitive disadvantage Average to below return

Table 4.0 represents the distribution and logistics model that Nordstrom has in place. This led to a temporary competitive advantage which is produced by valuable, rare, and costly to imitate capabilities. Most manufacturers of upscale merchandise are highly motivated to ensure their availability at Nordstrom’s (Perner, 2008). Exclusive or selective distribution strategies are developed by companies to create and enhance a certain image for their products. Exclusivity can also be created by limiting the quantity of goods available, such as limited editions, some private labels, or store brands, which are only available at certain stores and Nordstrom is one of those (Cornell University, n.d.). Their computerized inventory system enables managing inventories at its store and website as one entity. Therefore, it enables distribution and logistics more efficiently. Furthermore, it is very costly to imitate. To upgrade this system Nordstrom spent $69 million during its third quarter in 2010 (RIS, 2010). However, the system is substitutable. For example, Macy’s Inc. uses simple web-based load-matching system in distribution and logistics management to help its carriers save time and make money on backhauls in the process (Kerry, 2010). Nordstrom’s brand image has a temporary competitive advantage giving it an above average return. Brand is built on history, culture, consumer experience and consumer trust. Nordstrom carries over 200 brands and it has an incredible brand power. Nordstrom is famous for their exceptional and personalized customer service for the past 100 years. Nordstrom is a customer-centric, service-oriented brand (George, 2008). Nordstrom’s brand image is valuable, rare, and costly to imitate. The Customers ' Choice Awards, sponsored by American Express, honor retailers across all channels and formats who demonstrate superior customer service. Roughly 10,000 consumers were surveyed, and Nordstrom was selected as one of the top ten retailers for customer service in 2010 and 2011 (NRF Foundation, n.d.).
Nordstrom has a competitive advantage due to its strong emphasis on innovative technology development. Nordstrom is investing approximately $150 million a year for the next three years to upgrade its e-commerce and general I.T. infrastructure, which is costly to imitate for retailers. The broad scope of Nordstrom’s systems integration effort is enabling the merchant to heighten inventory management effectiveness. Other retailers are following the lead of Walmart Stores Inc. by using data integration to improve the movement of inventory to minimize costs of storing and transporting goods and keep retail prices down (Demery, 2007).
A recent innovation of Nordstrom is its mobile-based POS system, which was designed to improve customer service. The devices save customers’ time to check out, and enable with iPod Touches can look up the availability of certain sizes or colors without having to physically search through a stockroom (Price, 2011). In addition, Nordstrom has adapted “green” innovations, trying to reduce the impact on the environment by using economically friendly bags, boxes and dabbled in organic cotton development (Nordstrom, Inc., n.d.). Nordstrom has temporary obtained a competitive advantage in knowledge capability. Nordstrom’s workforce is comprised of highly skilled, professional, and knowledgeable employees who want to make a difference in the customer experience. The company’s strength in knowledge capability is seen through its employee training system. Nordstrom invested $925,000 in training in California in 2009. Employees are well trained and highly skilled in business, computer, commercial, leadership, and continuous improvement. Nordstrom also provides ongoing training including anti-harassment, diversity, violence in the workplace prevention, OSHA safety training, retail operations, merchandising, and retail math skills (Nordstrom, Inc., 2009). Nordstrom’s knowledge capability is most valuable, rare and costly to imitate. Nordstrom’s marketing is established to be a competitive disadvantage. Their marketing strategy is to focus on the quality of the customer 's experience and not on the price like Wal-Mart, though is very effective (Isidro, n.d.). While it is pricier to shop for clothes and home decorations at Nordstrom 's; most designer labels prove to be of better quality, uniqueness, and durability. Instead of making advertisement campaign addressed to a television audience, Nordstrom does pride in itself in utilizing ‘word of mouth’ marketing strategy from satisfied customers (Espey, 2010). Nordstrom’s marketing power has an average to below return for the reason that it is valuable. The word of mouth strategy is rare, not costly to imitate, and substitutable. According to Pellerin (2011), among all the different kinds of marketing strategies, word of mouth is the cheapest and the most effective way to market a company and build credibility.

VALUE CHAIN

Inbound Logistics (Supply Chain Management) The supply chain is the life blood of a company. Management must determine how to cut costs and find efficiencies in order to increase profits and ultimately help the bottom line. Nordstrom recognizes the need to create a supply chain focused on the customer and based on value. Nordstrom has continued to enhance their supply chain through corporate partnerships, stringent guidelines and bringing in new technology. Focused on constantly trying to stay ahead of competition and to deliver merchandise to its customers fast and effectively, Nordstrom has developed a Nordstrom Full Line and Rack Supplier Compliance Manual.
Nordstrom uses a supply chain management software company named SynQuest. SynQuest uses technology to analyze variables that impact supply chain performance. For example, materials supply, transportation, manufacturing, distribution and customer service are just a few of the variables considered. This tool allows Nordstrom to plan, execute and control orders. Therefore, Nordstrom is able to work with their vendors to minimize back orders, address seasonal and promotional items as well as compare inventory balances to the current supply and demand of consumers. Retail supply chains, target inventory as a way to lower costs and increase profits. Keeping inventory balances low and selling it fast is the goal of many retailers (Clifford, 2011). Nordstrom however, is using inventory to increase sales numbers through SynQuest technology and Nordstrom’s decision to switch to a shared inventory platform. Nordstrom’s supply chain starts with its vendors because they buy directly from their vendors and have the inventory shipped into one of the company warehouses. They use a perpetual inventory system called Accenture. Nordstrom’s customers expect superior customer service in addition to the latest trends and hottest fashion items. At the turn of the century, they were having trouble with regional buyers, finding themselves on the backend of trends, and not being able to get inventory into their stores when in demand. Nordstrom was relying heavily on their customer service and neglected the technological tools needed to manage their inventory. Until they upgraded their inventory system in 2003, the company had trouble tracking inventory by location and had inventory productivity and markdown issues. Their ‘perpetual’ inventory system has allowed them to track product, identify popular sellers as well as slow moving inventory, expedite orders and keep a perfect merchandise mix on its sales floors (Accenture, 2012). This systems conversion has proven to be quite successful and has helped them regain their competitive advantage. For example, Nordstrom holds inventory for an average of 62 days, while Macy 's, their largest competitor, holds inventory for 119 days, and Sax Fifth Ave holds inventory for 140 days (Timberlake, 2009). In addition Nordstrom has been able to limit new orders on past sales and target specific product items for markdown, instead of entire clothing lines (Timberlake, 2009). Macy 's lack of inventory technology forces them to rely on their Macy 's "One Day" sales and coupons to move their inventory. Macy’s venders have to send a daily inventory status to an Electronic Data Interchange themselves. Although Macy 's has a standardized inventory policy that all venders must follow, they hold inventories almost 60 days longer then Nordstrom. Nordstrom is a specialty fashion retailer who carries merchandise from many vendors. While Nordstrom has manufacturers that create merchandise for their “private label” line, they do rely on their vendors. The relationship with their vendors is a significant contributor to Nordstrom’s success. There are no guaranteed supply arrangements with their key vendors and many of them limit the number of retail channels to sell their merchandise (Annual Report, 2010). Many of their vendors like Coach and Kate Spade for example have their own retail stores. Management makes decisions regarding inventory purchases in advance of the season it will be sold so their ability to predict fashion trends and consumer preferences does impact company sales (Annual Report, 2010). Since management cannot predict trends 100% of the time, Nordstrom has found an outlet for the inventory that has fallen out of taste with consumers. The Nordstrom Rack is an outlet store where they offer products that haven 't sold in their traditional stores. By moving slow inventory off the floor quickly to the Nordstrom discount store, it can make way for the newest hot sellers, allowing them to maximize their sales per square foot.

Outbound Logistics (Distribution) Nordstrom’s level of commitment to delivery and routing is just as serious as they take supplier standards. Nordstrom has a 126 page Routing Guide which gives instructions on carrier selection and shopping specifications on all orders within the United States. The guide is extremely detailed. For example, the carrier is selection is based on shipment weight, method, rating mode, shipment zip code and destination. The guide is used by Nordstrom when shipping from store to store and to their customers but also by the venders and suppliers. The international shipping guidelines are just as stringent. Nordstrom participates in the Customs Trade Partnership against Terrorism (C-TPAT). They specifically state that they are not responsible for international freight charges nor will act as the importer for Customs and Border Protection (Nordstrom Inc., 2011). Nordstrom buyers are allowed to select the shipping method for a purchase order (PO) but are not allowed to select the carrier. Each PO is given a shipping window from the earliest ship date to the latest ship date, and failure to ship within the shipping window will result in all freight and handling costs to be charged to the supplier. All suppliers are urged to consolidate their shipments into the smallest possible number of shipments per week since the heavier the shipment the more economical the freight charge is. Nordstrom also has an order verification system called NOVS, which is used so that shippers may check the status of their PO’s. This system gives Nordstrom’s management and associates the ability to track shipments at any time for its customers leaving them with awareness and relieving the anxiety of when the purchase will be delivered (Nordstrom Inc., 2011). All purchases shipped directly to a customer include full return shipping papers, which allows the customer to examine the item for quality, color, size and return the item either by mail or in store without any hassle. Nordstrom has a no questions asked attitude toward returns; all returns are accepted regardless of reason. This contributes to the companies extraordinary after sales service. All items are tagged with a barcode at the time and place of purchase. The barcode is encoded with all the necessary information about that purchase, including price, discounts received, and the salesperson that completed the transaction. This is helpful for when a customer cannot find the return papers (Nordstrom Inc., 2011). Nordstrom offers free standard shipping everyday and delivery is promised between 3-8 business days from the date of purchase. Shipping charges are only applied if you opt for 2nd day, next day or Saturday delivery. One exception is on the purchase of jewelry and watch orders over $1,500. Purchases that meet these criteria are shipped insured and expedited at no additional cost to the customer (Nordstrom Inc., 2011).
Sales and Marketing
Nordstrom 's targets well-educated, middle-aged women in upper-income households. Although it targets shoppers in the highest income brackets, it also markets to luxury shoppers at more moderate income levels ranging from $75,000 to $149,999 representing 22.4 million households (Unity Marketing, 2005). This is one of the reasons why their primary competitor is Macy 's Inc, whose niche market is working women age 25 to 54 with its emphasis on "affordable fashion” (O 'Donnell, 2006).
It is in the stores where much of their advertising takes place through a unique customer experience and subsequent word of mouth. Outside the store their marketing has been flexible and targeted. Unlike many of their competitors that inundate potential consumers with weekly mailers and TV commercials, Claudia Gonzalas in Nordstrom’s corporate headquarters, explains that the marketing for the Providence store is primarily targeted around semiannual and annual sales in June and November. They do some seasonal advertising in the Providence Journal by taking out a full page color advertisement and sending targeted direct mail to their top 35,000 customers. When asked about TV and radio, she indicated that they do not participate in TV advertisement but do some radio advertisements locally on 92 Pro FM.
Their marketing strategy expands beyond the borders of the United States. With an expanding global economy and a domestic demographic that continues to change, so too has Nordstrom’s marketing strategy. "Through retail stores from Washington State to Washington D.C, and through world-wide mail order catalogs and online shopping opportunities, Nordstrom 's attracts the shopping dollars from people of all ages and backgrounds (SMG, 2000)." They regularly advertise in minority magazines, as they understand the diversity of its customer base. They have been recognized as being one of the top 50 best companies for Asians, Blacks, and Hispanics by Fortune Magazine.
In March 2011, Nordstrom bought HauteLook in order to make a name for itself as a technologically friendly retailer. HauteLook is an online flash sale marketplace where members can buy designer apparel, accessories, and other items at a discounted price for a limited time (Chang, 2011). To appeal to today’s technologically savvy shoppers Nordstrom is trying to reach out to customers on their smart phones and equipping stores with Wi-Fi (Martinez, 2011).
After Sales Service
Nordstrom is synonymous with extraordinary customer service, and has even been the subject of several books on the topic. The secret to their success in this area begins with their investment in people capital, beginning with their hiring practices. Nordstrom has been rated one of the top places to work for over the past 25 years according to the Great Place to Work Institute in 2009. Managers seek candidates who can be cordial under a variety of circumstances. They are trained on behavioral interview techniques to create an interview experience that will allow them to gain the greatest insight into a person 's ability to sell, with a clear focus on the needs of the customer.
All new employees, no matter what department they are hired for, go through a stringent mentoring, coaching and training program to help their transition into Nordstrom’s culture. Mentoring and coaching are part of everyone 's job, and help ensure that employees are continuously supported in their professional growth and development through an 'each one teach one ' approach (Great Place to Work Institute, 2009). Nordstrom also has a practice to promote from within, and just about every employee at Nordstrom started out as a floor salesperson. Many industry leaders say that Nordstrom has a secret to their success, but Nordstrom claims it is their people that make them so successful.

FINANCIAL ANALYSIS OF NORDSTROM
Introduction
The purpose of this paper is to highlight and asses the financial strength of Nordstrom Inc. (JWN). The ratios that will be analyzed focus on three key aspects of the financial analysis review with the first being the interpretation of Nordstrom’s key ratios as they relate to their profitability, liquidity, activity and leverage capabilities. Secondly, these key ratios will be analyzed to demonstrate their current performance as compared to their prior three years. Lastly, Nordstrom’s performance will be compared to the industry averages of the retail industry as well as to Saks performance.

RATIO ANALYSIS
Summary of Key Financial Ratios for Nordstrom
Nordstrom is on a January 31 fiscal year end
Table 6.0
Category
Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Profitability Gross Profit Margin 36.81% 38.24% 39.21% 39.3% 35.85%
Profitability Operating Profit Margin 8.98% 9.67% 11.53% N/A 3.7%
Profitability Net Profit Margin 4.68% 5.11% 6.32% 6.7% 1.72%
Profitability Return on Assets 7.12% 7.21% 8.73% 11.7% 4.35%
Profitability Return on Equity 34.49% 31.70% 34.12% 30.1% 4.28%
Profitability Return on Invested Capital 10.93% 11.15% 13.64% 15.5%
5.19%
Liquidity Current Ratio 2.01 2.01 2.57 2.3 2.2
Liquidity Quick Ratio 1.26 1.41 1.88 1.2 0.41
Liquidity Inventory to Net working Capital 0.56 0.44 0.33 N/A
1.16
Liquidity Times Interest Earned 5.95 6.04 8.80 N/A 1.59
Leverage Total Debt to Total Assets 0.79 0.76 0.73 N/A
0.24
Leverage Financial Leverage 4.68 4.19 3.69 3.5 1.84
Leverage Total Debt to Equity 2.08 1.66 1.38 1.16 0.44
Leverage Long-term Debt to Equity 1.83 1.44 1.37 N/A
0.31
Leverage Equity to Total Assets 33.53 30.54 27.45 N/A 54.29
Activity Days Sales Outstanding 79.40 84.13 76.41 N/A 86.76
Activity Receivables Turnover 4.60 4.34 4.78 76.5 0
Activity Days in Inventory 62.53 61.59 58.03 N/A 144.45
Activity Inventory Turnover 5.84 5.93 6.29 4.4 2.53
Activity Fixed Assets Turnover 4.08 3.87 4.25 N/A 3.02
Activity Assets Turnover 1.52 1.41 1.38 1.7 1.41
(Sources: W/D Partners Worldscope, 2011; ADVFN, 2012; MSN Money, 2012)

PROFITABILITY RATIOS A company’s ability to be profitable is the net result of a number of policies and decisions implemented by management (Brigham & Ehrhardt, 2008). In an effort to evaluate how these policies and decisions are affecting the company, it is important to look at their profitability ratios, which are financial metrics that are utilized to assess a business’s ability to generate earnings as compared to its expenses and other relevant costs (Brigham & Ehrhardt, 2008). The ratios used for analyzing Nordstrom’s profitability will be gross profit margin, operating profit margin, net profit margin, return on assets, return on equity and return on invested capital.

Gross Profit Margin

Category Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Profitability Gross Profit Margin 36.81% 38.24% 39.21% 39.3%
35.85%

Nordstrom’s gross profit margin has steadily increased by 6.5% over the past three years, which is almost in line with the industry average of 39.3%. The improved gross profit margin was driven primarily by leverage buying and occupancy costs, although merchandise margins also experienced a slight increase. Compared to Saks, it is a good indication that Nordstrom manages its costs more efficiently thus retaining more revenue which is ultimately available to shareholders. Basically, a gross profit margin of 39.21% means that for every dollar generated through sales, Nordstrom has $0.39 left over after deducting the cost of goods sold.

Operating Profit Margin

Category Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Profitability Operating Profit Margin 8.98% 9.67% 11.53% N/A
3.7%

Nordstrom’s operating profit margin has increased by 28.4% to 11.53% since 2009. This ratio is a measurement of what proportion of revenue is left over after paying variable costs of production such as wages and raw materials but before interest and taxes are paid. This indicates that Nordstrom’s pricing strategy and operating efficiency has been improving compared to Saks, who only has a 3.7% operating profit margin.
Net Profit Margin
Category
Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Profitability Net Profit Margin 4.68% 5.11% 6.32% 6.7%
1.72%

Nordstrom’s net profit margin for 2011 is 6.32%, which has increased by 35% over the past three years and is now comparable to the industry average of 6.7%. This ratio indicates that for every dollar of sales generated, Nordstrom retains $0.0632 in earnings. This upward trend was partially attributable to 3% decrease of Nordstrom’s interest expense since 2009, coupled with the 30% increase of cost of goods sold and a 13% increase in selling, general and administrative costs. Nordstrom retains over three times the amount of earnings that Saks retains, with a 1.72% net profit margin ratio.

Conclusion derived from the profitability ratios Nordstrom’s profitability is currently in line with the industry averages and well above Saks profitability performance. With a 13.2% increase in their revenue since 2009, Nordstrom continues to increase their bottom line through effective management of their costs, with a 8.8% and 13% increase in their cost of goods sold and selling, general and administrative costs, respectively. The strategies implemented by Nordstrom’s management have resulted in all of Nordstrom’s profitability ratios to trend upward, which have generated greater profit margins. Despite these upward trends, Nordstrom still has more work to do with utilizing their assets to increase profits.

LIQUIDITY RATIOS In an effort to review a company’s ability to turn assets quickly into cash, liquidity ratios will be analyzed. Nordstrom’s liquidity will be evaluated by reviewing their current ratio, quick ratio, inventory to net working capital, and times interest earned ratios.
Current Ratio

Category Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Liquidity Current Ratio 2.01 2.01 2.57 2.3
2.2

Nordstrom’s current ratio for 2011 is 2.57, which demonstrates that it’s fully capable of paying their short term debt obligations that are due within the next 12 months using only their cash, inventory and receivables. Nordstrom’s current ratio has increased by 27.9% over the past three years. For every dollar of short term obligations, Nordstrom has $2.57 available in assets that can be converted to cash in the short term. Since this ratio is higher than the industry average and Saks, with 2.3 and 2.2 respectively, we can determine that Nordstrom has a greater ability to turn its products in cash if needed.

Quick Ratio
Category
Ratio Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 Industry Average 2011
Saks, Inc.
2011
Liquidity Quick Ratio 1.26 1.41 1.88 1.2
0.41

Since it may take longer to turn inventory into cash, another method of analyzing Nordstrom’s liquidity is by analyzing the quick ratio, which excludes the inventory. The method uses the most liquid assets to pay off their short term debt. For 2011, Nordstrom’s quick ratio was 1.88, which represents a 49.2% increase over the past three years. This means that for every dollar that of their short term obligations, they have $1.88 available in assets to cover debt. Compared to the industry and Saks with quick ratios of 1.2 and 0.41 respectively, Nordstrom is in a better position to pay off their current obligations if they needed to do so. A ratio of greater than 1 indicates that they can pay their current debt but on the other hand, is Nordstrom holding on to too much cash that should be re-invested?
Conclusion derived from the liquidity ratio Due to the seasonal nature of the retail industry, it is important for Nordstrom to have sufficient liquidity to cover seasonal cash needs as well as to maintain appropriate funds to cover short term borrowings as well as potential long term initiatives. Nordstrom’s cash and cash equivalents increased from $72 in 2009 to $1,506 in 2011. This was attributable to working capital initiatives undertaken in 2009, which resulted in an increased amount of cash generated from operating activities; also, higher performance incentives were awarded as well as higher taxes compared to 2009. In addition to these liquid resources, at 2011 fiscal year end, Nordstrom also have short term borrowing capacity available for general corporate purposes of $950, which serve as a larger cushion for unforeseen liquidity situations or investment opportunities arise.

PER SHARE DATA
Table 7.0
Category Nordstrom
2009 Nordstrom 2010 Nordstrom 2011 3 Year Growth
Earnings per Share $1.83 $2.01 $2.75 50.3%
Revenue per Share $39.80 $39.63 $44.50 11.8%
Book Value $5.62 $7.22 $9.27 64.95%
Cash Flow $3.17 $3.27 $4.06 28.01%
Dividends Declared per Share $0.64 $0.64 $0.76 18.75% (Source: ADVFN, 2012)

Conclusions derived from Nordstrom’s Financial Analysis
One of Nordstrom’s strategies is to increase shareholder wealth through increasing revenue, while managing costs in an effort to pass these gains on to their shareholders. Nordstrom utilizes capital to finance operations, make capital expenditures and acquisitions, manage debt levels and return value to our shareholders through dividends and share repurchases. Earnings per share represents the portion of a company’s profit that’s allocated to each share of outstanding stock and serves as an indicator of a company’s profitability. Nordstrom has increased their shareholder’s earnings per share to $2.75, which is a 50% growth over a three year period. This increase is partly attributable to authorized buyback of $500 shares in addition to the revenue increase. In an effort increase shareholder wealth, Nordstrom has increased the amount of dividends declared per share to $0.76, which is an 18.78% increase over 3 years. Nordstrom’s continues to produce results and passes them onto investors through larger dividend payments and the buyback of shares, which increase per share figures. In conclusion, Nordstrom’s profitability is similar to industry averages as revenues continue to increase while costs are effectively managed. Nordstrom’s strategic growth initiative involves investing in capital projects in an effort to grow business and increase shareholder wealth. Long term debt as well as available cash is utilized to fund these capital and technological improvements. As far as liquidity, Nordstrom is fully capable of paying their short term obligations, while having sufficient liquidity to meet seasonal demands and potentially fund long term projects if needed. The return on Nordstrom’s assets is low but this may be attributed the opening of stores where the revenues have not been fully realized yet. Finally, Nordstrom exceeds expectations relating to how quickly inventory in being turned over due to their inventory system. Overall, Nordstrom is financially sound as capital improvements continue to be made to grow business.

SWOT CHART
Table 8.0

Strengths

• World class customer service
• Broad range of well recognized quality and highly fashionable products
• Improved profitability
• Strong management
• Innovative Technology Development: POS system, Accenture and SynQuest
• Knowledgeable and diverse workforce
• Perpetual inventory system
• Distribution channel
• Brand image Weaknesses

• Product recalls
• Smaller scale of operation
• Advertising
• Pricing capabilities
• Loyalty program
Opportunities

• Demand for E-Commerce and M-Commerce
• Social networking platforms
• Recovering U.S. economy
• Change in Consumer Buying Patterns
• Strategic agreements and activities
• Retail markets that are just outside of Nordstrom’s current customer base
• New technology (HauteLook) Threats

• Limited geographic presence
• Fast changing fashion trends and pricing pressure
• Fast pace of technological advances
• Highly competitive and saturated market
• Increased Personnel & Training

KEY RESULT AREAS

Improved profitability

2011 2010 2009 2008 2007
Revenues 9,700 8,627 8,573 8,828 8,561
Cost of Revenue 5,897 5,328 5,417 5,526 5,354
Gross profit 3,803 3,299 3,156 3,302 3,207
*In millions of dollars

Nordstrom has considerably improved its profitability within the last five years. The company has the highest sales per square foot among its competitor in 2011 with $382 per Sq Ft compared to $154 per Sq Ft for Macy’s (Retailsails, 2012). In addition, the acquisition of the company’s website HauteLook in early 2011 seems to be successful. The online sales increased by 8% in less than a year (Hoovers, 2011).

World Class Customer Service The extraordinary, legendary customer service of Nordstrom is its biggest strength and it is what differentiates itself from its competitors. Nordstrom wants to be more than customer focused, it wants to enhance the customers’ entire experience by becoming a truly customer driven organization. Nordstrom has been a recipient of the Customers’ Choice Awards for being one of the top ten retailers for customer service. This award honors retailers across all channels and formats who demonstrate superior customer service.

Change in Consumer Buying Patterns The retail industry falls into the consumer discretionary sector. Most shoppers have limited discretionary income which means that shoppers are looking for value. There is still a want for the luxurious apparel that Nordstrom provides, but at a lower price. This represents a great opportunity for Nordstrom that accompanies one of the company’s current growth strategies. The plan is to open 16 new Rack outlet stores by the end of 2012. This represents an expansion into a less typical market segment, the one of middle class and bargain hunters. Other competitors such as Saks and Macy’s are also attacking this new segment. In order to differentiate from these rivals, the challenge for Nordstrom is to carry its extraordinary customer service to the discounted Rack stores as well.

Demand for E-Commerce and M-Commerce The high demand for online and mobile channels represents a great opportunity for Nordstrom. Nordstrom has planned to invest approximately $150 million a year for the next three years to upgrade its e-commerce and general I.T. infrastructures. Nordstrom is willing to spend up to 15% of its capital budget on new technology through 2016 (Brohan, 2011).

Innovative Technology Development
In February 2011, Nordstrom acquired an LA-based on line retailer HauteLook that offers flash sales on designer goods for 180 million in stock and a three-year "earn-out" payment based on HauteLook 's financial performance. This acquisition aided Nordstrom in its quest to be known as a technologically friendly retailer. The company is stating that the majority of its sales growth over the next ten years will be online (RIS, 2011). In addition, Nordstrom plans to equip stores with Wi-Fi and find ways to reach out to customers on their smart phones.

Advertising
Nordstrom needs to develop a new marketing campaign. Nordstrom does very little advertising compared to competitors. The company usually advertises around its semiannual and annual sales. Nordstrom has made a commitment to make improvements to its loyalty program in 2012, by offering additional ways to get rewards as well as offering additional perks to reward card holders. In order to generate visitors to the new acquired website, Haute Look, developing a good social media program could be instrumental in keeping Nordstrom on top among luxury retail providers. Social Media and word of mouth advertising can be an extremely effective marketing channel at a very low price.

STRATEGIES

• Continues Improved Profitability Trend – Company revenues have been increasing on a year over year basis. With the addition of new mobile technology, Nordstrom is hoping to increase retail sales by 13% compared to the prior year as well as increasing the company’s credit sales by 7%.

• Technology Innovation – Nordstrom recently developed a mobile-based POS system. The devices assist customers with easier checkout and enable with iPod touches can look up the availability of certain sizes without physically searching through a stockroom. Sales personnel will be equipped with mobile devices. In addition, Nordstrom should look to develop a Nordstrom application as most customers are already equipped with smart phones and are familiar with shopping applications. The demand for m-commerce is strong and Nordstrom will need to be innovative to stay ahead of competition.

• Growth Plan Strategy – Nordstrom plans to open 6 new Nordstrom full line stores and 18 Nordstrom Rack stores by 2012. Nordstrom focuses on the Rack discount stores to cater to the customers focused on value and to be in line with economic trend. In addition, Nordstrom should continue to look at developing partnerships and the possibility of additional acquisitions of other technology based companies. This can offer additional resources and assets to Nordstrom as the HauteLook venture has proved.

• Expanding E-Commerce Strategy – Customers are responding to a new way of shopping. The E-Commerce makes up an ever larger portion of retailers’ sales each year. The acquisition of HauteLook proved to be a right choice since its sales hit Nordstrom’s highest ever. Nordstrom will continue to expand its E-Commerce business in 2012.

• Develop a Highly Personalized Shopping Experience – Increasing awareness of a Fashion Reward program for customers. Developing the program to include ways to earn points faster by including sales from the Rack stores as well as offering complimentary alterations to card holders. In addition, the new technology initiatives will enhance the customer experience by offering convenience, efficiency and options.

•

DECISION CRITERIA
The luxury fashion retail industry is very competitive. Expansion of E-Commerce and M-Commerce will help Nordstrom gain a higher percentage of the market share. This is what consumers are demanding as buyers. They want options, convenience and value. Nordstrom has already taken the first big step in this venture. The acquisition of HauteLook will enable Nordstrom to participate in the fast-growing online channel and provide a platform to serve customers more rapidly. In addition, unlike many other retail websites that fail to design an efficient on-line option, Nordstrom 's website is extremely user friendly. Nordstrom uses social media to share customers’ recommendations, comments and questions in order to increase on-line sales (Wittenstein, 2010).
Nordstrom’s strategy to increase technology resources and to be known as an innovative technology based retailer goes hand in hand with Nordstrom’s strategy to expand their e-commerce and m-commerce business segment. This is again to stay in front of the competition. Nordstrom’s recently developed mobile-based POS system will assist customers with easier checkout. Consumers are not strangers to mobile technology as most are already equipped with smart phones and other handheld mobile devices. The fact that Nordstrom is looking into equipping sales personnel with iPod touches to be able to look up the availability of certain sizes without physically searching through a stockroom is a win, win for both Nordstrom and the consumers. Reducing the time spent with each individual customer should allow employees time to assist additional customers and ultimately increase sales. At the same time consumers are looking for efficiency and convenience and this should help increase their overall shopping experience. Nordstrom 's success in creating an intimate shopping experience for its guests is largely due to creativity and innovative technology advancements, which would be the reason for future success and the decision to continue this technology pursuit.
Nordstrom’s growth plan strategy includes opening additional stores in the U.S. They have committed to opening 6 new full line stores and 18 Rack stores by the end of 2012. Since the company has a limited geographic presence both here and internationally this strategy makes sense. As shown in the strategic group map, Nordstrom had only 204 stores compared 805 stores operated by its primary competitor Macys in 2010. When expanding to new geographic markets, it is essential not only to maximize growth strategies, but also have a broad differentiation strategy across countries to reflect the differences in customers’ tastes and preferences. During the downturn in the economy, Nordstrom realized customers are more price sensitive than ever before and in order to stay competitive the company decided to increase their Nordstrom Rack store locations. So in addition to opening stores in more geographic locations, the company is focusing an addition target market, those that are not in the upper income class. This strategy will hopefully lead to an additional revenue sources and increase the company brand recognition both here in the U.S. and internationally.

Conclusion

Nordstrom Inc. has positioned itself as a major player in the upscale department store sector. It is known as the gold standard for customer service excellence and has been building its name through its primary marketing tool, word of mouth. After suffering through several lean years of reduced consumer spending caused by the deep recession in the U.S., Nordstrom saw its business rebound strongly during the 2011 fiscal year, increasing its sales by more than 12% compared to the prior period and while its net income grew by 39%. Its e-tailer acquisition, HauteLook, in early 2011 proved to be a big success for the company. It increased sales by 8% in less than a year causing the company to be optimistic about its future online sales. In the annual report, management stated that the majority of its sales growth over the next ten years will be online.
Many changes in the economy have affected the retail industry and are making things harder for Nordstrom and its competitors to succeed. There are more and more players in the retail industry that are becoming rivals of Nordstrom including outlet malls and discount stores. The demand for technology innovations and the change in consumer buying patterns are becoming critical factors to retail companies. In order to succeed and stay competitive, companies are trying to adhere and change to consumer demands. Nordstrom is striving to react to these changes by implementing new strategies in order to compete with its primary rivals and preserve its position as a leader in the luxury retail industry. The company needs to have a futuristic vision in this fast changing environment in order anticipate additional challenges it may face in the future.

RECOMMENDATIONS

Developing countries are less sensitive to the latest fashion trends presenting an opportunity in countries such as Latin America, Africa and South Asia. These are potential markets for “third hand “products. Currently, Nordstrom transfers slow moving inventory off the floor of the Nordstrom full line stores to their discount retail store The Nordstrom Rack. An additional way for the company to generate revenue would be to export unsold items from the Nordstrom Rack “second hand” stores into a new Nordstrom brand “third hand” store within the developing countries. This will allow the Rack stores to continually have the most current merchandise. Currently, the Rack stores have to rely on steep discounting in order to move less desired inventory therefore affecting the company’s bottom line. This provides an alternative that could increase profit margins and tighten the fashion trend cycle.
Nordstrom is known as a luxury retailer, but it currently does not sell luxury items such as crystal and china table settings or other high end kitchenware. Adding this new inventory segment would allow Nordstrom to offer wedding registries to their customers. Two of Nordstrom’s main competitors, Macys and Dillard are already providing this service. In addition Nordstrom operates in the food business industry. Most stores, including the Nordstrom at Providence Place, have an Espresso Bar called the "eBar” that offers quick snacks as well as hot and cold beverages. Most of their small stores, consisting of two-stories have an "In-House Cafe," offering a great selection of food and in larger locations have up to four full service restaurants. Nordstrom’s experience in the food industry, coupled with the companies potential bridal registry and world class customer service reputation could even look to expand into event planning in the future.
As a marketing strategy, Nordstrom could look to participate in fashion consulting events with renowned fashion designers in order to attract more potential customers and enhance their brand loyalty. A mobile bus for shopping parties could also be used as a marketing strategy for the Nordstrom and Nordstrom Rack stores. The bus could stop at high traffic locations such as Time Square in New York City or Union Square in San Francisco or in geographic locations where a physical Nordstrom store is not present. There are other opportunities for the mobile bus; Nordstrom could look to have specific inventory buses. For example a jeans bus or a cocktail dress bus might be popular on college campuses or used for home shopping parties. Home shopping parties are popular among women as a group typically gathers at one’s home to shop for jewelry, kitchen products and pocketbooks. Aside from the mobile advertising the bus would provide, the potential to draw in additional revenue and from additional revenue sources would make this a viable option for Nordstrom in the future.

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