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TEACHING NOTE
CASE 26
Nordstrom
Overview
The Nordstrom case is an examination of one of America’s greatest business success stories, and provides
a great illustration of how many of the lessons in Chapters 10 and 12 can be used to create value. Most
students will be familiar with the company although they may not shop there. Nordstrom, one of America’s
icon retailers, was started as Wallin & Nordstrom shoe company in Seattle in 1901. In 1929, Carl Wallin sold his
share of the business to the Nordstroms. The Nordstroms renovated the stores, increased the merchandising area,
carpeted the floors, added comfortable chairs, and improved lighting. New stores were added over the years, and
by the early 1960’s Nordstrom was the largest independent shoe chain in the U.S. The company bought Best
Apparel, a Seattle-based clothing store in 1963, and soon thereafter added children’s clothes and sportswear to
their clothing line. In 1971, the company went public and was renamed Nordstrom, Inc. By 19 77, Nordstroms
had become the third largest quality apparel retailer in the U.S. As Nordstrom continued to expand, the size of
the stores increased from around 70,000 square feet in the mid 1970’s to about 200,000 square feet by the mid
1990’s.
The company launched its website, Nordstrom.com, in 1998. Initially the website focused on supporting the
store sales primarily through data services such as merchandise availability, inventory control, store location
and directions, fashion suggestions, and chats with sales representatives. The website evolved into a major sales
channel and by 2013, the company’s online sales were $1 billion (U.S.), with 20% of that amount coming from
sales initiated from mobile devices.
Nordstrom’s evolution continued and in 2000, the company acquired the France-based Faconnable boutiques
for $169 million (U.S.). The next year, Nordstrom added eight additional stores to Faconnable’s 24 stores. As of
2013, the company operated 117 full line stores, 121 Nordstrom Rack stores (which sold off-price merchandise),
Last Chance (clearance store), an online subsidiary Haute Look, two Jeffrey boutiques, one Treasure and Bond
store (which donated all of its profits to charity), and its online store www.nordstrom.com. The company also
operated spas under the Spa Nordstrom brand. Nordstrom had 61,000 employees as of fiscal 2012 and sales of
over $11.7 billion.
Nordstrom realized very early that exceptional customer service could be a differentiating factor and a competitive
advantage: consequently the business philosophy was based on exceptional service, selection, quality, and value.
The Nordstrom family believed that customers always talked—good or bad—about the service they received;
consequently they attempted to create a positive impact on customers. The case explains the several facets of
Nordstrom’s approach to proficient strategy execution and the company’s culture of service. Also, the case
addresses the timely and interesting issues faced in transitioning a strategy of unparalleled customer service,
based on personal service, from the traditional retail setting to the online channel.
*This teaching note reflects the thinking and analysis of Professor David L. Turnipseed, University of South Alabama. We are most
grateful for his insight, analysis and contributions to how the case can be taught successfully.
: Focusing on Culture
of Service*
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Suggestions for Using the Case
The Nordstrom: Focusing on a Culture of Service case was written to enable students to study and understand
how to build an organization capable of proficient strategy execution, how a company can gain competitive
advantage with a service strategy, and how a service-focused culture can support strategy execution.
The relatively modest 13-page length of the case will please students, and students will easily grasp the nature
of Nordstrom’s business. Because many class members will have been customers of Nordstrom, they will be
able to recount their experiences as customers—which always adds interest and liveliness to the class discussion.
The Nordstrom case works quite well when assigned immediately after the class has covered Chapters 10 and
12. The straightforward nature of the required analysis makes it ideal for use in the last half of your module on
business strategy.
The assignment questions and teaching outline presented below reflect our thinking and suggestions about
how to conduct the class discussion and what aspects to emphasize.
Making Use of Assignment Questions. It is really very difficult to have an insightful and constructive
class discussion of an assigned case unless students have not only read the case but also conscientiously worked
their way through a set of well-conceived assignments or study questions before they come to class. In our
classes, we expect students to bring their notes to assigned study questions to use/refer to in responding to the
questions that we pose. Moreover, students often find having a set of assignments or study questions useful in
preparing oral team presentations and written case assignments—in addition to whatever directive questions you
supply for these assignments.
Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
class members read the Guide to Case Analysis that immediately follows Case 31 in the text. The content of this
Guide should be particularly helpful to students if your course is their first experience with cases and they are
unsure about the mechanics of how to prepare a case for class discussion, oral presentation, or written analysis.
Video for Use with the Nordstrom: Focusing on a Culture of Service Case. There is a 6:29 Bloomberg
Businessweek video entitled “Nordstrom Always Outperforms the Competition” that you may wish to assign
along with the case. This video is best viewed after students have read the case and become familiar with the
company. The video can be found at http://www.businessweek.com/ videos/2014-11-14/nordstrom-always-
outperform-the-competition.
Suggested Assignment Questions for an Oral Team Presentation or Written Case Analysis. You
will find that the Nordstrom: Focusing on a Culture of Service case is very appropriate for written assignments
and/or oral team presentations. Three good assignment questions are:
1. Top executives at Nordstrom, having heard of your abilities in strategic thinking and strategic analysis, have
employed you as a consultant and asked you to assess the company’s strategy, and the execution of that
strategy. Please prepare a report to the senior executives at Nordstrom that includes:
• A broad description of the company’s strategy
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2. (Short written case assignment) What are the challenges for Nordstrom to transition its traditional channel
3. (Short written case assignment) What actions would you recommend to Nordstrom to put the traditional
Assignment Questions
1. How did Nordstrom build their organization for proficient strategy execution? How did the organization’s
culture reflect in the “Nordstrom Experience”?
2. What does the data in Exhibit 2 reveal about the financial situation of Nordstrom?
3. Describe the customer experience at Nordstrom.
4. How did Nordstrom build the employee component of the organization’s strategy-supportive resources and
capabilities for good execution of their customer service strategy? What was Nordstrom’s philosophy on the
“right people”?
5. Explain the challenges to Nordstrom’s concept of customer service in the digital era. What advice can you
offer Nordstom’s management to help preserve and enhance the Nordstrom signature service level?
Teaching Outline and Analysis
1. How did Nordstrom build their organization for proficient strategy execution? How did
the organization’s culture reflect in the “Nordstrom Experience”?
Nordstrom’s organization structure was designed to support its salespeople and customer service initiatives.
The management structure was an inverted pyramid, with the customers at the top. Subsequent layers were
the sales and support people who interacted with the customers. The department managers were on the next
level, with buyers, merchandise managers, store and regional managers on the fourth layer. The bottom layer
The Nordstrom culture was to satisfy customers with unparalleled service. All employees were expected to
focus on providing the best service possible to customers: the ultimate goal was satisfied customers. The
Nordstrom family believed that customers would always talk about the service they received, whether it was
good or bad. Thus the company made every effort to make a positive impact on its customers. The company
Nordstrom set out to create the Nordstom Experience through several strategic initiatives:
n Appealing Stores and Attractive Displays. Customers were made to feel special from the time they
entered the store. Adequate parking was provided within walking distance and during busy periods,
valet parking was provided. External windows had attractive displays that were often changed. Isles
were wide and comfortable seating was provided for customers. Nordstrom devoted about 50 percent
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n Wide Range of Products. Nordstrom believed that one of the most important things to satisfy a customer
was to offer a wide range of merchandise in different sizes. The company believed that if there was a
large amount of merchandise available, a customer would never walk out without buying something.
Apparel and shoes were stocked in a wide range of sizes. Merchandise was arranged by style. Buying
n Customer Service. Nordstrom made every customer feel special. The salespeople were not pushy, but
customers were greeted when they entered the store and directed to the right department, and assisted
if they had any questions. When customers asked about a specific item, the salesperson took them to
the department where the item was stocked. Salespeople helped with fitting clothing and finding any
needed accessories to go with purchased clothing. If a requested item was not available in the store in
the desired size or color, the salesperson would call to other stores and have the item shipped to the
customer’s home. Salespeople attempted to build relationships with customers, and often customers
Each Nordstrom store had a register where customers could record their shopping experience. Every
morning before the stores opened, the store manager and employees assembled in the stores’ lobby
n Employee Empowerment. Nordstrom’s employees were empowered to make any decision that would
benefit the customer. Erik Nordstrom, the company’s president, stated succinctly, “[Our] sales associates
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n Motivating Employees. Employees were motivated by several methods at Nordstrom: first, the
employees were paid a commission on sales, which encouraged business building. The company
encouraged competition and had contests among the salespeople. Outstanding sales per hour and per
month performances were rewarded and the winners’ contributions to the company were acknowledged.
All employees, including sales associates, buyers, and managers set personal daily, monthly, and yearly
goals. The departments, stores, and regions also had goals. At the beginning of each work shift, employees
were reminded of their goals. The best salespeople were designated “Pace-setters” and as additional
2. What does the data in case Exhibit 2 reveal about the financial situation of Nordstrom?
Examination of Nordstrom’s Consolidated Statement of Earnings for Fiscal 2011–2012 reveals that the
company increased its net sales by a healthy 12 percent and total revenues by 11.7 percent. From Table 1
below, notice that:
n cost of sales, and related buying and occupancy costs held steady at 61 percent
TABLE 1. Nordstrom, Inc.’s Consolidated Statement of Earnings,
Fiscal 2011–Fiscal 2012 (in millions of USD)
Year Ended
2 Feb., 2013 28 Jan., 2012
% Change Change Percent
Net Sales 12 1,265 96.8 96.5
Credit card revenue 1.6 6 3.2 3.5
Total Revenue 11.7 1,271 100 100
Cost of sales, buying and related costs 61 61
Selling, general, & administrative:
Retail 26 26
Credit 1.7 2.1
Earnings before interest and taxes 7.7 96 9.8 10.3
Net Earnings 7.6 52 6.1 6.3
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3. Describe the customer experience at Nordstrom.
Nordstrom built the company’s strategy on exceptional customer service on every aspect of shopping. The
Nordstrom family believed that customers would always talk about the service they received—good or
bad—and consequently they made every effort to make a positive impact on their customers. Nordstrom
The sales people at Nordstrom provided excellent service and helped customers through their shopping
experience. The excellent service continued after customers completed their shopping trip: employees sent
4. How did Nordstrom build the employee component of the organization’s strategy-
supportive resources and capabilities for good execution of their customer service
strategy? What was Nordstrom’s philosophy on the “right people”?
Nordstrom’s strategy was customer service, which was based on its employees. Students will find Figure
Nordstom’s management believed that the right kind of staff was requisite to providing great customer
service. Hiring of sales personnel was decentralized and each store could make the hiring decisions and
establish its own interviewing and training processes. Rather than searching for salespeople with prior
Nordstrom’s ideal salespeople were:
n Self-starters, with ambition and the desire to build a career
Nordstrom screened potential employees by having them narrate their worst customer service experience
and how they dealt with it. They were also asked about their best experience and why they thought it was the
best. Because the company believed that parents were the best trainers, there was minimal formal training
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The company had few operating rules because they were considered an impediment to work. Rather than
focus on rules, Nordstrom wanted its employees to concentrate on satisfying its customers. The former
co-Chairman J. F. Nordstrom believed that rules were a hindrance to giving customers the best service
and to empowering employees. Mr. Nordstrom thought that rules could be more important than customers
Upon completion of the first three month’s work, new Nordstrom employees discussed their job performance
with their supervisor. Those in sales were evaluated on productivity, customer service, and teamwork.
Nordstrom believed in encouraging its salespeople to build business and earn more money: the company
began paying its salespeople commission in the1950’s. It also encouraged competition among the employees
and held contests for sales performance. Contest winners were publically acknowledged and given prizes.
Nordstrom’s emphasis on its employees was evident in its rating on CareerBliss, an online career community
which published a list of “Happiest Retailers”. Nordstrom ranked number one on that list in 2011 and 2012.
5. Explain the challenges to Nordstrom’s concept of customer service in the digital era.
What advice can you offer Nordstom’s management to help preserve and enhance the
Nordstrom signature service level?
Nordstrom was founded on the concept of personal service: salespeople were the face of the company
to the customers and the high level of customer service was the company’s competitive advantage. The
age of digital shopping, by its nature, reduced the personal service that was the hallmark of Nordstrom.
The challenge in seamlessly transitioning the Nordstrom service to online shopping is the lack of personal
interaction in the online segment. Unless a customer chooses to call customer service, purchase and return
transactions can be done with no personal contact. Nordstrom does not have the opportunity to price match,
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Recommendations for integrating Nordstrom-level customer service in online shopping:
n Regardless of the type and frequency of electronic communication between Nordstrom’s salespeople
and customers, some degree of familiarity and personal touch are lost. The Nordstrom “Personal Book”
should be kept, because of its ability to quickly and cheaply reach a huge audience and provide purchase
and sales information. Some form of personal “touch” should be implemented: handwritten, short
n Constantly work on the company’s website. Ease of navigation, the presentation of products, and ease of
purchase and return should be major areas of emphasis for the company’s website. Some differentiating
n If a customer has a Personal Stylist, the technology is available to have a picture of the stylist appear on
Epilogue
There was no recent news related to Nordstrom’s approach to strategy execution at the time this note went to
press.