Monday, June 26, 2000

Access could erode Nordstrom's allure


Service will be key to retaining stellar reputation

By Lisa Biank Fasig
The Cincinnati Enquirer

        Back in 1901, when Swedish gold digger John Nordstrom sunk $5,000 into a Seattle shoe store that immortalized his family name, the word cachet was probably not a part of the 30-year-old's vocabulary.

        Nor was passe.

        Didn't matter. John Nordstrom had a golden touch, and in the early part of the century he nurtured what would become a retailer that symbolized distinction. Nordstrom's legendary service, its wide range of merchandise and its showroom floors are the examples that have come to define cachet 99 years later.

        The trick now, as Nordstrom transforms from a West Coast institution into a national brand with locations in major as well as secondary markets, is to avoid becoming old shoe, or passe.

        For years, Cincinnati-area shoppers pined for a Nordstrom, often driving hours to shop one. But suddenly, the retailer is attainable. Nordstrom's expansion includes plans to be in the top 50 markets — it is in 30 now.

        In the next four years, 30 Nordstrom stores are planned to open, including two in Greater Cincinnati, one in Columbus and one in Louisville. (The deal for the downtown Cincinnati store remains somewhat iffy as city council prepares to vote this week on it. A majority supports the deal, but store executives balked late last week at some of the city's conditions.)

        Nordstrom's expansion here and elsewhere begs the question: Will the easy avail ability of the store and its goods erode their appeal? Nordstrom analysts and experts agree the merchant has not knocked the cover off the ball in all its markets — but it has in most.

        “There's always the danger of that,” said Robert Spector, author of the book The Nordstrom Way: The Inside Story of America's No. 1 Customer Service Company. “They are trying to become a national brand and you become a national brand by not only being in the primary markets but the secondary markets as well.”

        The challenge on the way, Mr. Spector and other retail experts said, will be maintaining Nordstrom's renowned product while managing nationwide expansion and a new, youthful merchandising approach. Retailing is a tough industry, even among the well-respected, and Nordstrom's thinner gross margins reflect that.

        The merchant must please its shareholders as well as its shoppers. In the ideal situation, one hand should wash the other.

        “The Cincinnati market is very unique. It's the most sales-oriented market around,” said shopper Denise Harpring, an Anderson Township resident and a former buyer for Shillito's. “In that respect it might be tough.

        “I think one of the things that will help them is their reputation for service.”

        Nordstrom agreed that service is the key, adding that any reputation that precedes it is a result of its employees, who undergo vigorous training and maintain ambitious sales goals.

        “Whether there is really a "Nordstrom mystique' is not for us to say,” said Paula Weigand, Nordstrom spokeswoman. “We hope and try to give the best service possible every day, but we also know that we make mistakes so we have to work hard at it.”

"The experience'
        Nordstrom's calling card is good service, but that means more than retaining sincere and entrepreneurial workers. It's the whole shebang, from keeping a broad, fashion-forward merchandising mix to a pub in the men's clothing department.

        It also means staying current — Nordstrom is immersed in an effort to appeal to younger shoppers, while at the same time aggressively expanding its store numbers.

        “I would be extremely surprised if they were to do anything to tarnish your opinion of them,” said Ted Leonhardt, a Seattle-based marketing expert whose firm helped develop branding strategies for Nordstrom, Federated Department Stores, Microsoft and others. “This is not Sears, you know? These people are serious about maintaining the Nordstrom experience.”

        That experience is at the same time upscale and casual. Nordstrom carries Chanel gowns along with moderately priced popular brands and private labels. Its commissioned workers seem to take pains to make shoppers feel welcome — enticing them to stay and shop without being pushy.

        A Nordstrom employee won't measure one foot for new shoes, she'll measure both, Mr. Spector said. And any purchase made will be made in the right color as well as right size — if not, Nordstrom will take it back, no questions asked.

        The result: Nordstrom in 1999 registered sales of $365 per square foot. For comparison, Dillard's reported $152.

        Mr. Spector called city council's call to require that Nordstrom carry the same or better quality merchandise downtown as in Deerfield Township, described last week, as “political posturing.”

        “Will they tell them how many of each style and size to carry?” he said. “Nordstrom is going to put in merchandise that they think their customer will buy. It's a strictly non-political philosophy.”

        So far, that has worked for customers.

        “There is just an ambience about it, you're glad you're in the store,” said Mary Jo Nead, a shopper from Deerfield Township. “Anybody who hasn't shopped a store like that, once its here and they visit it a few times, they'll be hooked.”

        Nordstrom hooked Ms. Nead on her visit two years ago, when a sales associate in Indianapolis gave her free sand pails for her granddaughters. On the second visit, in San Francisco, she got free purses.

        “I am not rich by any means. But I do my shopping at upscale places because I think it's better and lasts longer,” said Nordstrom shopper Jodi Tinney, of Hyde Park.

        “You can find good deals even in an upscale department store.”

        At Nordstrom, the escalators are six inches wider than average. There are two elevators instead of the standard one. In the shoe department, chairs sport extra upholstery and higher arms, to make it easier for sitting and standing.

        The main aisles are wide enough to accommodate a Lexus. The dressing rooms have separate thermostats.

        These are enticing perks, but can't the oohs and aahs of chandeliers wear out after a while? Not at this point, analysts said. With about 75 stores, Nordstrom is far from reaching the saturation point.

        “They're still very selective about the sites they go into,” said Joseph Grillo, an analyst with Deutsche Bank. “If they expanded to 1,000 stores, like J.C. Penney, that might cut into the cache of the Nordstrom brand.”

Not all stores work
        This service does come at a price, and it isn't always passed on to the customer. The chain had been struggling with mid-paced profit margins and slow sales in its women's apparel, a problem it has begun to turn around, analysts said.

        “Nordstrom is a player in terms of its profitability and its margins, but it's not a top company,” said Mr. Leonhardt.

        According to a first-quarter report by Banc of America Securities, Nordstrom increased its gross margin to 35 percent in the first quarter 2000, its highest level in a decade. In the same report, Saks Inc. posted a gross margin of 37.5 percent.

        Nordstrom “doesn't hit the ball out of the park in every market they go into,” said analyst Wayne Hood with Prudential Securities. But the successes outnumber the failures, he said. Part of Nordstrom's expansion challenge is knowing what is wanted in each market.

        “You'll find the same service levels in Cincinnati as you'll find in Chicago,” Mr. Hood said. “But will you find the same couture clothing? Probably not.”

        One thing most shoppers and experts agree upon: When Nordstrom arrives in Cincinnati, it will raise the bar on retailing for all local merchants.

        “Nordstrom really has the philosophy — not the flavor of the month — that "We do whatever it takes to care for the customer,” said The Nordstrom Way's Mr. Spector. “Nordstrom has that cachet and there's no other retailer in the country that has it.

        “I predict that it will lead to the revitalization of downtown Cincinnati.”

       



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