Nordstrom History Case Study- The Department Store Giant

Ask anyone in the retail industry, the biggest department store, and most of them will immediately mention Nordstrom. This upscale retailer has been around for more than a century and has successfully built a reputation for a great shopping experience. Throughout Nordstrom history, the brand has been synonymous with customer service. However, few people know Nordstrom history and how the brand became the department store giant. In this article, we’ll explore Nordstrom history and the company’s strategy for success. Without further ado, let’s dive in.

Nordstrom History: Opening of the Shoe Store in 1901

John Nordstrom, who was a 16-year-old Sweden, arrived in Minnesota in 1887 with only $5 to his name. After working across the United States for a while, he finally settled in Seattle. In 1897, he started heading north to Alaska, searching for gold, and he was lucky enough to find it. He opened a shoe store with Carl Wallin, a shoemaker he met in Alaska. The partners sold $1250 in shoes on the first day of opening in 1901. This made him $13,000 richer, and he decided to move back to Seattle in 1899. 

It didn’t take too long before business began to pick up. By 1905, the business made up to $80,000 annually. The partners decided to open another store in 1923. However, Nordstrom decided to retire in 1928 and passed his business shares to Elmer and Everett. The following year, Carl Willin did the same and sold his shares to Nordstrom’s next generation. The new owners decided to rename the place Nordstrom in 1930. Three years later, Nordstrom’s youngest son Lloyd joined the family business.

Although Nordstrom left a large business to the new generation, it was up to them to build on their father’s success. They decided to increase the store’s size in 1929. Despite 1930 beginning with the Great Depression, the two Nordstrom stores made over $250,000 in sales. The stores survived the Depression and had to find a way to survive World War II. The leather rationing prevented US consumers from buying more than three pairs of shoes yearly. Therefore, the brothers had to search for shoe supplies around the country.

Nordstrom History – Expansion and Diversification

Decades after the war, the brothers built the company into the largest independent shoe chain in the country. The brothers decided to open two new shoe stores in 1950. One was in Portland, while the other was in a Seattle suburb. They remodeled the flagship store and stocked it with 100,000 pairs of shoes, the most extensive inventory in the United States. By 1961, Nordstrom had eight shoe stores and 13 shoe departments in California, Washington, and Oregon. That year, the company made $12 million in sales and boasted 600 employees. 

However, in the 1960s, the Nordstrom brothers were at a crossroads. They didn’t know if they should expand their business into other retailing areas or expand the shoe business to the East and the South. In the end, they chose to diversify and bought a Seattle-based women’s clothing store called Best Apparel. They opened a new Best Apparel store next to one of their shoe stores in Suburban Seattle. Additionally, they purchased a Portland retail fashion outlet and merged it with their shoe store in Portland, which they renamed Nordstrom Best. 

Late into the 1960s, the new department store started to take shape. The company opened five additional stores that offered a mix of shoes and apparel. By the time annual sales reached $40 million, they had changed the department store chain’s name to Nordstrom Best. The company continued to diversify over the years, and soon, they also offered children’s and men’s clothing.

Nordstrom History – The Third Generation

Everett turned 65 in 1968, and in agreement with his brothers, they decided to hand over the company’s reins to the next generation. Their sons Bruce, James, and John, family friend Robert Bender, and Lloyd’s son-in-law John McMillan took over the company’s reins. The company went public in 1971, offering Nordstrom Best stock in the market. However, the family members retained a majority of the stock. When sales topped $100 million, the company changed its name to Nordstrom, Inc and opened the first Nordstrom Rack. This was an outlet store the company used to sell old inventories at discount prices. The first Nordstrom rack was in the basement of the Seattle store.

Nordstrom continued to grow steadily and opened new stores while still diversifying and increasing the volume in the existing stores. It wasn’t long before the company hit $130 million in annual sales and decided to open three more stores in Alaska. The company also launched Place Two, a division that featured smaller stores offering a few shoes and men and women apparel. By 1977, Nordstrom had over 24 stores and made $246 million in annual sales. 

Growth Fueled by Customer Service

By 1980, Nordstrom was already the third-largest specialty retailer in the United States and had 31 stores. Over the years, the store came to be known as an efficient, full-service department store. The company’s excellent customer service brought results as they maintained the highest sales in the industry. Although the company maintained huge inventories, its decentralized corporate structure allowed local buyers who knew their consumer’s preferences to make inventory selections. The company’s management also encouraged an aggressive sales force. Most of their clerks worked on commission and made up to $24,000 annually. Additionally, most managers were promoted from the salespeople rank, which intensified the desire to sell. 

Nordstrom’s customer service became legendary as there were several tales of the salespeople’s heroic efforts. Clerks were famous for paying shoppers’ parking tickets, lending cash to strapped customers, rushing deliveries to offices, sending tailors to customers’ homes, and accepting returns. Motivational exercises were a routine at Nordstrom. Additionally, the company created a customer-friendly environment. Some stores offered free coat check services, piano players, and even concierge. Due to this and the economy’s boom in the 1980s, Nordstrom sales continued to climb till the company topped sales of $1.3 billion in 1985. 

Transition in the Family’s Business

In the early 1990s, the five partners owned 40% of the business and maintained tight control over Nordstrom. Although the company suffered from the early 1990s recession, it continued expanding and opening new stores in the Midwest and East. However, there was a management transition in 1995. James, Bruce, and Jon Nordstrom, alongside John McMillan, decided to retire. Ray Johnson and John Whitacre replaced them as co-chairmen. Johnson retired in 1996, and the new generation replaced these co-chairmen, Blake, Erik, Bill, Pete, Dan, and Jim A. Nordstrom. These new generations were all in their early 30s and struggled with taking over in the sluggish and highly competitive sales environment of the mid-1990s. They found it hard to maintain Nordstrom’s position as one of the leading retailers in the country.

The company’s struggling continued during this period. Sales were lacking, and the company’s earnings were down. Most customers began to view Nordstrom’s merchandise as formal and didn’t keep up with their lifestyle changes, nor did it offer pacesetting fashion. The company decided to introduce a private label fashion line for women. They also replaced the company’s advertising with its first television campaign. However, it all backfired as the advertising campaign emphasized youthful fashions that the 20-somethings found appealing. However, the campaign alienated their core baby-boomer shoppers. 

This led to Bruce retiring in Nordstrom history to take the chairman’s position while his son Blake became president. It wasn’t till 2003 that Nordstrom regained some of its lost lusters. Through new technology initiatives, it refocused its niche: luxury goods at affordable prices and cost containment. The new technology initiative allows the company to track sales minute by minute in all its stores. This system allows the company better target what they offer customers while reducing their markdowns. 

Nordstrom’s Strategy for Success

Nordstrom history shows that Nordstrom is quite strong and has survived many downfalls over the years. If you want to know how this company remained relevant over the decades, Nordstrom’s strategies for success are below. 

An Integration Between the Offline and Online Channel

The key to boosting online sales is an efficient offline presence. Over the years, Nordstrom continually integrated its online and offline channels. This department store giant was amongst the first retailers to offer curbside pickup. The company also entered into a partnership where they started accepting returns of online orders from competitors like Macy’s and Kohl. This was the company’s way of thinking about the customer’s needs. In return, most customers would end up shopping when they dropped off a return. 

Nordstrom went a step further with its mobile app’s functionality by allowing customers to reserve products online that they would try on in stores. Customers could reserve a maximum of ten items they wanted to try on when they finally arrived at the store. When the customer is only 0.2 miles away, a sales associate will place their items in a fitting room and notify the customer when it’s set up. The company pushed the convenience feature further through its flagship store in New York City. It allowed customers to pick up orders at all times, whether the store was open or closed.

Nordstrom Innovative Store Formats

Another strategy that was successful throughout Nordstrom history was its innovative store formats. In 2017, the company launched Nordstrom Locals, which were small stores. This store’s focus was service and a great shopping experience. You could get a personal stylist at the Nordstrom local store. The store also offered pickup for online orders, alterations, shoe repairs, manicures, returns, charity drop-offs for used items, gift wrappings, and complimentary refreshments. These stores were popular because they made it easy to pick up and return online orders. 

Partnerships with Trending Brands

When the beauty brand Glossier wanted to increase sales by introducing its fragrance to more customers, they chose Nordstrom as their partner. This led to the brand setting up pop-up shops in Nordstrom stores all over the country. Most department stores are viewed as outdated, but these partnerships allow Nordstrom to remain relevant to the younger generation. This is because Glossier already engages with a younger customer base. Through this partnership, they introduce this set of customers to Nordstrom when they visit the stores searching for Glossier’s merchandise. 

Final Thoughts

As retail sales are shifting online, only department stores that pay attention to all business segments benefit the most. This is the case with Nordstrom, as Nordstrom’s history shows how the brand continued to grow and evolve over the decades. One of the company’s most notable features is its impressive customer experience. This allows the company to obtain new customers while retaining existing ones. There’s hope that opportunities will continue to appear for Nordstrom with growth in the fashion retail industry. 

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Nordstrom History Case Study- The Department Store Giant This article covers the beginning of the retail store and its growth over the years. Keep reading to learn more about Nordstrom history.
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