nordstrom app case study

How Nordstrom's 'Flash Mob' Software Team Built An App At Its Flagship Store

Nordstrom is a Fortune 500 that brings in around $9 billion annually, but it knows that it has to act like a startup to stay competitive. So it created an "innovation lab," comprising of a small team under the corporate umbrella charged with creating disruptive products. 

Eric Ries, who just published " The Lean Start-Up ," profiles Nordstrom's lab as a case study on his blog, Startup Lessons Learned . He says the innovation lab classifies as a lean startup because it focuses on developing rapid prototypes while working with customers in real time — in other words, it conducts one big experiment after another. In this case, the lab created an iPad app (to help customers select sunglasses) throughout the course of a week while working on the ground at the Nordstrom flagship store in Seattle. (The innovation lab's lead developer called it "the world's first 'flash build,' or a flash mob where a software team shows up and builds an app in a surprise location.") 

Ries says the Nordstrom team was successful because it pulled this off in a week, embraced "genchi gemutsu" — a concept of the Toyota Production System that translates to "go see for yourself," or "get out of the building" (and go interact with customers), and it did a bunch of "simple, rapid experiments" to develop for iOS. In other words, it acted like a startup, not a Fortune 500 with long product-development cycles. 

Creating an innovation lab is a smart move on Nordstrom's part, as it faces more competition from start-ups and other department stores around the world. 

Check out the video of the Nordstrom innovation team here: 

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In Retail, Personalized and Connected Experiences Are the Future

Retail giants like Nordstrom are tapping engineers and data scientists to connect web, mobile and in-store experiences.

With a smartphone in every pocket, we’re able to do a lot from just about anywhere. Work, communicate, manage finances, access humanity’s collective knowledge — and shop, shop, shop. That accessibility means traditional retailers, long accustomed to serving people in-store and advertising sales through TV ads, have had to adapt to this new shop-from-anywhere culture or drift into obscurity. 

Take Nordstrom .  The company operates 380 stores, ranging from its high-fashion department stores to styling services and off-price outlets. In recent years, the company’s made big investments in its online presence to complement innovations in how it thinks about the physical store experience. 

4 Ways Retailers Are Changing With the Times

• Gap, Nordstrom, JCPenney and Macy’s resell second-hand clothing
• Macy’s, JCPenney and Sears have closed large department stores in favor of smaller locations and online sales
• Adidas and Nike have used AR to launch new products
• Some brands are creating stylist consultation locations — like Nordstrom Local, which comes complete with wine, manicures, coffee and online pickup services

“One of the things that I find interesting is the bridge between the physical — where we’re delivering products to customers — and the digital,” said Jacob Ulrich, a software engineer supporting the Seattle retailer’s iOS app. “It’s not just about solving an app problem — it goes much deeper. You’ve got to consider distribution and inventory counts, for example.”

Nordstrom engineers have shipped a number of digital products over the years, including an app feature that alerts customers when an item in their wish list is restocked or marked down. Ulrich spent the last six months working on that project. Meanwhile, veteran developer Shangfan Tu worked as an engineering manager on the team that put together Nordstrom’s “Looks” feature, which combines stylists’ expertise with customer preferences to create complete outfits digitally. Together, the two projects offer a glimpse into how traditional retailers like Nordstrom are embracing tech and the role engineers play in the process.  

Creating the Looks product meant blending the expert eye of Nordstrom’s stylists with the individual preferences of its customers. In this process, stylists use software to design various outfits for casual, formal and other occasions. Within the framework of a given look, customer preferences and inventory availability dictate individual variations. 

“For example, we have some looks that include T-shirts,” Tu said. “But if that particular shirt is sold out and we want to maintain the look, we use visual similarity defined by computer vision to find and substitute similar products.”

Users provide input by viewing, liking and interacting with different looks, which Nordstrom follows using streaming platforms. 

“When they add an item to their cart and make the purchase, we are actively listening to those activities online,” Tu said. “Then those activities sync to our machine learning algorithms to help train them and optimize those recommendations.”

While individual customer preferences and underlying technology plays an important role in this feature, Tu pointed out that it mainly relies on Nordstrom’s stylists to guide its recommendations. The company has a fleet of fashionistas on staff, and building a product around their experience plays to the retailer’s strengths.

“We have a lot of human expertise to leverage,” she said. “If you’re training the machine learning to style, these stylists are the main people we want to learn from. Their input is pretty much how we train our machine learning.”

After almost two years on Looks, Tu recently moved to Nordstrom’s “personalization and recommendations” team, supporting the company’s webpage and mobile app. Her new team provides personalized product recommendations based on how customers engage with different products online. 

“We have to bring this personalization system into our UI to track customer activities and offer our recommendations, and we have machine learning that can adjust based on customers’ preference changes,” she said. “The next step is to go deeper into the model and find a more scalable way to do personalization.”

It’s one of the most frustrating phrases in e-commerce: “That item is out of stock.”

And it’s not much fun for retailers, either. The work Tu and her team do on delivering outfit recommendations won’t help boost sales if the items they recommended aren’t in the company’s inventory in the first place. 

That’s where Ulrich’s iOS app team comes in — the team who recently shipped the feature for opting in to wish list notifications.

“One of the big considerations is coordination across teams,” Ulrich said. “There’s a lot of data that we need to enable this feature.”

Those data sets include the items a customer is interested in, when a SKU might change, when a price drop occurs and when an item comes back in stock. To track them all, Nordstrom uses a number of event-streaming technologies, including Apache’s Kafka Streams. 

“The main challenge was figuring out how to get the data feed internally, and in an efficient way,” Ulrich said. “Our goal was to get something out there that people could easily toggle on and get those notifications in real time.” 

Ulrich said his team was cognizant of the fact that, for users who opted in, this feature would introduce a new flurry of alerts in a world chock-full of notifications. The team debated quiet hours, or introducing certain periods of time when notifications would come through. 

“One type of future development will be to leverage customer activity and data in the store, and have that data available to train our model as well.”

However, prices can drop and shipments can arrive at all hours of the day — and that’s before considering odd hours when users might be online shopping. 

“We ultimately decided that it’s a real-time event,” Ulrich said. “Should we have some kind of quiet-hour window in which you don’t get the notification, then there’s always a problem of stale data. If we delay those types of things, maybe the price has gone back up by the time they see it.”

T he company is also exploring more ways to bridge the gap between users’ screens and Nordstrom’s physical locations.

“We want to branch those and create a connected experience,” Tu said. “One type of future development will be to leverage customer activity and data in the store, and have that data available to train our model as well.”

Recent Big Data Articles

Nordstrom’s Innovation Lab – Sunglasses iPad app case study

By applying a healthy dose of Lean and Agile methodologies to projects, the waterfall model of software development has been replaced leading to rapid innovation and learning.

It’s one thing to talk about ‘rapid experimentation’ and ‘validated learning’ as abstract concepts. It’s quite another to see them in action, in a real-world setting. —Eric Ries, Startup Lessons Learned

Nordstrom has put Eric Reis’ statement into practice by creating an ‘innovation lab’. The following video is an interesting case study on Lean UX and what Nordstrom are doing to embrace innovation.

https://www.youtube.com/watch?v=JG-pmctxlLs

Here are some of the highlights from the video:

• One week experiments. Innovation and agility is notoriously difficult for large organisations such as Nordstrom, but by working in one week iterations, the lab is able to break from the usual corporate slowness. In the video above, the team creates a usable product in one week.
• Simple and rapid experimentation. By having two iPads, the team were able to use one for testing, while another was loaded with the latest version of the software, cutting down the time needed to deploy each release.
• Innovation on the shop floor. By being on the shop floor, the lab is able to rapidly prototype and test their ideas with real users: the salespeople and customers. This also allows them to identify an opportunity and execute it extremely quickly. An example is when the team discover iPad screens can’t be seen in portrait when wearing polaroid sunglasses.

Arguably, innovation should flow through the veins of everyone in the company, but where that is unrealistic, or impossible, ‘innovation labs’ such as Nordstrom’s, are helping to extol the virtues of the Lean movement.

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Mba student perspectives.

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Nordstrom Innovation Lab: Rethinking How You Shop

Nordstrom’s Innovation Lab, based in Seattle has been tasked with the job of mining data gathered from Facebook, Pinterest, Twitter and its loyalty card to create curated experiences for customers based off of their preferences and in-store shopping activity.

Nordstrom’s Innovation Lab, based in Seattle has been tasked with the job of mining data gathered from Facebook, Pinterest, Twitter and its loyalty card to create curated experiences for customers based off of their preferences and in-store shopping activity. For example, trending and popular products online can be displayed more prominently in-store to encourage purchases. It gives consumers the benefit of convenience and having their voice heard and ensures that the product that they see is more closely linked to what they actually want. The Innovation Lab is also focused on lean start-up fundamentals by quickly testing products and scraping them if thye are not successful. For example, the Innovation Squad began building a sunglass buying iPad app in their flagship Seattle store where they tested different features with customers that included the ability to take pictures and compare side-by-side photos to decide which pair to buy. They spent over a week in the store building the app and testing each additional feature with customers and sales people to continue iterating based upon feedback. However, in the end they decided the app was not as helpful as they wanted and it was never rolled out across stores. Nordstrom’s approach is interesting because it continually pushes for innovation while not becoming wedded to ideas and instead focusing on creating new apps and options that consumers actually love. The concepts of design thinking, ideation, and pivoting quickly are all on display here.

  Value Creation

Value is created in this model by providing customers with easier ways to interact with and find products that are meaningful to them. It also adds a convenience factor by creating solutions that do not even require customers to be in store. Consumers can also pick and choose which technological innovations are most helpful to them and can opt in to whichever services they find most compelling.  

Value Capture

Nordstrom has been heavily incentivizing consumers to use their Nordstrom credit card so they can better capture who is buying what and in what quantities. They are also able to use technology like WiFi signals to see where people are traveling in the store and how long they are staying. This is a good metric to use as a proxy for what products may be most engaging and which displays may need to be fixed or updated. Another unique value capture play is their texting app, TextStyle. This app allows personal shoppers at Nordstrom to text customers who opt into the program with ideas on what to purchase based on their likes and previous buys. Customers can then purchase the product right then and there by texting back a unique code, thus bypassing lengthy financial input processes since that information is already on file in the store. This allows Nordstrom to capture data from its various technological and personal interactions to up-sell customers and give them opportunities to buy product even when they are not in the store. It will also encourage consumer’s to have higher conversion to purchase ratios because the recommendations are based off of personalized data. Another similar option was PocketStyle where customers could ask personal shoppers questions about anything from makeup tips to fashion dos and don’ts. This is another option that helps consumers find the products they need will also increasing loyalty to the Nordstrom brand due to the personalized aspect of their interaction with store personnel.

Pathways to a Just Digital Future

PocketStyle

http://blogs.wsj.com/cio/2015/05/28/nordstroms-innovation-revamp-leads-to-e-commerce-texting-app/

https://www.umbel.com/blog/retail/13-retail-companies-already-using-data-revolutionize-shopping-experiences/

Student comments on Nordstrom Innovation Lab: Rethinking How You Shop

How does the wifi technology work? Does a customer need to have the app installed and open for Nordstrom to be able to track their movements in the store?

The underlying question on this for me is where leveraging data and technology is actually creating value to customers? or is this being digital for being digital’s sake? Is it actually keeping its clients coming back ?

hey! thanks for the comment. referencing the value creation section above, i think the value to consumers is having 1) curated experiences that leverages past buying data and social media likes and 2) the convenience afforded to customers not having to enter brick and mortar stores to find clothes and accessories. not every technological innovation is going to be a hit, as is seen with the sunglasses app that was never launched, but I do think Nordstrom is at the forefront of trying to test new innovations to see what consumers like and see where the most potential value is created and captured. i would argue that it keeps clients coming back since the data that Nordstrom is able to collect via these avenues makes it so that any future advice / buying suggestions are based upon a heavily data mined list that makes it so it is more likely that that suggestion is in line with the customer’s preferences. this type of knowledge will keep that customer buying at Nordstrom and at the same time allow Nordstrom to keep collecting valuable data.

I don’t know that Nordstrom has really found the true captured value through their apps as they stand. How is what they are doing in terms of tracking loyalty card purchases and page click views very different than other retailers?

Hi Grace, I don’t agree with the premise that this is the same as other retailers are doing given the fact Nordstrom has created an entire Innovation Lab to use that content to create end products for consumers. It is one thing to track data and completely another to use that to attempt to disrupt how you serve consumers. Using the principles of lean startup technology companies, they are continually testing new applications and features to increase convenience and personalization for consumers. Not all of the technology is eventually rolled out because heavy testing may show it is not a hit with consumers, but the underlying difference is that they are constantly innovating and pivoting to create new consumer experiences. It may still be in the early processes at this juncture, however they have clearly shown a commitment to both collecting ever more data about consumers and using it in a unique way. For example, with TextStyle you are increasing consumer engagement while collecting additional information above and beyond anything you would have been able to collect with simply a loyalty card.

You bring up a good point. I think Nordstrom (like most traditional retailers) is in a tricky position-since they are not really ‘redesigning’ and ‘innovating’ on the fashion product itself (that is the job of the manufacturer). They have to come up with ways to ‘innovate’ the in-store experience. I like your points about out-of-store experiences, such as TestStyle and PocketStyle. While I could see these potentially helping to create a customer profile and understanding of ‘who’ their customers are, I wonder how successful the tools are? For the example above, such as makeup, I would think that is a pretty personal decision–to match colors to skin tone, etc. It would be very interesting to track returns and customer satisfaction on orders suggested through these new tools.

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Nordstrom’s E-Commerce UX self.__wrap_n!=1&&self.__wrap_b(":R2abb396:",1)

This is a case study of Nordstrom’s e-commerce user experience (UX) performance. It’s based on an exhaustive performance review of 784 design elements. 243 other sites have also been benchmarked for a complete picture of the e-commerce UX landscape.

Nordstrom’s overall e-commerce UX performance is decent. Nordstrom has decent performances across the board with neither any great nor any broken performances.

First benchmarked in April 2012, and reviewed 25 times since then, most recently in April 2023.

Performance :  45.6 Decent

URL :  shop.nordstrom.com

UX Award Winner ( see all ) :

Apparel & Accessories Top 1%

Cart & Checkout (desktop) Top 1%

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Overall UX Performance

880 Guidelines · Performance:

Desktop Web

264 Guidelines · Performance:

267 Guidelines · Performance:

349 Guidelines · Performance:

To learn how we calculate our performance scores and read up on our evaluation criteria and scoring algorithm head over to our Methodology page.

The scatterplot you see above is the free version we make public to all our users. If you wish to dive deeper and learn about each guideline and even review your own site you’ll need to get premium access .

Nordstrom’s Desktop Web E-Commerce Design

23 pages of Nordstrom’s e-commerce site, marked up with 322 best practice examples:

Nordstrom’s Mobile Web E-Commerce Design

18 pages of Nordstrom’s e-commerce site, marked up with 277 best practice examples:

Nordstrom’s Mobile App E-Commerce Design

27 pages of Nordstrom’s e-commerce site, marked up with 263 best practice examples:

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Nordstrom Innovation Lab Sunglass iPad App Case Study

from Anna Di Vizio

November 3, 2023

Two Nordstrom Case Studies from The DevOps Handbook through the Lens of Slowification, Simplification, Amplification

The goal of science is to explain the most amount of observable phenomena with the fewest number of principles, confirm deeply held intuitions, and reveal surprising insights. This is known as the principle of parsimony .

With Wiring the Winning Organization , we present a very simple and parsimonious theory of performance based on the three mechanisms of slowification, simplification, and amplification. I’ve been continually amazed at how every transformation can be described using these three mechanism:

• Slowify (i.e., “slow down to speed up”) to make it easier and more forgiving to solve problems.
• Simplify (i.e., partition problems in time and space) to split apart large problems to make them easier to solve, most likely in parallel.
• Amplify (among other things, weak signals of failure) to make it obvious that problems need to be solved and that they were successfully resolved.

Over the next several months, I’ll be showing examples of these mechanisms at work. I’ll be picking some of my favorite case studies from The DevOps Handbook and describing them through the lens of slowification, simplification, and amplification.

In this post, I’ll present two case studies from Nordstrom that appeared in The DevOps Handbook , 2nd Edition, followed by specific examples of the three mechanisms from Wiring the Winning Organization .

(NOTE: We used GPT-4 to halve the word count down from the original 1,000+-word case study. Astonishingly, the examples of the three mechanisms were also generated by GPT-4. To me, the fact that GPT-4 can do this so well is strong evidence of the correctness and expressiveness of our model. In other words, we can explain many observable phenomena using fewer words!)

Abridged Nordstrom Case Study 1: Digital Transformation 

Let us examine how the Nordstrom team started their DevOps transformation initiative in 2013, which Courtney Kissler, their VP of E-Commerce and Store Technologies, described at the DevOps Enterprise Summit in 2014 and 2015.

Founded in 1901, Nordstrom is a leading fashion retailer focused on delivering the best possible shopping experience to its customers. In 2015, Nordstrom had annual revenue of $13.5 billion.

The stage for Nordstrom’s DevOps journey was likely set in 2011 during one of their annual board of directors meetings… The strategic topics discussed were the need for online revenue growth. They studied the plight of Blockbuster, Borders, and Barnes & Noble… These organizations were clearly at risk of losing their position in the marketplace or even going out of business entirely…

In 2011, the Nordstrom technology organization was very much optimized for cost—It had outsourced many of their technology functions, and had an annual planning cycle with large batch, “waterfall” software releases…

Kissler and the Nordstrom technology management team had to decide where to start their initial transformation efforts… They focused on three areas: the customer mobile application, their in-store restaurant systems, and their digital properties…

The Nordstrom mobile application had experienced an inauspicious start…any fixes to the application would have to wait months to reach the customer.

Their first goal was to enable faster or on-demand releases… They created a product team that was solely dedicated to supporting the mobile application… They had the goal of enabling the mobile application team to be able to independently implement, test, and deliver value to customers…

Furthermore, the mobile application team moved from planning once per year to a continuous planning process… Over the following year, they eliminated testing as a separate phase of work; instead, they integrated it into everyone’s daily work… They doubled the features being delivered per month and halved the number of defects…

Their second area of focus was the systems supporting their in-store Café Bistro restaurants… In 2013, Nordstrom had completed eleven “restaurant re-concepts”…

As Kissler stated, “One of our business leaders suggested that we triple our team size to handle these new demands, but I proposed that we had to stop throwing more bodies at the problem and instead improve the way we worked.”… They were able to reduce code deployment lead times by 60% and reduce the number of production incidents 60-90%.

These successes gave the teams confidence that DevOps principles and practices were applicable to a wide variety of value streams. 

In 2015, Kissler said that in order for the selling or customer-facing technology organization to enable the business to meet their goals, “we needed to increase productivity in all our technology value streams, not just in a few…”

She continued, “This is an audacious challenge… Our first target condition requires us to help all our teams measure, make [the work] visible, and perform experiments to start reducing their process times, iteration by iteration.”… From a high-level perspective, we believe that techniques such as value stream mapping, reducing our batch sizes toward single-piece flow, as well as using continuous delivery and microservices will get us to our desired state…

Nordstrom’s Transformation Viewed through the Three Mechanisms of Wiring the Winning Organization

Now that we have reviewed this case study, let’s see how Nordstrom moved from the danger zone to the winning zone using the three mechanisms of slowification, simplification, and amplification introduced in Wiring the Winning Organization. 

Slowification

Nordstrom shifted from a fast-paced, cost-optimized approach to a more deliberate focus on speed and agility. This shift was triggered by the need for online revenue growth and the realization that traditional retail models were at risk.

They decided to focus on specific areas of the business to experiment and learn rather than causing upheaval in the whole system. This allowed for more deliberate planning and practice. (In other words, they created a model line—a small but coherent unit in which they could more safely experiment and change.)

They targeted the customer mobile application, in-store restaurant systems, and digital properties for initial transformation efforts.

Simplification

Nordstrom simplified their approach by focusing on specific areas of the business for their initial transformation efforts. This made the complex task of transformation more manageable.

They created a dedicated product team for the mobile application, enabling the team to independently implement, test, and deliver value to the customer. This reduced the need for coordination with other teams.

They moved from an annual planning cycle to a continuous planning process, simplifying the prioritization of work based on customer needs.

Amplification

Nordstrom amplified the issues with their mobile application by acknowledging the negative reviews and the inflexible structure that allowed only biannual updates.

They identified the need for faster releases and quicker responses to customer feedback, which highlighted the issues with their existing processes.

Their focus on reducing code deployment lead times and reducing the number of production incidents in their in-store Café Bistro restaurants also amplified the issues in these areas and led to significant improvements.

Abridged Nordstrom Case Study 2: Experience with Value Stream Mapping

In the previous case study, we learned about the DevOps transformation led by Courtney Kissler and the team at Nordstrom. Over the years, they have learned that one of the most efficient ways to start improving any value stream is to conduct a workshop with all the major stakeholders and perform a value stream mapping exercise—a process designed to help capture all the steps required to create value.

Kissler’s favorite example of the valuable and unexpected insights that can come from value stream mapping is when her team tried to improve the long lead times associated with requests going through the Cosmetics Business Office application, a COBOL mainframe application that supported all the floor and department managers of their in-store beauty and cosmetic departments. This application allowed department managers to register new salespeople for various product lines carried in their stores so they could track sales commissions, enable vendor rebates, and so forth.

As Kissler explained, “I knew this particular mainframe application well—earlier in my career I supported this technology team, so I know firsthand that for nearly a decade, during each annual planning cycle, we would debate about how we needed to get this application off the mainframe. Of course, like in most organizations, even when there was full management support, we never seemed to get around to migrating it.

“My team wanted to conduct a value stream mapping exercise to determine whether the COBOL application really was the problem, or maybe there was a larger problem that we needed to address. They conducted a workshop that assembled everyone with any accountability for delivering value to our internal customers, including our business partners, the mainframe team, the shared service teams, and so forth.

“What they discovered was that when department managers were submitting the ‘product line assignment’ request form, we were asking them for an employee number, which they didn’t have—so they would either leave it blank or put in something like ‘I don’t know.’ Worse, in order to fill out the form, department managers would have to inconveniently leave the store floor in order to use a PC in the back office. The end result was all this wasted time, with work bouncing back and forth in the process.”

During the mapping workshop, the participants conducted several experiments, including deleting the employee number field in the form and letting another department get that information in a downstream step. These experiments, conducted with the help of department managers, showed a four-day reduction in processing time. The team later replaced the PC application with an iPad application that allowed managers to submit the necessary information without leaving the store floor, and the processing time was further reduced to seconds.

Kissler said proudly, “With those amazing improvements, all the demands to get this application off the mainframe disappeared. Furthermore, other business leaders took notice and started coming to us with a whole list of further experiments they wanted to conduct with us in their own organizations. Everyone in the business and technology teams was excited by the outcome because [it] solved a real business problem, and, most importantly, they learned something in the process.”

Case Study Viewed through the Three Mechanisms of Wiring the Winning Organization

Nordstrom decided to slow down and conduct a value stream mapping exercise to determine whether the COBOL application was the problem or if there was a larger issue that needed to be addressed. This involved assembling everyone with any accountability for delivering value to their internal customers, including business partners, the mainframe team, and the shared service teams. The process allowed them to identify inefficiencies in the process, such as department managers having to leave the store floor to fill out a form in the back office.

The value stream mapping exercise simplified the problem by breaking it down and identifying the root cause. This allowed them to isolate, diagnose, and address each issue in the order it occurred in the process, simplifying the problem-solving process.

They discovered that the problem was not the COBOL application itself but the process of submitting the “product line assignment” request form. By identifying this, they were able to focus on simplifying and improving this process rather than attempting to migrate the entire application off the mainframe.

The linearization of the process helped the team to break down the complex problem into simpler, more manageable components. This made it easier to identify and address the root cause of the problem, leading to more effective solutions.

The issue with the “product line assignment” request form was amplified when they realized that department managers were being asked for an employee number they didn’t have, leading to incomplete forms and wasted time.

The need to leave the store floor to fill out the form was also identified as a significant inconvenience and inefficiency in the process.

By amplifying these issues, they were able to address them directly and improve the overall process.

Stay tuned for more case studies viewed through the lens of slowification, simplification, and amplification.

Wiring the Winning Organization comes out on November 21, 2023. Pre-order your copy at your favorite book retailer.

Gene Kim is a Wall Street Journal bestselling author, researcher, and multiple award-winning CTO. He has been studying high-performing technology organizations since 1999 and was the founder and CTO of Tripwire for 13 years. He is the author of six books, The Unicorn Project (2019), and co-author of the Shingo Publication Award winning Accelerate (2018), The DevOps Handbook (2016), and The Phoenix Project (2013). Since 2014, he has been the founder and organizer of DevOps Enterprise Summit, studying the technology transformations of large, complex organizations.

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Design Thinking @ Nordstrom

• Post author: Jonas Rettig
• Post published: 2023-06-15
• Post category: How Companies Use Design Thinking
• Post comments: 0 Comments

Introduction

Everyone that has ever shopped for a pair of sunglasses knows the struggle of that process. Shoppers try out tens of pairs, take equally as many selfies of themselves with the glasses and swipe desperately from left to right to compare them against each other to find the best pair. To make this easier and involve salespeople in this process, Nordstrom, a Fortune 500 company and one of the leading American luxury store chains, sent their Innovation Lab, an interdisciplinary team consisting of programmers, designers and ethnographers, tasked with keeping Nordstrom relevant in the digital age, on a one-week assignment. The mission, developing an iPad app which allows shoppers to easily take selfies with different sunglasses and compare them against each other, was relatively normal. The setting, however, was anything but that. The whole app was built on the shopping floor of the biggest store Nordstrom had to offer.

The team started only with the simple input “People take a lot of pictures of themselves with the sunglasses, I’d be cool to show them side by side to make the process better”. From there on out the team chose to create an iPad app which customers and salespeople alike could use to do this in Nordstrom stores. To only develop features end users wanted to use and never work on something that would not create value the team chose to develop the app with direct user feedback. And what space is better suited to get feedback from end users than the place where these end users are? Thus, the decision was made to develop the app in a one-week “Flash Build” in the biggest Nordstrom store worldwide.

Before any development could start, the team built a User-Story-Map, a tool which teams use to visualize the journey a customer takes with a product. In Nordstrom’s case, the team mapped all the steps a customer takes to buy a pair of sunglasses. Based on this they asked themselves how that process would change with their app and derived from this the features the app would have to provide to change the process in this way.

After laying the foundations of the app, the team obviously wasn’t ready to provide users with a usable app. Instead, they opted to show customers so-called “paper prototypes” to rapidly test user interface (UI) concepts and feature ideas. A paper prototype is exactly what one would imagine under that term. The team’s user experience specialist went up to customers with a stack of papers with different UI states drawn onto them. The customers could then use these paper slides as they would the final app with the user experience specialist swapping different pieces of paper in and out for each action the customer takes. This technique allowed the development team to prototype features and get first valuable feedback quickly at the cost of a few sheets of paper.

Development

On the second day, the development team had already built a minimum viable product which could be tested among the customers and salespeople in the store. The location of the development team on the store floor led to a very fast feedback cycle. After a couple of features were completed, the team could just compile the app, load it onto an iPad and switch it with the iPad which was currently used for testing. Instead of the usual focus testing, the results of which can take weeks to come back to the development team, the Nordstrom development team received feedback for their new features in ten minutes or less after completing them. This instant feedback led to a lot of new, user-requested, features being added during the week. When salespeople in the store mentioned, that the breadth of pictures being taken made it hard to remember which photo was connected to which pair of sunglasses, the development team built a feature which allowed photos to be given names. When users did not understand that pictures showed up in another spot when tapped, the team built animations which showed the connection between the two views. Besides new features being added the customers also helped the development team to find critical bugs which otherwise probably would not have been found for months. An example of this is an issue which caused certain sunglasses to show up as black due to the polarization from the iPad camera and the sunglasses cancelling each other out. To solve this Nordstroms team simply converted the app to landscape mode.

Even though the app was completed at the end of the day and the general sentiment among the team and salespeople in the store was positive, the project ultimately failed and the app was never rolled out across Nordstrom stores. The main reason the app failed was, that it did not properly address customer needs. This problem originated even before work on the app started. In a post-mortem analysis, the team concluded, that one of the main problems was, that the idea for the app originated with the sales department and not from observing normal customers. This combined with the fact that the salespeople in Nordstroms Seattle Store were better at articulating their needs than the customers led to the final app being heavily skewed towards the perspective and needs of salespeople.

However, the failure of the project was not necessarily a bad thing. The failure to properly assess customer needs led the team to explore new methods to better capture these in future experiments. Furthermore, the team started using the Desirability, Feasibility, Viability (DFV) framework to assess future projects. This method tries to ensure that an idea is needed by the customer (Desirability), possible to create (Feasibility) and has a profitable business model (Viability). The team would be tasked with exploring ideas which had uncertainty in any of these fields, validating if they fulfilled the DFV-Framework and if they did, delivering the idea as a product as fast as possible to end users. Furthermore, instead of avoiding future failure through safer projects, Nordstroms Innovation Lab even set itself an 80% failure target rate to force itself to always innovate. In the coming years, the Innovation Lab applied this knowledge to projects like a wedding mood board, not unlike the then obscure Pinterest and TextStyle, an app which allowed customers to shop via SMS messages. In 2015 the Innovation Lab was shrunk drastically, with most of its employees being absorbed into other experiment and innovation-focused parts of the company.

Nordstrom Innovation Lab (2011), https://vimeo.com/274897152, accessed on 02.04.2023

CC24 (2015), https://d3.harvard.edu/platform-digit/submission/nordstrom-innovation-lab-rethinking-how-you-shop/, accessed on 11.04.2023

Grossman-Kahn, B., & Ryan, R. (2012, 11 12). Skip the Silver Bullet: Driving Innovation through Small Bets. Leading Innovation through Design Proceeding of the DMI 2012 International Research Conference Boston, USA 8–9 August 2012 , pp. 815-829

Tricia Duryee (2015), https://www.geekwire.com/2015/nordstrom-shrinks-innovation-lab-reassigns-employees-shakeup-tech-intiatives/, accessed on 11.04.2023

Christine Kern (2015), https://www.retailsupplychaininsights.com/doc/nordstrom-hopes-to-win-over-shoppers-with-text-and-buy-program-0001, accessed on 16.04.2023

IDEO U (2017), https://www.ideou.com/blogs/inspiration/how-to-prototype-a-new-business, accessed on 17.04.2023

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Case study: Finding Millions in Potential Savings in a Tough Retail Climate

Nordstrom wanted to increase the efficiency and speed of its technology operations, which includes the Nordstrom.com e-commerce site. At the same time, Nordstrom Technology was looking for ways to tighten its technology operational costs.

After embracing a DevOps transformation and launching a continuous integration/continuous deployment (CI/CD) project four years ago, the company reduced its deployment time from three months to 30 minutes. But they wanted to go even faster across environments, so they began their cloud native journey, adopting Docker containers orchestrated with Kubernetes .

Nordstrom Technology developers using Kubernetes now deploy faster and can "just focus on writing applications," says Dhawal Patel, a senior engineer on the team building a Kubernetes enterprise platform for Nordstrom. Furthermore, the team has increased Ops efficiency, improving CPU utilization from 5x to 12x depending on the workload. "We run thousands of virtual machines (VMs), but aren't effectively using all those resources," says Patel. "With Kubernetes, without even trying to make our cluster efficient, we are currently at a 10x increase."

When Dhawal Patel joined Nordstrom five years ago as an application developer for the retailer's website, he realized there was an opportunity to help speed up development cycles.

In those early DevOps days, Nordstrom Technology still followed a traditional model of silo teams and functions. "As a developer, I was spending more time fixing environments than writing code and adding value to business," Patel says. "I was passionate about that—so I was given the opportunity to help fix it."

The company was eager to move faster, too, and in 2013 launched the first continuous integration/continuous deployment (CI/CD) project. That project was the first step in Nordstrom's cloud native journey.

Dev and Ops team members built a CI/CD pipeline, working with the company's servers on premise. The team chose Chef , and wrote cookbooks that automated virtual IP creation, servers, and load balancing. "After we completed the project, deployment went from three months to 30 minutes," says Patel. "We still had multiple environments—dev, test, staging, then production—so with each environment running the Chef cookbooks, it took 30 minutes. It was a huge achievement at that point."

But new environments still took too long to turn up, so the next step was working in the cloud. Today, Nordstrom Technology has built an enterprise platform that allows the company's 1,500 developers to deploy applications running as Docker containers in the cloud, orchestrated with Kubernetes.

"The cloud provided faster access to resources, because it took weeks for us to get a virtual machine (VM) on premises," says Patel. "But now we can do the same thing in only five minutes."

Nordstrom's first foray into scheduling containers on a cluster was a homegrown system based on CoreOS fleet. They began doing a few proofs of concept projects with that system until Kubernetes 1.0 was released when they made the switch. "We made a bet that Kubernetes was going to take off, informed by early indicators of community support and project velocity, so we rebuilt our system with Kubernetes at the core," says Marius Grigoriu, Sr. Manager of the Kubernetes team at Nordstrom.

While Kubernetes is often thought as a platform for microservices, the first application to launch on Kubernetes in a critical production role at Nordstrom was Jira. "It was not the ideal microservice we were hoping to get as our first application," Patel admits, "but the team that was working on it was really passionate about Docker and Kubernetes, and they wanted to try it out. They had their application running on premises, and wanted to move it to Kubernetes."

The benefits were immediate for the teams that came on board. "Teams running on our Kubernetes cluster loved the fact that they had fewer issues to worry about. They didn't need to manage infrastructure or operating systems," says Grigoriu. "Early adopters loved the declarative nature of Kubernetes. They loved the reduced surface area they had to deal with."

To support these early adopters, Patel's team began growing the cluster and building production-grade services. "We integrated with Prometheus for monitoring, with a Grafana front end; we used Fluentd to push logs to Elasticsearch , so that gives us log aggregation," says Patel. The team also added dozens of open-source components, including CNCF projects and has made contributions to Kubernetes, Terraform, and kube2iam.

There are now more than 60 development teams running Kubernetes in Nordstrom Technology, and as success stories have popped up, more teams have gotten on board. "Our initial customer base, the ones who were willing to try this out, are now going and evangelizing to the next set of users," says Patel. "One early adopter had Docker containers and he was not sure how to run it in production. We sat with him and within 15 minutes we deployed it in production. He thought it was amazing, and more people in his org started coming in."

For Nordstrom Technology, going cloud-native has vastly improved development and operational efficiency. The developers using Kubernetes now deploy faster and can focus on building value in their applications. One such team started with a 25-minute merge to deploy by launching virtual machines in the cloud. Switching to Kubernetes was a 5x speedup in their process, improving their merge to deploy time to 5 minutes.

Speed is great, and easily demonstrated, but perhaps the bigger impact lies in the operational efficiency. "We run thousands of VMs on AWS, and their overall average CPU utilization is about four percent," says Patel. "With Kubernetes, without even trying to make our cluster efficient, we are currently at 40 percent CPU utilization—a 10x increase. We are running 2600+ customer pods that would have been 2600+ VMs if they had gone directly to the cloud. We are running them on 40 VMs now, so that's a huge reduction in operational overhead."

Nordstrom Technology is also exploring running Kubernetes on bare metal on premises. "If we can build an on-premises Kubernetes cluster," says Patel, "we could bring the power of cloud to provision resources fast on-premises. Then for the developer, their interface is Kubernetes; they might not even realize or care that their services are now deployed on premises because they're only working with Kubernetes."

For that reason, Patel is eagerly following Kubernetes' development of multi-cluster capabilities. "With cluster federation, we can have our on-premise as the primary cluster and the cloud as a secondary burstable cluster," he says. "So, when there is an anniversary sale or Black Friday sale, and we need more containers - we can go to the cloud."

That kind of possibility—as well as the impact that Grigoriu and Patel's team has already delivered using Kubernetes—is what led Nordstrom on its cloud native journey in the first place. "The way the retail environment is today, we are trying to build responsiveness and flexibility where we can," says Grigoriu. "Kubernetes makes it easy to: bring efficiency to both the Dev and Ops side of the equation. It's a win-win."

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Nordstrom leans on off-price, digital to chase customers and profits

With a goal of boosting its assortment fivefold, the department store is also making sweeping changes to how it works with suppliers.

During its investors day conference on Thursday, Nordstrom executives shared plans for profitable growth that are partly an expansion of its existing strategy and partly a remarkable departure from how it has historically done business. Most notable is the integration of its off-price Rack with its full-line business, along with an embrace of e-commerce that leaves physical locations — usually the centerpiece for any department store — in a supporting role.

"At the heart of our business transformation is the recognition that the unique combination of the Nordstrom and Nordstrom Rack brands, along with our combined physical and digital expertise, create a powerful opportunity to get closer to the customer than ever before," CEO Erik Nordstrom said via video conference.

In financial terms, the goals are to accelerate revenue growth, "with opportunity to reach $17 billion in sales over the medium term;" expand profit margin, with the "potential to sustain 6% or higher EBIT margin going forward; improve return on investment through shifts in inventory and assortment management; and "consistently generate more than $1 billion in operating cash flow annually."

Connecting Rack

Nordstrom has spent the last year bringing its off-price Rack business more fully into its market strategy, announced in 2018, which knits together online and offline operations in a given area. On Thursday, executives said that the Rack and Nordstrom websites will also merge into one.

The market approach is perhaps seen most vividly in New York City , where a new flagship, two Local stores, several Rack stores and the website work in concert. In the last year, it has been rolled out to the company's top 10 markets, which provide about half its total sales. That will expand to 20 markets, representing 75% of sales through 76 Nordstrom stores, seven Nordstrom Locals and counting, and 167 Rack Stores.

All locations offer pickup and returns, regardless of where or how a purchase was made. The integration has sped up order fulfillment, with on average four times more product available to the customer the next day and a one-day reduction in shipping speed, Erik Nordstrom said Thursday. In these areas, customer accounts are up by 20%, and sales have grown "at a rate of nearly 200 basis points higher than other markets," he also said.

In addition to getting place of pride on the Nordstrom website and within the market strategy, the Rack brand will no longer have to compete with HauteLook, the flash-sale site the company bought in 2011 for around $200 million. HauteLook allowed Nordstrom to expand Rack's e-commerce "into a $1.4 billion plus digital business," according to Rack chief Geevy Thomas, far outpacing other off-pricers . Flash sales will continue, but under the Rack brand.

"[W]e have an unmatched digital presence in the off price space, which means we're the only off price retailer with a full transactional digital and physical ecosystem, we're able to engage with more customers in more ways and drive scale with less risk and lower capital intensity than our store-based competitors," Thomas said.

Some change coming to Rack is potentially riskier to the premium "Nordstrom" brand, though executives dismissed that notion Thursday. The off-pricer traditionally caters to a fashion-minded customer looking for a deal, less so to strictly price-driven consumers. To reach more shoppers, Nordstrom is "dramatically" expanding its price-driven inventory into some stores. The company is using demographic and store-level data to determine which locations will be price-driven, which will stick with the traditional Rack approach and which will have a hybrid. Rack's performance has lagged behind  the company's full-line as well as its store-dependent peers. 

"With Nordstrom Rack underperforming the broader off-price segment in recent years, we believe the repositioning to a more price-focused model could allow the company to better compete with traditional off-price retailers," William Blair analyst Dylan Carden said in emailed comments, noting that its more mature digital operation is also an advantage. "As management focuses on bringing Rack’s digital margin at parity with its brick-and-mortar channel, there is potential for Rack to become the dominant digital player in the off-price space and significantly contribute to the total company’s margin expansion." 

Expanding merchandise assortment

Like many retailers, in order to sell more, Nordstrom is working to broaden its assortment, with the goal of expanding from about 300,000 items today to more than 1.5 million over the next three to five years. 

This will be accomplished through what Nordstrom executives all day emphasized will be a "digital-first" platform. Nordstrom's online selection is already nearly three times its physical store selection, and the company envisions that stretching to 20 times the store-based selection, President and Chief Brand Officer Pete Nordstrom said Thursday.

Unlike many retailers, however, including most recently Canadian department store Hudson's Bay, it won't create a digital marketplace to accomplish that. Rather, executives outlined a new approach to inventory management that shares more risk with vendors. The plan is reduce its traditional wholesale operation, which now provides 85% of its assortment, to provide 50%, by increasing drop-shipping and concessions and instituting a hybrid model with shared revenue and risk.

Overall, it's clear that Nordstrom is intent on opening all borders between its online and offline channels and its full-price and off-price businesses, in order to reach more people, notch more sales and make more money. "Our customers don't view themselves as store or digital shoppers, or only as Nordstrom or Nordstrom Rack shoppers," Chief Operating Officer Ken Worzel said. "They see us as one company, and they expect to be able to engage with us seamlessly across all of our touchpoints." 

Less clear is how soon this may be accomplished, several analysts said. While the pandemic disrupted its plans to some extent, Nordstrom, which was redrawing the department store model before the pandemic, appears to have accelerated its plans in the past year.

"Against the backdrop of a quickly changing retail environment, management focused on the company’s pivot to a digital-first platform and the opportunity to broaden the reach of the business," William Blair analysts said. "Nordstrom has taken advantage of the pandemic by pulling forward several omnichannel initiatives, from which it leaves the pandemic in an arguably more flexible and ever more customer-centric position."

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Case Study: How does Nordstrom Reward Program Work

Key Notable Stats

The Nordy Club is Nordstrom's loyalty program, designed to provide benefits and rewards to their customers. As of my last knowledge update in September 2021, here's a general overview of how The Nordy Club rewards program was structured:

• Membership Tiers: The Nordy Club had multiple membership tiers, including Insider, Influencer, Ambassador, and Icon. Each tier offered different benefits and perks. Membership was typically determined based on annual spending at Nordstrom stores or online.
• Earning Points:
• Members earned points for every dollar spent at Nordstrom, Nordstrom Rack, HauteLook, and Trunk Club. The points earned could vary based on the tier, with higher tiers earning more points per dollar.
• Members also had opportunities to earn bonus points during special events or promotions.
• Nordstrom Notes: Members could convert their points into Nordstrom Notes, which are essentially gift certificates to be used on future purchases at Nordstrom stores or online.
• Birthday Rewards: Many loyalty programs, including The Nordy Club, offered special birthday rewards, which could include discounts, bonus points, or other surprises.
• Exclusive Access: Members often received early access to sales events, allowing them to shop select items before the general public.
• Free Basic Alterations: Certain tiers of The Nordy Club received free basic alterations on regular-priced items, ensuring a better fit.
• Beauty Benefits: The Nordy Club sometimes offered special beauty-related perks, including early access to beauty and fragrance events and free beauty samples.
• Personal Double Points Days: Members could select specific days where they earned double points on eligible purchases.
• Invitations to Events: Top-tier members, such as Ambassadors and Icons, were invited to special Nordstrom events and experiences.
• Digital Experience: The Nordy Club members could conveniently track their points, view their rewards, and access exclusive offers through the Nordstrom website or mobile app.

Please note that the specific details of The Nordy Club program may have evolved or changed since my last update. To get the most current information on The Nordy Club rewards program and its benefits, visit the official Nordstrom website or contact their customer service directly.

Loyalty programs like The Nordy Club are designed to provide added value and rewards to loyal customers, so it's worth staying informed about the latest terms and offerings to make the most of your membership.

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Join the world's fastest-growing brands.

Nordstrom: A culture of service

While Nordstrom’s customer service was widely admired, the pace of change in retailing was accelerating and expectations around customer service were rising. Mobile shopping (or m-commerce) was quickly becoming the fastest growing space online. And the unparalleled access consumers had to information was tipping the balance of power in favor of customers. In response, Nordstrom had evolved into a multichannel retailer and was seeking ways to satisfy its customers’ new definition of service. By 2012, Nordstrom had grown from one downtown Seattle shoe store to serving customers in 44 countries and 31 states. With a new record of $11.8 billion in net sales in 2012 and gross profit margins averaging about 38.8%, Nordstrom’s strategy seemed to be working. Online sales surpassed $1 billion for the first time, with mobile devices accounting for more than 20% of Nordstrom’s total online sales. This reinforced the importance of online retailing and the significant growth potential it offered. But would the company’s culture of service be able to keep pace with its customers in the digital age?

The case introduces participants to the challenge of provide outstanding customer service in the retail sector in the digital age. It will help participants gain an understanding of how e-commerce is changing the concept of customer service. It also explores how Nordstrom – a company with a deeply engrained customer service culture – is reshaping its strategy and expanding its multichannel capabilities to keep up with its customers accelerating.

IMD retains all proprietary interests in its case studies and notes. Without prior written permission, IMD cases and notes may not be reproduced, used, translated, included in books or other publications, distributed in any form or by any means, stored in a database or in other retrieval systems. For additional copyright information related to case studies, please contact Case Services .

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15.1: Building a Customer Service Culture: The Case of Nordstrom

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Nordstrom Inc. (NYSE: JWN) is a Seattle-based department store rivaling the likes of Saks Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of Fame member of Fortune magazine’s “100 Best Companies to Work For” list, including being ranked 34th in 2008. Nordstrom is known for its quality apparel, upscale environment, and generous employee rewards. However, what Nordstrom is most famous for is its delivery of customer service above and beyond the norms of the retail industry. Stories about Nordstrom service abound. For example, according to one story the company confirms, in 1975 Nordstrom moved into a new location that had formerly been a tire store. A customer brought a set of tires into the store to return them. Without a word about the mix-up, the tires were accepted, and the customer was fully refunded the purchase price. In a different story, a customer tried on several pairs of shoes but failed to find the right combination of size and color. As she was about to leave, the clerk called other Nordstrom stores but could only locate the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the shoes to the customer’s home at Nordstrom’s expense. In a third story, a customer describes wandering into a Portland, Oregon, Nordstrom looking for an Armani tuxedo for his daughter’s wedding. The sales associate took his measurements just in case one was found. The next day, the customer got a phone call, informing him that the tux was available. When pressed, she revealed that using her connections she found one in New York, had it put on a truck destined to Chicago, and dispatched someone to meet the truck in Chicago at a rest stop. The next day she shipped the tux to the customer’s address, and the customer found that the tux had already been altered for his measurements and was ready to wear. What is even more impressive about this story is that Nordstrom does not sell Armani tuxedos.

How does Nordstrom persist in creating these stories? If you guessed that they have a large number of rules and regulations designed to emphasize quality in customer service, you’d be wrong. In fact, the company gives employees a 5½-inch by 7½-inch card as the employee handbook. On one side of the card, the company welcomes employees to Nordstrom and states that their number one goal is to provide outstanding customer service, and for this they have only one rule. On the other side of the card, the single rule is stated: “Use good judgment in all situations.” By leaving it in the hands of Nordstrom associates, the company seems to have empowered employees who deliver customer service heroics every day.

Based on information from Chatman, J. A., & Eunyoung Cha, S. (2003). Leading by leveraging culture. California Management Review, 45 , 19–34; McCarthy, P. D., & Spector, R. (2005). The Nordstrom way to customer service excellence: A handbook for implementing great service in your organization . Hoboken, NJ: John Wiley; Pfeffer, J. (2005). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 19 , 95–106.

Discussion Questions

• Describe Nordstrom’s organizational culture.
• Despite the low wages and long hours that are typical of retail employment, Nordstrom still has the ability to motivate its staff to exhibit exemplary customer service. How might this be explained?
• What suggestions would you give Nordstrom for maintaining and evolving the organizational culture that has contributed to its success?
• What type of organizational culture do you view as most important?
• What attributes of Nordstrom’s culture do you find most appealing?

Business Case Study: Nordstrom's Culture of Customer Service

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

Table of Contents

Keeping customers happy, nordstrom's legendary customer service, organizational culture, nordstrom's culture, lesson summary.

Have you ever tried to return an item without a receipt and been told no? This doesn't happen at Nordstrom. When you exchange an item, are you charged a restocking fee? Nordstrom doesn't have any restocking fees. Have you complained about an inferior product only to be ignored? Nordstrom will go as far as providing a competitor's product to make a customer happy. If you've never had a chance to shop at this upscale department store, you're missing out. In just a few decades, Nordstrom has become the gold standard when it comes to customer service. Let's learn more about how they keep people coming back.

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• 0:00 Keeping Customers Happy
• 0:38 Nordstrom's Legendary…
• 1:44 Organizational Culture
• 3:30 Nordstrom's Culture
• 4:31 Lesson Summary

Based in Seattle, Washington, Nordstrom is a multinational retail company that employs nearly 70,000 employees and has 200 locations. The company is known for upscale fashion, jewelry, housewares, and wedding items. It brings in more than $15 billion in revenue every year and is considered one of the top fashion stores in the world. But if you ask customers what Nordstrom is most well known for, the answer is simple: customer service.

Even a quick look at Nordstrom's website and social media accounts reveals that the company makes it easy for customers to make contact. When a customer posts a question or a concern, he or she can expect an answer within minutes, not days. If you have a not-great experience with service in the shoe department and you post about it on Nordstrom's Facebook page, chances are very good that you'll see a response within a few minutes. And that response will probably include an apology and a few questions asking for more information and for suggestions for improvement. And it will come from a real person, not just a generic corporate email. Even in today's age of immediate responses, this type of customer service is rarely seen.

When new employees come on board at Nordstrom, they are warmly welcomed and given one rule: Use good judgment. The company doesn't train to a strict handbook of how to handle situations with customers. There isn't even a company handbook by today's standards. In true innovative fashion, Nordstrom gives employees the freedom to handle situations on their own. Each employee is part of customer service--it's not a single department that operates in a silo. What this has done is empower employees, creating an organizational culture of skillful customer service.

Organizational culture is the heartbeat of a company, the values, attitudes, relationships, and behaviors that drive the way a company does business. Organization culture is unique, sort of like a company's fingerprint--no two are exactly the same. Some are aggressive, innovative, team-oriented, or people-oriented. Nordstrom has a service culture that is intensely customer-oriented and goes above and beyond to please customers.

A service culture is one in which employees have the power to resolve customer complaints quickly. There's no waiting to call a manager over or forwarding your comments on to the corporate office--if that employee can address your concern, that employee will. Employees are cross-trained to know how to handle these situations and use their own judgment. This is a revolutionary idea. If you've ever had a bad customer service experience that was then made worse by being handed off to a series of unresponsive managers or an automated corporate phone system, it's easy to understand why Nordstrom's approach has built an incredibly loyal customer base. And in the always-on world of social media, people rave about Nordstrom's customer service every chance they get--the company's social media accounts are flooded with positive, glowing praise. Even when they get it wrong, Nordstrom gets it right.

It's clear that Nordstrom wants lifetime customers and employees. The company makes customer service its number one priority, and it has been named one of the best companies to work for by Fortune. Remember, this is a company that has no policy handbook. We'd know more about Nordstrom if the company bragged about its successes but it doesn't. Nordstrom representatives don't even like to be interviewed about the success of its customer service culture, which is why it takes some digging to put the backstory together.

Company representatives politely decline interviews and state that Nordstrom still has many opportunities to improve. For business analysts, though, Nordstrom is a dream case study. Some of the customer service lessons the Nordstrom model offers to those who listen are:

• Hire nice people
• Trust employees
• Reward customer service
• Remain humble
• Make customer service part of the mission
• Mentor employees
• Provide professional development opportunities
• Encourage friendly competition among employees
• Emphasize teamwork

Nordstrom is a large global company that is widely known for its legendary customer service. The company has done this with a grassroots push that supports the independence of its employees. Nordstrom focuses on improving its customer service by hiring good employees, mentoring them, and encouraging teamwork and supportive competition. New employees are given the charge of making good decisions and then trusted to do so.

What this has done is empower employees to provide excellent customer service. When a customer has a complaint, there isn't a customer service department or manager who can figure things out. All associates have the power to resolve problems, so all are part of the solution. Nordstrom's organizational culture highlights values and relationships that set the tone for how the company operates day to day. Nordstrom has built an intensely loyal customer base through its commitment to a service culture , which the company and its associates live out every day.

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Home > School, College, or Department > MCECS > ETM > ETM Student Projects > 1463

Engineering and Technology Management Student Projects

Team project #2: case analysis of nordstrom, inc..

Sarka Dluhosova , Portland State University Follow Diane Keil , Portland State University

Document Type

Closed Project

Publication Date

Spring 2003

Dragan Milosevic

Course Title

Strategic Planning in Engineering Management

Course Number

EMGT 525/625

EXECUTIVE SUMMARY

The following case study describes a strategic planning process at Nordstrom, Inc., one of the most wellknown fashion specialty stores in the U.S.A. Their primary philosophy is to offer customers the best possible service, selection, quality and value. In contrast with their primary corporate strategy, which is continued growth, they have recently experienced decreasing sales due to factors such as slowing demand, high operating costs and new store openings in markets the company already occupies. The goal of this case study analysis is to assess Nordstrom's current situation and recommend strategies, which the strategy team believes, will bring the company back to historic growth and profitability levels. In the first part we address Nordstrom's strengths and weaknesses, which are results of their internal operations and also opportunities and threats that they are facing from the external environment. Next, we determine the industry key success factors. Based on the success factors we evaluate Nordstrom's performance and how they are standing with respect to the industry standards. Combining critical issues and the company's weaknesses we derive gaps and present them in the gap analysis. Eventually, we examine their current strategies and assess whether or not they address the critical issues. In the second part of the analysis we suggest strategies and describe their advantages and disadvantages. We also explain how each either deals with Nordstrom's critical issues and weaknesses or minimizes their gaps. Derived from evaluation of the cons and pros of each recommended strategy we either choose to pursue with the strategy or reject it. At the end, we develop a timeline for the strategy implementation. We conclude by presenting the expected results of strategic implementation.

In Copyright. URI: http://rightsstatements.org/vocab/InC/1.0/ This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s).

This project is only available to students, staff, and faculty of Portland State University

Persistent Identifier

http://archives.pdx.edu/ds/psu/23714

Citation Details

Dluhosova, Sarka and Keil, Diane, "Team Project #2: Case Analysis of Nordstrom, Inc." (2003). Engineering and Technology Management Student Projects . 1463. http://archives.pdx.edu/ds/psu/23714

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Nordstrom SWOT Analysis

Before we dive deep into the SWOT analysis, let us get the business overview of Nordstrom. Nordstrom, Inc. is a leading fashion retailer based in the United States, offering a wide range of products, including clothing, shoes, accessories, and beauty items.

Founded in 1901 by John W. Nordstrom and Carl F. Wallin as a small shoe store in Seattle, Washington, the company has since expanded significantly. It now operates over 350 stores across the US, Canada, and Puerto Rico, as well as an online presence.

Nordstrom’s primary focus is on providing high customer service and offering an extensive assortment of products from well-known and emerging brands. The company operates through several retail formats, including:

• Full-Line Stores: These are traditional department stores offering a vast selection of products, ranging from designer wear to affordable fashion, cosmetics, accessories, and home goods.
• Nordstrom Rack: A discounted off-price retail chain offering customers significant savings on designer and branded products. Nordstrom Rack caters to price-conscious consumers seeking high-quality products at reduced prices.
• Trunk Club: A personalized styling service that provides curated, handpicked clothing selections based on individual customer preferences. Customers can choose to receive shipments periodically or schedule appointments with a stylist.
• Jeffrey: A luxury boutique chain acquired by Nordstrom in 2005, offering high-end designer products in a curated and personalized shopping environment.
• Online and Mobile Channels: Nordstrom operates an e-commerce platform through its websites, Nordstrom.com and Nordstromrack.com, as well as mobile applications, allowing customers to shop from anywhere and offering a seamless omnichannel experience.

Financial Performance :  For the fiscal year ended January 28, 2023, net earnings were $245 million, and diluted EPS was $1.51, with EBIT of $465 million, or 3.1 percent of sales. Full-year revenue for fiscal 2022, including retail sales and credit card revenues, increased 5.0 percent compared with fiscal 2021. GMV increased by 5.0 percent in fiscal 2022 compared to 2021.

Here is a SWOT analysis for  Nordstrom :

A SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats of a business, project, or individual. It involves identifying the internal and external factors that can affect a venture’s success or failure and analyzing them to develop a strategic plan. In this article, we do a SWOT Analysis of Nordstrom.

SWOT Analysis: Meaning, Importance, and Examples

• Strong brand reputation : Nordstrom has built a solid reputation for offering high-quality products and exceptional customer service. The company has consistently received accolades for its dedication to customer satisfaction and its ability to provide a seamless and personalized shopping experience.
• Diverse product offering : The company offers a wide range of products, from luxury brands to more affordable options, catering to a broad customer base with different preferences and budgets. This diverse product offering allows Nordstrom to attract various customer segments and maintain a loyal customer base.
• Multiple retail formats : Nordstrom operates through several retail formats, including full-line stores, Nordstrom Rack, Trunk Club, and Jeffrey. This diversification allows the company to cater to different customer needs and preferences while minimizing the impact of a decline in a single retail segment.
• Omnichannel presence : Nordstrom has invested in its digital capabilities, resulting in a solid online and mobile presence. The company’s seamless integration of brick-and-mortar stores with its online platforms enhances the customer experience and allows it to reach a wider audience, catering to their shopping preferences.
• Innovative initiatives : Nordstrom is committed to staying ahead of the curve regarding technology and customer experience. The company has implemented several innovative initiatives, such as using AI-powered chatbots, virtual stylists, and personalized styling services like Trunk Club, to create a unique and engaging shopping experience for its customers.
• Employee culture : Nordstrom places a strong emphasis on employee satisfaction and empowerment. The company is known for its positive work environment and offers employees training, development opportunities, and competitive benefits. A motivated workforce allows Nordstrom to maintain its high level of customer service.
• Strategic partnerships and acquisitions : Nordstrom has pursued strategic partnerships and acquisitions to expand its product offering, enhance its customer experience, and stay competitive in the retail landscape. For example, the acquisition of Trunk Club and the partnership with Rent the Runway have allowed the company to diversify its services and cater to new customer segments.

• Dependence on the US market : Nordstrom derives a significant portion of its revenue from the US market, making it vulnerable to economic fluctuations and changes in consumer spending habits within the country. This geographic concentration could impact the company’s growth and profitability during economic downturns.
• Competition : The retail industry is highly competitive, with numerous players offering similar products at various prices. Nordstrom faces competition from traditional department stores, specialty retailers, discount stores, and e-commerce platforms. As a result, the company must constantly innovate and adapt to maintain its market position and stay relevant to consumers.
• Slow international expansion : Compared to some of its competitors, Nordstrom’s global presence is relatively limited, with a few stores in Canada and none in other countries. This slow international expansion limits the company’s growth potential and exposes it to risks associated with a heavy reliance on the US market.
• High operating costs : Operating large brick-and-mortar stores, particularly full-line department stores, can be expensive due to rent, utilities, and staffing costs. As a result, Nordstrom’s profitability may be impacted by these high operating costs, especially if sales decline or there is a shift toward online shopping.
• Vulnerability to fashion trends : As a fashion retailer, Nordstrom is susceptible to consumers’ changing tastes and preferences. If the company fails to predict or quickly adapt to new fashion trends accurately, it may experience a decline in sales and customer loyalty.
• Challenges in the off-price segment : Nordstrom Rack faces intense competition from other off-price retailers like TJ Maxx, Ross, and Burlington. Ensuring a consistent flow of high-quality inventory at discounted prices can be challenging, and any shortcomings in this area could negatively impact the company’s reputation and sales.
• Supply chain risks : Nordstrom’s supply chain is susceptible to disruptions caused by factors such as global economic conditions, natural disasters, or geopolitical issues. Any disruptions in the supply chain could lead to delays, increased costs, or inventory shortages, which could harm the company’s operations and reputation.

Opportunities

• International expansion : Expanding into new international markets can provide Nordstrom with a broader customer base and increased revenue streams. By strategically entering high-potential markets, the company can reduce its dependence on the US market and diversify its geographic risk.
• E-commerce growth : Nordstrom can further invest in its e-commerce and digital capabilities to provide a seamless shopping experience for customers. Enhancing its online presence and leveraging innovative technologies can help the company attract more customers, improve customer retention, and increase sales.
• Personalization and customer experience : Nordstrom can continue to enhance the customer experience by offering more personalized services, such as AI-driven recommendations, virtual styling, and tailored loyalty programs. These efforts can help build customer loyalty and differentiate the company from its competitors.
• Expansion of private-label brands : Developing and expanding its portfolio of private-label brands can help Nordstrom increase profit margins and offer unique products that cater to different customer segments. This approach can also help the company differentiate itself from competitors and enhance customer loyalty.
• Sustainable and ethical practices : As consumers become increasingly conscious of the environmental and social impact of the products they purchase, Nordstrom has an opportunity to position itself as a leader sustainably and ethically. This can involve offering more eco-friendly products, ensuring fair labor practices in the supply chain, and implementing sustainable packaging and store operations.
• Partnerships and collaborations : Nordstrom can explore strategic partnerships and alliances with emerging brands, designers, or technology providers to enhance its product offerings, improve the customer experience, and gain a competitive advantage.
• Strengthening the off-price segment : Nordstrom can focus on strengthening its off-price segment, Nordstrom Rack, by improving inventory management, enhancing the in-store and online shopping experience, and expanding its store network. This can help the company attract price-conscious customers and capitalize on the growing popularity of off-price retail.
• Intense competition : The retail industry is highly competitive, with numerous players vying for market share. Nordstrom faces competition from traditional department stores, specialty retailers, discount stores, and e-commerce platforms. Increased competition can lead to price wars, reduced profit margins, and a potential loss of market share.
• Economic fluctuations : As a retailer primarily focused on discretionary spending, Nordstrom is susceptible to economic downturns and changes in consumer spending habits. Reduced consumer spending due to economic uncertainty or recessions could negatively impact the company’s sales and profitability.
• Shift towards online shopping : The rapid growth of e-commerce has led to declining foot traffic at brick-and-mortar stores. If Nordstrom fails to adapt to consumers’ changing shopping habits and enhances its online presence, it may struggle to retain customers and maintain sales.
• Fast-fashion and changing consumer preferences : The rise of fast-fashion retailers and ever-changing consumer preferences threaten Nordstrom’s business model. If the company fails to keep up with the latest trends and cater to the evolving needs of its customers, it may lose market share to more agile competitors.
• Supply chain disruptions : Nordstrom’s supply chain is susceptible to disruptions due to various factors such as global economic conditions, natural disasters, geopolitical issues, or labor disputes. Any disruptions in the supply chain could lead to delays, increased costs, or inventory shortages, which could negatively impact the company’s operations and reputation.
• Cybersecurity risks : As Nordstrom expands its digital presence, the company becomes more vulnerable to cybersecurity threats, such as data breaches or cyberattacks. Any security incidents could lead to the loss of customer trust, legal issues, and financial losses.
• Regulatory changes and compliance : Nordstrom operates in a highly regulated environment and must comply with various laws and regulations related to labor, health and safety, consumer protection, and environmental practices. Changes in regulations or failure to comply with existing regulations could lead to fines, legal issues, and damage to the company’s reputation.

Check out the SWOT Analysis of Global Businesses

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STEaPP’s Dr Bipashyee Ghosh’s case study is published in the new report by Climate strategies.

13 June 2024

STEaPP’s Dr. Bipashyee Ghosh’s case study on ‘Ensuring water security in India’ is published in the new ‘Transition Indicators’ report by Climate strategies.

Climate Strategies report titled ‘Transition Indicators to broaden perspectives beyond adaptation and mitigation’ explores how transition indicators can drive climate action by acting as tangible and accessible metrics to facilitate policy dialogues for systemic change.  These indicators articulate desired outcomes, facilitate dialogue, guide policy implementation, and enhance investment frameworks.

In this pivotal report published on 3 rd June 2024 by Climate Strategies, Dr Bipashyee Ghosh, Lecturer in Engineering, Innovation and Public Policy at UCL’s Department of Science, Technology, Engineering and Public Policy (STEaPP), explores key transition pathways for water security in India. Water, a vital resource essential for sustaining livelihoods and ensuring human well-being, remains a critical system to be transformed, in order to ensure sustainable development in India. Against the backdrop of evolving climate patterns and increasing demands for water, the need for innovative solutions has never been more urgent.

Ghosh identified two interconnected pathways for transitions to sustainable water system in India. The first pathway focuses on ensuring round-the-clock access to safe drinking water for all citizens, regardless of socioeconomic status or geographical location. Through a series of indicators, including measures of affordability, safety, and adequacy, this pathway aims to guarantee universal access to clean water by 2030.

In parallel, the second pathway emphasises water savings and efficient water usage in households and agricultural settings. By harnessing technological innovations and behavioural changes, such as the adoption of water-efficient irrigation techniques and the promotion of sustainable household practices, this pathway seeks to enhance water use efficiency and resilience to climate variability.

Crucially, these transition indicators are not only designed to measure progress but also to facilitate effective governance and stakeholder engagement. The pathways and indicators are ways to engage communities in decision-making, and empowering them to take ownership of technologies and innovations, and drive change in a more democratic manner.

Looking ahead, Ghosh suggests international cooperation will play a pivotal role in scaling up these initiatives and fostering knowledge exchange between nations facing similar water challenges. By leveraging engineering expertise, infrastructural investments, and financial support, collaborative efforts in the national and regional contexts can accelerate progress towards a water-secure, net-zero future for India and beyond.

As the global community grapples with the complex interplay between water security, climate change, and sustainable development, UCL remains at the forefront of pioneering research and innovation, driving positive change for generations to come.

You can explore the full report here. For further information on this research and for feedback and collaborations, please contact Bipashyee Ghosh at [email protected]

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