Nordstrom Market Selection
Founded in 1901 as a retail shoe business in Seattle, Nordstrom later incorporated in the state of Washington in 1946. Today, Nordstrom is one of the nation’s leading fashion specialty retailers, with stores located in 30 states as of March 16, 2012. The west and east coasts of the United States are the areas in which Nordstrom has the largest presence. As of March 16, 2012, Nordstrom included 116 ‘Nordstrom’ branded full-line stores, an online store at
www.nordstrom.com; and 105 off-price ‘Nordstrom Rack’ stores. Other retail channels include their online private sale subsidiary ‘HauteLook’ acquired in Feburary 2011, two ‘Jeffrey’ boutiques, one philanthropic ‘treasure&bond’ store and one clearance store that operates under the name ‘Last Chance.’ HauteLook is a Los Angeles based e-tailer that offers flash sales on designer fashion merchandise may be a key to Nordstrom’s future growth. HauteLook (
www.hautelook.com) offers merchandise at 50-75% off regular price.
Growth through Market Expansion
In the U.S. market it has been difficult for retailers to grow since household income adjusted for inflation is often flat if not negative. And even though Nordstrom appears to upper middle class households they have also been hit hard by the economy. Thus Nordstrom has grown via expansion into other states outside its home in Seattle Washington. This actually is somewhat of a continuation of its store growth strategy going back twenty-five years but store growth and market expansion is more important than ever.
Between 2008 and 2011 continued its geographic expansion as show in exhibits 1 and 2. Nordstrom generally opened between a dozen and 20 stores annually with the major focus on opening of Nordstrom Rack Stores. Over the last five years Nordstrom Rack Stores have almost doubled. At the same time the firm experience inconsistent financial and operating performance as show in exhibit 3. In fact 2011 operating profits were lower than in 2007; a rather sobering experience for the senior management team. Some analysts are surprised why with this inconsistent operating performance the firm continues to increase its dividend to shareholders.
1. Why do you believe Nordstrom is opening more Nordstrom Rack Stores than its traditional Nordstrom stores?
2. Register for the HauteLook website and evaluate if you think Nordstrom should put more of its emphasis on growth sales via e-tailing and less on its brick and mortar stores. Do the same for Nordstrom’s online store (www.nordstrom .com)
3. Should Nordstrom expand to markets outside the United States? If so, what markets do you think would be most attractive?