Phase 1

Marketing 361, Section 1

September 18, 2019

Team #28
Kevin Gerlach
Jessica Madrid
Kristi McLaughlin
Paige Price
Kari Sylla
Noah Weisman

Company Overview
Nordstrom Inc. is a leading luxury department retail chain that began as a small shoe store in 1901. Today,
Nordstrom operates in 40 states and Canada as a luxury department store. The reputable retailer serves customers in
over 115 stores, 250 Nordstrom Rack off-price stores, and online through nordstrom.com and nordstromrack.com.
Nordstrom’s mission is to give their customers the most compelling shopping experience, while also giving them the
best possible service, selection, quality, and value.

Industry (NAICS Code: 45211)

Nordstrom is apart of the department store industry and operates as the third-largest firm in this industry with
revenues of over $15.6 billion. Some of Nordstrom’s top competitors in its industry is Gap Inc., TJX Companies,
Inc., and Ross Stores Inc. (Nordstrom, Inc., 2019). Nordstrom is a publicly-traded on the New York Stock Exchange
under the symbol JWN at its current stock share price of $34.80 (Nordstrom, Inc., 2019).

Marketing Challenges
Diminished Premium Pricing
Nordstrom currently is mainly known for its flagship store simply titled “Nordstrom”. However, the company is
now opening much more of their “Nordstrom Rack” stores. Nordstrom Rack is a discount store for the luxury brand
and is constantly growing in popularity. However, due to the growth of Rack, the Nordstrom brand is beginning to
fall from a luxury high-end company to discount outlets. Customers are drawn to the cheaper alternatives offered at
Nordstrom Rack and have begun to shop more at the outlet rather than the main store. Fashion Marketing states,
“This discounting could hurt Nordstrom’s ability to sell at full price” (Fashion Marketing, 2016). Consumers now
have begun to expect price cuts from Nordstrom which harms Nordstrom's ability to price accordingly. If Nordstrom
goes against consumer perceptions and begins selling items for higher prices, consumers will likely shop elsewhere.

The Emergence of Online Shopping

As online shopping trends continue to grow, brick and mortar stores are diminishing at a startling rate. Consumers
are drawn to the simplicity and speed of being able to order a product with one click. Most people do not have the
time to go to stores or may simply feel like impulsive shopping. Online stores navigate this by allowing consumers
to shop anywhere at any time. With online retailers like Amazon, you have everything at the power of your
fingertips. An article on Business Insider says, “40% of consumers say they're more likely to shop with Amazon due
to familiarity and the volume of product reviews” (Biron, 2019). Amazon allows for ease by putting all resources in
one place without having to strenuously look anywhere else. These new online shopping experiences make it easier
for consumers to buy products that cater to consumer wants of a quick and simple shopping experience. The shift
towards online shopping endangers traditional brick and mortar stores such as Nordstrom if they do not adapt to the
change quickly. In response to this shift, Nordstrom launched its websites Nordstrom and Nordstromrack.com.
However, If they want to continue competing on this new level, they must seek to make their online shopping
interface into a memorable experience for consumers.

Price Transparency
With the growth of the internet, consumers can now check competitors' prices with the touch of a button. Consumers
are more likely to shop at the cheapest option. Often times, stores will have different prices between their online
store and the retail option. A management professional stated, “Pricing differences between the two will only drive
customers to the less expensive alternative or worse yet, a competitor” (Alexander, 2016). Companies' prices not
being uniform causes consumers to go straight for the cheapest option with little regard for brand name or luxury.
Customers will spend time researching prices because they are concerned with where their money is going and are
prone to follow discounts and reduced prices. This poses a challenge for Nordstrom because it affects how the
company is able to price items in an environment where consumers can easily access information on competitors.

SWOTT
(See Figure 1)
Strengths
Nordstrom has many strengths, that is why they have been in business for about 118 years (Ask us, 2019).
Nordstrom is known for its excellent customer service by making shopping experiences personal, convenient, and
catering to whatever the customer needs. The company does this by putting great efforts into training their
employees and offering a wide variety of products and services for customers.

Weaknesses
Though Nordstrom has many strengths, they also have notable weaknesses. One weakness of Nordstrom is that they
are only located in the United States and Canada. They have a low global presence and expanding operations would
open up new markets and opportunities for the company.

Opportunities
New opportunities for Nordstrom arise as the times and market change. Nordstrom has the opportunity to acquire
smaller retail chains that can no longer compete with them. Nordstrom has an edge against the competition with the
diverse shopping departments and services that they offer, so they keep pushing more competition out. They can
acquire these smaller chains to grow as a company and remove competition.

Threats
There are threats to every industry, but as an upscale department chain, Nordstrom faces threats against “fast
fashion” companies. Fast fashion is unsustainable, mass-produced, inexpensive clothes. The recent trends of fast
fashion companies imitating luxury brands that could be found in Nordstrom are bringing down the value of
Nordstroms products.

Trends
Being in the fashion industry, trends are constantly changing, and Nordstrom has to keep up with the latest styles.
Sustainable fashion is on the rise for the company because customers have shown a great interest in reducing their
environmental footprints. Nordstrom now has an online page just for sustainable products with over 90 brands (Ask
us, 2019).

Unique Selling Proposition and Competition

Nordstrom competes with other department store chains like Macy’s, Dillards, and Neiman Marcus. To stay ahead
of the competition, Nordstrom’s unique selling proposition is having many enticing services for customers that the
competitors do not possess. These services include alteration services, personal stylists, and curbside pick up (Ask
us, 2019).

Target Market
(See Figure 2)
Primary Market
The addition of Nordstrom Rack has led to a shift away from appealing to only upper-middle and middle-class
segments and now includes the lower-middle end. Millennial women, between the ages of 24-36, prove to be a
viable, growing market.

Namely, those with income levels from $30,000-$40,000 will compose this target market. (Bailey 2015). Millennial
females especially are drawn toward Nordstrom’s carrying of top brands, value the high-quality service, and
appreciate the emerging push toward e-commerce. With the introduction of Nordstrom Rack outlets, this market has
become the fastest-growing consumer for the company.
 Secondary Market
Another large target market is men between the ages of 24-36 and, in general, they make up the main target market
for high-end retail stores, which includes standard Nordstrom stores (Bartle 2019). These are middle to upper-
middle-class men with sizable levels of disposable income, so around $50,000-$60,000

They too value the carrying of top brands and the push toward e-commerce, however, a high level of service is not
as crucial to them in the shopping process. Due to this, they are the secondary market as opposed to being the
primary.

Tertiary Market
“Baby boomer” generations from 54-74 are becoming some of the largest spenders and have large discretionary
budgets they typically spend on luxury goods. (McGee 2018), (Best 2019).

The middle and upper-middle-class baby boomers typically have fixed incomes around $70,000-$80,000 and with
downsized homes and no dependents, they can spend strongly. The high level of service and traditional feel of the
main brick and mortar Nordstrom stores appeal to their desire for a classic shopping experience.

Summary
Nordstrom is a luxury retail store that generates over $15 billion in revenue annually. Three distinctive marketing
challenges that affect Nordstrom are diminished premium pricing, the emergence of online shopping, and price
transparency. Diminishing premium pricing refers to the fact that Nordstrom is being associated more with
discounted prices due to the continuous openings of Nordstrom Rack outlet stores. The emergence of online
shopping highlights how brick and mortar stores are being replaced by online shopping. Price transparency covers
the fact that consumers are constantly aware of competitors' prices and companies need to price their items
accordingly in order to draw consumers. Nordstrom’s strength lies in its customer service while they suffer in their
international influence. The acquisition of smaller retailers is a viable opportunity while fast fashion, rapidly-
changing trends, and its many large competitors remain threats. The primary target market for Nordstrom is
Millennial women 24-36, the secondary market is men 24-36, and the tertiary market is baby boomer 54-74. These
markets contribute to a large portion of Nordstrom’s revenue.

Figure 1: SWOTT Analysis

Factor Type of Factor

Location Favorable Unfavorable

Strengths
·Operates in a multitude of departments including
clothing, footwear, houseware, beauty, and more
Internal ·Offers exclusive services such as cafes, personal
shoppers, alterations, in-store pick-ups, and spas
· Named Fortune 100 Best Companies to Work For
20 consecutive years
· Nordstrom has built an expertise in entering new
markets and generating revenue.
· Customer Service
Weaknesses
·Nordstrom carries a more expensive product line than some
competing retailers
·Global presence is lacking
·Over time, Nordstrom Rack will outnumber their full-price stores
and therefore prevent customers from wanting to buy full price
·Nordstrom’s profitability ratio and net contribution percentage are
below the industry’s average
·Unique selling proposition is not clearly defined which can lead to
attacks from competitors

Opportunities
·Nordstrom and Nordstrom Rack are able to reach a
large demographic due to discounting and annual
External sales
·Increased customer traffic due to a new online
sales channel
·New customers and increased market share will
come from an economic uptick after years of
recession and slow growth rate in the industry
·Acquisition of smaller retail chains
Threats
·Fast fashion is offering product dupes for notably cheaper prices
·Increasing minimum wage in America and increasing prices in
China can lead to pressure on the profitability of Nordstrom
·If a recession hits, people will cut out luxury expenditures such as
shopping at Nordstrom
·Nordstrom has not regularly supplied innovative products leading to
high and low swings in sales over time
·The demand for highly profitable products is seasonal in nature and
any unlikely event peak season may impact profitability short term

Trends · Sustainable fashion

· Fast fashion ·
· Online shopping

Figure 2: Target Markets

Primary Market Secondary Market Tertiary Market

Target Millennial women (24-36)
Description who are single, without
children, and who value good
service heavily and e-
commerce
Millennial men (24-36) who
are single, without children,
and who value e-commerce
and brand-name items.
Baby Boomer men and women
(54-74) who are married or
widowed, with adult children
that have moved out, and high
disposable incomes they spend
on luxury goods.

Annual $30,000-$40,000 $50,000-$60,000 $70,000-$80,000

Income

Education Bachelor’s degree earned or Bachelor’s degree earned or Bachelor’s degree or higher
Level in-progress (college students) in-progress (college students)

Reference Page
 About Us. (2019). Retrieved from https://shop.nordstrom.com/content/about-us?cm_sp=corp-_-
corp_AboutUs-_-globalfooternav_aboutus&origin=footer
Bailey, S. (2015, February 19). Nordstrom's target customers. Retrieved from
https://finance.yahoo.com/news/nordstrom-target-customers-140545216.html
Bartle, T. (2019, March 11). Business Objectives of High End Clothing Stores. Retrieved from
https://smallbusiness.chron.com/business-objectives-high-end-clothing-stores-22414.html
Best, W. (2019, June 17). Baby Boomers Still Outspend Millennials. Retrieved from
https://usa.visa.com/partner-with-us/visa-consulting-analytics/baby-boomers-still-outspend-
millennials.html
Bethany Biron. (2019, July 9). Struggling Nordstrom is banking on exclusivity to compete with Amazon and
overcome sales woes. Retrieved from https://www.businessinsider.com/nordstrom-banks-on-exclusivity-to-
compete-with-amazon-boost-sales-2019-7
Fashion Marketing (2016, Feb. 28). Key Challenges Facing Nordstrom. Retreived from
https://fashionmktsp16.wordpress.com/2016/02/28/key-challenges-facing-nordstrom/
James Alexander. (2016). 5 Challenges Facing Retailers Today. Retrieved from
https://sites.psu.edu/jamesalexander/blog-post-1/
McGee, T. (2018, August 13). Retailers Are Adjusting To The Surge In Baby Boomers. Retrieved from
https://www.forbes.com/sites/tommcgee/2018/08/13/retailers-adjust-to-surge-in-boomers/#7a546fcd5ab9
Nordstrom, Inc. (2019). Company details. Retrieved from Mergent Online database.
Nordstrom, Inc. (2019). Competitors. Retrieved from Mergent Online database.