Nordstrom Innovates Retail– A New Store Without Inventory
In reading the article “Nordstrom Innovates Retail”, Nordstrom recently opened the first prototype of a new store concept “Nordstrom Local” in Los Angeles, California. The “Nordstrom Local” store is incredibly unique, as it carries no merchandise inventory for consumers to purchase. Instead, the new store offers a variety of services to customers, including curbside pickup for those who have bought online.
“Nordstrom Local” provides a link between buying online and in-person attention from Nordstrom stylists. Because the store has no dedicated inventory, customers can shop at the company’s website and pick up the purchases on the same day when placed before 2 pm. Talk about convenience and easy pick-up for Nordstrom customers! In addition, these personal stylists find the merchandise for customers across the Nordstrom chain and have it shipped for customers to try on in the new stores.
Nordstrom’s senior vice president of customer experience, Shea Jensen, stated in regards to the opening of this prototype, “We know there are more and more demands on a customer’s time and we want to offer our best services in a convenient location to meet their shopping needs”. It seems to me that Nordstrom is trying to better target to their retail customer’s order winners that are “great service, speed, and convenience”. The target customer base for these stores are frequent Nordstrom’s customers looking for an “intimate setting offering a full array of services that are available”. “Nordstrom Local” is a practical solution to consumer’s time restraints, as the store is close to the Nordstrom customers and allows for quick pick up of items over the internet.
In regards to inventory flow, fashion merchandise will mainly come from a Nordstrom mother store (a Nordstrom located relatively close to the “Nordstrom Local” location). Because these two locations are somewhat close, shipping and transportation costs would be reduced. Instead of these items being shipped from Nordstrom store locations all over the country, merchandise is transported quickly from the mother store to “Nordstrom Local” and costs are reduced for the company.
Nordstrom is also trying to better the company’s inventory management (the planning and controlling of inventories to meet the competitive priorities of the business) and overall customer experience. As previously stated, customer’s retail expectations are evolving and Nordstrom is emphasizing speed as a competitive priority. With this change in competitive priorities for the company, Nordstrom has aimed to change how they plan and control their merchandise. Having no inventory at these stores streamlines the process, as there will be fewer waits and returns for customers. With fewer waits and returns, Nordstrom customers will have a better experience, as these pains are reduced. When the customer experience is improved, Nordstrom is provided with better and higher quality information in regards to customer preferences. This information allows the company to have a better inventory supply of merchandise for customers, aiding in more effective inventory planning. In conclusion, the “Nordstrom Local” store is now able to have improved processes and smarter inventory, allowing the company to be even more prosperous.
Do you think Nordstrom’s new venture with “Nordstrom Local” stores having no inventory on hand will be successful? How does this expansion relate to other class topics we have discussed?
http://fortune.com/2017/09/15/nordstrom-local-retail/
This article was very interesting to me, I think the next thing to watch is to see how other department stores react to this move by Nordstrom. From our discussions in class, we have learned many different ways to actively manage supply chain industry. However, it seems that because of the way consumers’ needs are changing, it makes the most sense for brick-and-mortar stores to have little to no inventory. Many department stores and other retail stores have made headlines for closing many of their stores, this is due to increase traffic in online shopping. Despite this trend, many customers want in-store experiences when shopping for close. Nordstrom Local is a move that creates compromise from these two wants. Nordstrom Local will allow Nordstrom to continue to function at a high level and close many of its excessive “mother stores”. These satellite stores will help the inventory management and allow for a more “just in time” philosophy than was previously incorporated. I would expect holding costs to drop dramatically as well as employee and other related expenses. This idea could prove to be the best way for brick and mortar stores to combat e-commerce. If Nordstrom Local is successful, I expect to see other large retailers follow with similar strategies. With how quickly markets are changing in this era, it is important for companies to react with strategies that continue to help them manage their inventory effectively.
What sticks out to me in reading about this strategy is that Nordstrom seems to be emphasizing the continuation of all of its main services, but the new prototype does not have an option for trying on clothes. I am sure there are many customers who are hesitant to buy a piece of clothing without knowing that it will fit or that it will look good on them so the absence of this opportunity may distance some. However, it seems Nordstrom must be assuming that the convenience of good customer service outweighs this, as customers could inquire about clothing before they purchased and receive a dependable answer. They may also see the advantage of picking up the clothes and trying them on at home, and if need be, returning them through the store, as more cost-effective than stocking an entire store. This way, holding no inventory can vastly outweigh the cost of dealing with returns for unsatisfied customers.
I agree with Nick’s point. That being said, I’m sure Nordstrom will realize very quickly that having some sort of changing rooms at these locations is essential, so that customers will be able to return items that they have ordered if they don’t fit or don’t like them. Still, I think Nordstrom will need to make some additions to their Local stores for them to really take off, as opposed to simply being places where online customers can go to pick up clothing items. Online shoppers have gotten so used to quick and easy shipping anyways, mainly due to Amazon, so I feel this medium will have little influence over customers. Sure, if someone needs a dress or a suit at short notice, and the main store doesn’t have his or her proper fit, then they could go to the Local store, but I don’t think Nordstrom can rely on having enough of these instances to keep this new idea profitable. However, I think by branding these locations as a place for potential shoppers to get a coffee, see upcoming sales or simply as just a place to relax and do work (providing a similar atmosphere as Starbucks), they could see a high inflow of people coming to these stores.
This article was surprising to me, because I actually had no idea that Nordstrom, a prominent high-fashion chain, was going for this model. Initially, it had me thinking a lot about the math problems that we practiced in class regarding S&OP forecasting. I think it definitely poses a drastically different structure from the traditional store inventory that stocks merchandise and clothing. Logistically, Nordstrom will have to make sure that the orders received online to be picked up in store have to be transported and available efficiently. I could potentially see issues with this aspect, in which the online order isn’t processed correctly or prepared fast enough for an online order placed before 2 pm. With this new model, I predict Nordstrom would have designated storage centers nearby the stores that have in stock the merchandise. Therefore, much like the skateboard manufacturing problem online, Nordstrom would have to maintain a close eye and rigorous inventory keeping on the merchandise. Otherwise, there could be lots of backlog equalling unsatisfied customers. This model could be beneficial in eliminating large brick and mortar stores and saving on space, but would focus more on transportation and logistics. Additionally, this strategic move could elevate and distinguish Nordstrom as even more luxe and high class in the way it moves merchandise.
This seems to me an impressive way to expand a store to a new location while not having to worry about the storage costs of keeping on hand inventory. It seems their Inventory position will simply be that of sales, leading to a uniquely just in time system for retail stores. Shelf space is often a huge issue for retail stores. What to store, where to store it, how much to have. It’s an extremely costly system and Nordstrom seems to be eliminating a large part of this cost. It’s very difficult for a retail store to have a just in time system due to the nature of their business. This system allows them to open a new store in a different area while only keeping the storage at a centralized and nearby location. Plus customers get the added benefit of feeling more important. If they are able to show up at a store and they have exactly what they want waiting for them, there is a certain amount of satisfaction a customer will get from that. With no on-hand inventory to manage customer service become a new focus. It certainly seems like a good way for expansion while still adjusting to the growing demand for online shopping. Plus customers pick it up themselves and Nordstrom won’t have to deliver directly to individual houses, further saving on transportation costs.
The Nordstrom local is quite similar to companies, like Amazon, who have decided to create no inventory stores available for pickup. I believe that Nordstrom made a smart decision by doing this because they understand customer trend and preference. As I learned last year in my marketing class after doing a project on online shopping versus in-store shopping, I have realized that people enjoy having things delivered to them quickly and with minimal effort. We interviewed 80 college-aged students asking whether they shop in-store more often or online. Of course, they admitted to preferring online shopping because of its ease. Companies like Warby Parker have demonstrated customer trend that prefers items be delivered directly to them. Nordstrom Local would also benefit the mother store as it helps get items off the shelves and improves inventory turnover. I find this to be a very smart strategy that will be financially and economically positive.
I think this is an absolutely genius idea by Nordstrom. They have realized that consumer behavior is changing with the increase of technology, specifically online buying. They are clearly focusing their efforts on the e-commerce aspect of the business while also maintaining a position in the brick and mortar setting. It may seem as if opening these local stores would be more effort but like you said it will cut down on shipping cost and with the increase of online shopping will actually benefit them in the long run. I for one am ecstatic about this initiative. Both in Richmond and back home in North Carolina the closest Nordstroms is at least a 30-45 min drive. I do 95% of my shopping online so having a store closer to me where I can simply run and pick up my order or return an item is much more convenient and cost effective.
While researching this new initiative I also found out that these local stores will be more experienced based. The new local stores offer personal stylists, manicure appointments, tailoring services, and an array of beverages. I find this fascinating as Nordstroms doesn’t want a simple pickup and go interaction they want to offer the consumer an experience. It is honestly a perfect idea. When people order clothes they want to try it on and return it as soon as they can so that they can get the correct sizing or style. Now instead of having to drive home to do this they can do it at the local store while enjoying a fresh smoothie or warm cup of coffee.
http://www.businessinsider.com/nordstrom-new-store-concept-opens-2017-10
I agree with Isabella that this is a genius idea that Nordstrom has come up with. I also think this is a great example of darwinism, similar to what I discussed in my blog post response about Toys R Us’s bankruptcy. The market for retail is changing, and consumer behavior is changing. For brick and mortar retail stores, I believe that you can either adapt and innovate or die off (become bankrupt). Unlike Toys R Us, Nordstrom has been able to analyze market trends and come up with new ideas that will satisfy costumers and keep their business running. It is important for these firms to never get comfortable; they should always try and follow the market and adapt. If they can grow while doing this, then that is even better.
I’m a little confused by Nordstrom’s new store, it seems like they could remove the entire building part and just have Nordstrom “stylists” sent to homes or offices to do this kind of work. It reminds me of a campaign the company I’m working for after graduation did with TaskRabbit – they gave social media influencers “Instagram Husbands” to help with OOTD photos, running errands etc.
https://www.curalate.com/blog/bianca-caampued-small-girls-pr/
Nordstrom Local is an incredibly smart idea to bridge the gap between high quality service and inventory. Amazon cannot offer what Nordstrom can in terms of knowledge about their products, so this move is very smart by Nordstrom to keep their customers happy and loyal to them long term. Also, this move will help lower holding costs for Nordstrom given the store will just be used for pickups and returns.