Businessmodel of Nordstrom

Customer Segments

Nordstrom is a directly customer-facing business. It provides a range of retail channels targeted at general consumers across several demographics.

Nordstrom’s core full-line stores provide high-end branded clothing to consumers, typically attracting a more affluent customer demographic. The Company also operates a chain of Nordstrom Rack stores, which offer clothing and accessories from major brands at a significant discount, typically selling out-of-season products and overstocked merchandise. These stores attract more middle-class consumers.

Nordstrom also caters significantly to millennials, stocking popular brands such as Topshop and utilising various digital and e-commerce channels, which have experienced substantial growth in recent years.

Nordstrom operates exclusively in the US and Canada, with the Company’s home market of the US being is largest market by some distance. The Company, however, does have plans to expand its reach to new markets.

Value Propositions

Nordstrom provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as one of the leading clothing retailers in the US, with a track record of providing high-quality products to consumers;
• Its broad catalogue of branded clothing products, with the Company stocking clothing products from popular and well-regarded brands, such as Topshop, Chanel, Nike, Michael Kors, and Burberry;
• Its operation of discount stores, with the Company offering quality branded clothing products at discounted prices;
• Its accessibility, with the Company operating various online and mobile channels, through which it sells products and offers various customer account, tracking, and billing services; and
• Its domestic reach, with the Company operating a broad network of physical outlets across the US, including through its core Nordstrom and Nordstrom Rack brands, which number more 300 individual stores. ### Channels

Nordstrom operates a website at www.shop.nordstrom.com, through which it provides information on its products, locations, retail brands. The Company operates multiple online sales channels. This includes its core Nordstrom-branded online store, as well its online discount retailers at www.nordstromrack.com and www.hautelook.com. Nordstrom also operates an online personal stylist service and clothing club through its Trunk Club brand, which can be accessed at www.trunkclub.com. The Company provides several mobile apps that offer much of the same digital functionality.

Nordstrom’s core business is the operation of its network of physical outlets, through which its team of customer service and retail staff serve consumers directly. The Company operates 118 Nordstrom-branded full-line stores across the US, 197 off-price Nordstrom Rack stores, three full-line stores in Canada, five Trunk Club clubhouses, two Jeffrey boutiques and one clearance store that operates under the name Last Chance.

Nordstrom operates an affiliate marketing program, which enables customers to reach Nordstrom’s various online stores through third-party websites.

Customer Relationships

Nordstrom operates a number of digital and mobile channels through which customers are able to make purchases, track deliveries, manage customer accounts, and arrange returns and exchanges without interacting directly with members of the Nordstrom staff.

The Company offers a greater degree of personal care through its numerous physical outlets across the US and Canada, where customers can receive direct assistance from customer service and retail staff. Customers, however, are able to make purchases in-store on a largely self-service basis, browsing and purchasing clothing with limited interaction with Nordstrom representatives.

Nordstrom provides a range of customer support services. It includes online customers service resources, such as recall information, returns and exchange information, shipping information, and FAQs. It also operates a customer service team which provides a personalised service, and can be contacted over the phone, via email, or through an online live-chat platform.

Customers are also able to interact directly with Nordstrom through its various social media accounts, including with Facebook, Twitter, Pinterest, Instagram, and YouTube.

Key Activities

Nordstrom is a fashion retailer operating primarily in the US. The Company’s activities are divided into two business two segments: Retail and Credit. The Retail, which includes the operation of Nordstrom branded full-line stores, off-price Nordstrom Rack stores, Trunk Club showrooms, Jeffrey-branded boutiques, and one Last Chance clearance store, as well as the operation of digital sales channels www.nordstrom.com, www.nordstromrack.com, www.hautelook.com, and www.trunkclub.com; and Credit, which includes the operations of its federal savings bank, Nordstrom FSB, through which it provides a private label credit card, two Nordstrom VISA credit cards and a debit card.

Key Partners

Nordstrom collaborates with a range of companies and organisations across its two operating segments. These partners include:

• Branded Clothing Partners, comprising a range of clothing designers and manufacturers that provide branded clothing products for sale in Nordstrom stores;
• Supplier and Vendor Partners, comprising suppliers of tools, resources, technology, and services, as well as companies to which certain functions are outsourced;
• Affiliate and Marketing Partners, comprising websites and online retailers that help to extend the Company’s marketing reach, in return for commissions; and
• Strategic and Alliance Partners, comprising a range of companies and organisations, with which the Company shares resources and collaborates on joint projects. Nordstrom partners with a number of clothing brands, including J Crew, which sells an edited range of merchandise through the Company’s physical and online stores. The Company also has a branding partnership with Etsy, with which is collaborates on selling a unique collection of handmade and vintage goods from emerging artists and designers.

Key Resources

Nordstrom’s key resources are its brands and intellectual properties, its catalogue of branded clothing, its network of physical outlets, its IT infrastructure and digital channels, its partnerships, and its personnel.

Nordstrom operates more than 300 physical sales outlets across the US and Canada through its various brands. The Company has 147 trademarks, each of which is the subject of one or more trademark registrations and/or trademark applications. These trademarks include Nordstrom, Nordstrom Rack, HauteLook, Trunk Club, Halogen, Zella, 14th & Union, Tucker+Tate and Caslon.

Cost Structure

Nordstrom incurs costs in relation to the management of its supply agreements, the operation of its physical sales networks, the operation and maintenance of its IT infrastructure and digital channels, the implementation of advertising and marketing campaigns, the management of its partnerships, and the retention of its personnel.

Nordstrom accrued cost of sales and related buying and occupancy costs totaling $9.17 billion in 2015, and selling, general, and administrative expenses totaling $4.18 billion. Nordstrom implements advertising and marketing programs through the internet, magazines, store events and other media. In 2015 the Company’s total advertising expenses amounted to $227 million.

Revenue Streams

Nordstrom generates revenue through the sale of clothing and accessories to customers across the US and Canada, including shipping revenue when applicable. The Company also derives revenue from its credit services, principally through the collection of various fees and charges.

In 2015 Nordstrom generated $14.44 billion in annual revenue, up on the $13.51 billion recorded by the Company in 2014. The vast majority of the Company’s revenue is attributed to the sales made through its digital and physical sales channels. This sales revenue amounted to $14.10 billion in 2015, with credit revenue totaling just $342 million.