Posts Tagged 'Nordstrom'



Thoughts on Macy’s self-service shoe and cosmetics departments

RetailWire panelists just took on the subject of a new test at Macy’s, in which its shoe and cosmetics departments are being converted to “assisted self-service” instead of the traditional associate-driven model. In the case of shoes, Macy’s is getting more of its inventory out of the stockroom and bulked out on the floor, with apparent early success. I’m raising a caution flag, however:

It’s hard to tell whether the reconfigured shoe department is meant to be a sales driver or an expense saver. JCP recently reconfigured a store that I visited to mass out its shoe inventory — DSW-style — instead of depending on salepeople to find the right size in the back. (And these associates are often paid a commission, just like cosmetics salespeople.) But it gets to the heart of what Macy’s wants to be. As Art put it, are they trying to be JCP or Kohl’s? Are they finding the hidden costs of “omnichannel” (BOPIS and so forth) to be unsustainable for a traditional department store?

And one more issue: By abandoning the Nordstrom model (where the salesperson is trained to bring out three pairs of shoes when the customer asks to look at one), Macy’s may in the long run walk away from the sales and margin potential of “upselling” that shoe and cosmetics departments should be known for. A declaration of victory may be premature.

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Should customers pay extra for service?

RetailWire recently posted an online discussion — about whether customers will pay an upcharge for customer service — that triggered plenty of comment. My perspective follows, and it is based on the idea that there is more than one way to define “service”:

To answer the question, you have to define “customer service” differently for different kinds of retailers. Customer service at Nordstrom means “high touch” and the SG&A cost of providing it is covered by high merchandise gross margins (or it should be). Conversely, expectations of “customer service” at Target are totally different — shoppers expect store shelves to be well-stocked and checkout lines to be efficient. Again, this lower-expense model is reflected in tighter merchandise margins.

My point? Customers are already paying for the “customer service” they seek in the stores they choose, based on the “cost of goods sold” that they are willing to pay. Any surcharge imposed by retailers to meet or exceed these expectations (hidden or otherwise) would be a bad idea.

Can Nordstrom find growth outside of its Rack expansion?

Nordstrom seemed immune from the problems plaguing the rest of the department store sector, but this is no longer the case. I posted some thoughts on RetailWire last month after the company’s earnings announcement:

If I were a JWN shareholder, I’d be happy that the company is growing the Rack business. It’s good to have a growth vehicle in light of the well-documented issues with both the traditional department store business and the near-luxury brands like Coach, Michael Kors and Ralph Lauren. And Nordstrom has always been very cautious about opening its full-line stores.

This being said, the company’s brand reputation is really built on the success of its full-line stores. I shopped my local Nordstrom on Saturday (newly opened in Milwaukee last fall) and I wonder whether a little more attention to the store’s value positioning — without hopping on Macy’s promotional carousel — might help its traffic levels and reduce its clearance levels more effectively.

And some further thoughts about how Nordstrom can grow its core business, based on its announcement about a partnership with J. Crew:

For Nordstrom, this continues a trend that already includes partnerships with Madewell and Topshop. A presence inside Nordstrom has helped these two labels create brand awareness (and benefit from the halo effect) as they build out a relatively small footprint of their own stores.

The association with J. Crew is different: This brand has been in the penalty box with its loyal fans for at least a couple of years, and it’s debatable whether its merchandise content problems have been fully addressed yet. (Plus, there is no scarcity of J. Crew locations across the country.) I see more upside for J. Crew than for Nordstrom (especially if JWN has to carve out space that could be devoted to higher-performing goods), but it puts some burden on JWN to make sure that its J. Crew shops put forward the “best of the brand.”

Location strategy: Not just for upscale retailers

“Location, location, location” is one of the oldest cliches in retailing but with more than a grain of truth to it. On a recent RetailWire discussion, panelists took on the topic in terms of site selection for upscale retailers. I comment (below) that it’s an issue for any concept and any price segment:

Yes, being in “the best malls” in a given metro area is important for retailers such as Nordstrom and Apple. As the discussion points out, these companies are especially smart about expanding at a deliberate pace in order to maintain their brand equity along with the halo effect of comparable brands in a high-traffic setting.

But location choices matter to all types of brick-and-mortar retailers, not just those located inside high-traffic malls and upscale town centers. Costco, for example, thrives in locations that might not be considered high-traffic (or high cost) because of its strength as a destination store. Being a magnet for a wide trading area in a low-cost location can be just as important for reinforcing a retailer’s branding message.

“Back to the future” for department stores?

An interesting RetailWire discussion earlier this month about department stores’ path to revival. Can they lean on nostalgia, and just what exactly does that mean? Here’s my point of view:

The answer to the question depends on your definition of “nostalgia.” If it’s defined by elevated levels of customer service and merchandise assortments, it continues to be a winning strategy for Nordstrom despite its current issues. Macy’s has strayed far from this formula in its effort to keep up with the promotional cadence of mass merchants like Kohl’s and JCPenney, and now its plan to open off-price stores risks its brand equity even further.

Playing the “nostalgia card” (better service and assortments) might just give the traditional department store more pricing power in the face of intense competition from value-oriented retailers and from e-commerce.

Higher wages = more customer satisfaction?

Walmart and several other retailers have made well-publicized moves to raise the starting pay of their associates. At RetailWire, the “Brain Trust” discussed the cost/benefit of these changes, not only in terms of measurable economic benefit but also in terms of morale and goodwill. To me, it’s not just about reducing turnover and training costs:

The costs of turnover are certainly measurable, as George Anderson’s article points out. Over time, Walmart and other stores will be able to gauge the higher costs of payroll vs. the lower costs of recruiting and training. Short-term, however, this is unlikely to deliver a payback.

But as an intangible benefit to service levels, employee morale and goodwill among shoppers, the higher pay scale will begin to pay dividends sooner rather than later. Consumers are well aware that higher-paying retailers like Costco, Nordstrom and The Container Store also have some of the highest customer satisfaction ratings in the business…and it’s no accident.

What makes a top retail CEO?

RetailWire panelists recently discussed a ranking of America’s top CEO’s, and in particular the members of the list who run retail companies. While several panelists commented on these executives’ vision and entrepreneurship, I found something else that many of them share:

One common thread is the number of CEO’s who are “homegrown.” They are either family members (Wegman, Butt, Nordstrom) or founders (Schultz) or longtime employees themselves (Jelinek, Cook, Iger). These are people who have been immersed in each company’s culture, have a sense of “ownership” and in some cases have their names on the door.

This isn’t to suggest that companies always should look inward for their senior management, and there are other names on the list who earned their stripes elsewhere. (Although Mickey Drexler’s reputation is under a cloud right now.) And “great” — as rated by one’s employees — may not always translate into great results from shareholders’ perspective. But it’s a telling argument for the importance of company culture in the overall success of a retail business.


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