Leader of the Pack
A Special Report Sponsored by
"The idea of a big cash register or a big cash wrap anchoring different parts of the store – those days are gone. For the future, we will not have cash registers in our stores…” By investing in in-store technologies such as mobile POS and hand-held devices to improve service and selling, “we have the opportunity to transform the shopping experience.”
Those are the words of Jamie Nordstrom, president of Nordstrom Direct, discussing the role of mobile, digital and e-commerce technologies at the Shop.org Annual Summit in September. Nordstrom insists commitment to customer service, the cornerstone of the venerable 111-year old department store’s business, remains resolute, yet he’s quick to acknowledge today’s evolving definition of customer service — and the role mobile plays in supporting it.
“Our No. 1 goal is always to improve customer service … we believe that the experience is often just as important as the product. We all need to do a better job of creating experiences that customers value. The point is to make customers happy. That hasn’t changed.
“What has changed is what makes them happy. We’re trying to do our best to figure out what that is,” he admits.
That’s where mobile comes in.
Mobile POS is just part of the company’s ongoing investments in mobile, digital and e-commerce technologies. Nordstrom was an early adopter of in-store Wi-Fi, which opened the door to a connected shopping experience for both the retailer and its customers, and laid the groundwork for the 6,000 mobile POS devices Nordstrom deployed in June 2011.
The retailer has experimented with other types of mobile devices for more collaborative customer experiences. Sales associates have iPhones that let them quickly contact customers when new merchandise arrives. Meanwhile, iPads help engage shoppers in a more personalized manner: In the men’s department this spring, a Joseph Abboud iPad app allowed customers to custom-tailor a suit and have it delivered in two weeks. Using the iPad, sales associates could showcase the breadth of fabrics, styles and details available.
Last year, Nordstrom began experimenting with mobile POS in its Rack stores and found that it sped up the checkout process. In August the company announced that it would roll out approximately 1,500 of the devices to its Rack units by the end of the third quarter.
Around the same time, Nordstrom launched a new iPad app, featuring “The Dressing Room,” which gives customers the option to create and save multiple looks. Items placed in The Dressing Room can be added to the customer’s shopping bag, as well as shared with friends via social sharing options like Facebook or Twitter.
Nordstrom gets it,” says Jon Stine, director, Internet business solutions group for Cisco Systems. “What someone ... clearly realized is that in this age of rapid changes in shopper behavior and expectations, the leaders will obtain proprietary process knowledge and increased intimacy with shoppers … driving a growing competitive advantage between them and so called fast-followers. It’s not about the technology — it’s about how the brand meets the changing expectations of shoppers in this Internet-normative age, and how associates and shoppers interact with the technology.”
Nordstrom’s tack is working: At the end of the second quarter, net sales had increased 7.4 percent to $2.92 billion from the same period in fiscal 2011; same-store sales increased 4.5 percent. The direct channel, powered by e-commerce, mobile and digital selling, continued to outpace the rest of the business with an increase of 40 percent. Rack stores demonstrated continued sales growth too, with an 18.9 percent increase in net sales and a 7.7 percent boost in same store sales.
For Jeff Roster, research vice president at Gartner, the significance of the Nordstrom mobile POS play is that “they seemed to intuitively know that their customers would value the technology and not see it as an intrusion or mar the brand. They saw the opportunity, they took the risk and I believe they hit it out of the park.”
Paula Rosenblum, managing partner at RSR Research, agrees that Nordstrom’s decision to embrace mobile was forward-thinking, especially given the fact that the company was performing well prior to launching various initiatives. “Management was able to see mobile as an extension of the company’s customer and employee experience rather than a disruptor,” she says. “That’s often quite difficult in retail — to ‘mess with’ a winning formula.”
Colin Johnson, a spokesman for Nordstrom, reports that stitching together mobile, digital and social technology is an ongoing process for the retailer. “It’s nice to be thought of as a leader, but we don’t think we have it all figured out. We’re experimenting all the time — the goal is to learn, to evolve and to keep looking for new ways to use technology as an enabler of service.”
Johnson notes that by the end of this year, the mobile POS devices will be at parity with the cash registers that once dotted the store landscape. “The functionality now allows for mobile checkout, inventory search, interaction with customer information, provides back-of-the-house capabilities and yields key metrics,” he says. “Next year the functionality of the handheld devices will surpass that of the traditional cash registers, enabling new features that we hope customers will appreciate.”
Johnson emphasizes that while the company is moving full steam ahead on mobile, it does so in the context of the customer experience. “We do things based on what the customer values,” he says. “The goal is to meet the customer on their terms and respond based on what’s relevant to them.”
An essential focus
Mobile is just part of Nordstrom’s commitment to innovation, says Lori Schafer, executive advisor for SAS Institute’s Retail Practice. “Nordstrom has figured out how to use its investments in mobile, social and e-commerce companies such as HauteLook and Bonobos to learn how it needs to adapt to the new digital world and to begin bringing aspirational, younger buyers into the Nordstrom brand.”
Schafer cites numerous examples of how Nordstrom has used mobile to enhance its overall growth and strategic principles: The Innovation Lab focuses on Nordstrom’s continuous need to improve and learn how to use digital to more effectively compete; the Bonobos investment also gives Nordstrom insight into more effective digital retailing; and the acquisition of Hautelook brought Nordstrom digital talent.
Nordstrom plans to pump an additional $1 billion — one-third of capital expenditures — into mobile, e-commerce and digital technologies over the next five years. Jamie Nordstrom insists it’s an important use of shareholder capital, asserting that as the world becomes more geared toward a personalized experience, focusing on technological innovation is essential.
“Retailers need to be best in class in-store and online,” Nordstrom told Shop.org attendees. “It’s not a case of one or the other. It has to be a good experience no matter what. Those days when we had a lot of control – that has completely changed. The customer is completely in control. The customer is in the driver’s seat.”