Retailing 8th Edition by Patrick Dunne,Robert Lusch, James Carver

Exercise 10

Nordstrom Market Selection
Background
Founded in 1901 as a retail shoe business in Seattle, Nordstrom later incorporated in the state of Washington in 1946. Today, Nordstrom is one of the nation's leading fashion specialty retailers, with stores located in 30 states as of March 16, 2012. The west and east coasts of the United States are the areas in which Nordstrom has the largest presence.
As of March 16, 2012, Nordstrom included 116 'Nordstrom' branded full-line stores, an online store at www.nordstrom.com, and 105 off-price 'Nordstrom Rack' stores. Other retail channels include their online private sale subsidiary 'HauteLook' acquired in February 2011, two 'Jeffrey' boutiques, one philanthropic 'treasure…bond ' store and one clearance store that operates under the name 'Last Chance.' HauteLook is a LosAngeles based e-tailer that offers flash sales on designer fashion merchandise may be a key to Nordstrom's future growth. HauteLook (www.hautelook.com) offers merchandise at 50-75% off regular price.
Growth Through Market Expansion
In the U.S. market it has been difficult for retailers to grow since household income adjusted for inflation is often flat if not negative. And even though Nordstrom appears to upper middle class households they have also been hit hard by the economy. Thus Nordstrom has grown via expansion into other states outside its home in Seattle, Washington. This actually is somewhat of a continuation of its store growth strategy going back twenty-five years but store growth and market expansion is more important than ever.
Between 2008 and 2011 continued its geographic expansion as shown in exhibits 1 and 2. Nordstrom generally opened between a dozen and 20 stores annually with the major focus on opening of Nordstrom Rack Stores. Over the last five years Nordstrom Rack stores have almost doubled. At the same time the firm experienced inconsistent financial and operating performance as shown in exhibit 3. In fact 2011 operating profits were lower than in 2007; a rather sobering experience for the senior management team. Some analysts are surprised why with this inconsistent operating performance the firm continues to increase its dividend to shareholders.
Exhibit 1
Nordstrom Store Growth (2008-2011)

Exhibit 2
Nordstrom Store Openings (2008-2011)

Exhibit 3
Nordstrom Financial and Operating Performance (fiscal year ended January 2007-2011)

Questions
1. Why do you believe Nordstrom is opening more Nordstrom Rack Stores than its traditional Nordstrom stores
2. Analyze Nordstrom's financial and operating performance and store growth and draw conclusions on the effectiveness of the market expansion strategy.
3. Register for the HauteLook website and evaluate if you think Nordstrom should put more of its emphasis on growth sales via e-tailing and less on its brick and mortar stores. Do the same for Nordstroms online store (www.nordstrom.com).
4. Should Nordstrom expand to markets outside the United States If so, what markets do you think would be most attractive
Source
SEC 10-K and Annual Report to Shareholders for Nordstrom, fiscal years 2007-2011. Three decades of authors experience as a Nordstrom shopper and observer of its retail competitive strategy.
Note: This case was prepared as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative or strategic decision.