The famous Nordstrom Inc. started in 1901 from humble beginnings of John W. Nordstrom who invested his stakes previously acquired from the Alaska gold rush into a small shoe store in Seattle, Washington, and the rest is history. In present time, Nordstrom is one of the nation’s leading fashion retailers; build by a family of employees with a strong focus on quality, value, selection, and service. In 2003, the family-owned retailer had expanded to 180 outlets, 27 chains, which tailed close to $6. 5 billion in sales.
To add to that, Nordstrom stretched its nfluence to Europe as well, accounting for about 90 flagship department stores, 50 Nordstrom Rack and 35 fashionable boutiques. In 1905, a few years after after opening the first shoe store, the company experienced increased sales to $80,000. The business opened its second store with intention to expand. John Nordstrom however, decided to retire at the age of 57 years from the shoe business. The business was handed to his sons from 1928 onwards, same year John Nordstrom has retired.
Despite the Great Depression, the two shoe stores had $250,000 in sales under the leadership of the sons. During the 1950s and 60s, the company had gained ground in terms of expansions and diversification. During the 50s’ Nordstrom opened two new shoe stores in Portland and one more in Seattle. Close to two milestones later, Nordstrom remodeled their flagship store in Seattle and stocked it with 100,000 shoes, the biggest inventory in the United States. By the early 1960s, Nordstrom operated eight shoe stores and 13 leased shoe departments, in Oregon, California, and the origin Washington.
During this time, the company experienced grossed $12 million in sales and ccounted responsible for 600 employees. Along with expansion, diversification was also significant in the early 60s. Nordstrom purchased Best Apparel and shortly after acquired Nicholas Ungar and merged it with Nordstrom shoe store in Portland which was renamed Nordstrom Best. This trend began to gain shape, and by the mid 60s the organization opened five stores that combined shoes and apparel.
Shortly after, the company experience $40 million is sales. Diversification continued strongly throughout the late 60s venturing into men’s and children’s clothing. Towards the end of the 60s, the third eneration had the responsibility to carry on the legacy and shortly after in 1971 the company went public. A couple of year after in 1972 when sales topped $100 million. That same year, the company changed its name to Nordstrom, Inc. and also launched the first Nordstrom Rack.
The firm continued to grow steadily in the 70s hitting sales of $130 million in 1974 and in 1975, The company bought three stores in Alaska and opened a new division offering selected men’s and women’s apparel and shoes in smaller stores and by 1977 sales hit $246 million generated from 24 operating stores. The late 70s marked the beginning of a rapid growth after success was experience in the Southern California market receiving $13. 5 million in earning of nearly $300 million, after which an aggressive expansion program was implemented.
Trailing behind only Saks Fifth Avenue and Lord & Taylor, Nordstrom was the third largest specialty retailer by 1980. Their existing operations at that time accounted for 31 stores yet a new expansion plan required 25 new stores to be added in the 80s. Top executive projected the sales to double due to this expansion plan, but by 1983 sales umped more than doubled, reaching $787 Million. The chain’s largest growth was in the California Market area, staring with 7 stores in 1984 to 22 full-sized stores around California within five years.
The firm became increasingly recognized as a full- service department store with an aggressive customer service regime, which generated the highest sales per square foot of retail space ratios within the industry. In the mid 80s a typical store would contain a stock of 75,000 pairs of shoes, 5000 men’s dress shirts, and 7000 ties. The firm’s management encouraged he evolution of an aggressive sales force where by sales employee work on a commission basis and majority of company promotions are from the sales force, an effective incentive to drive employee motivation.
So much emphasis was put on customer service to the point that their service was known to be legendary. This customer service fed Nordstrom’s rapid growth in the 80s for the first time, reaching $1 billion in sales in 1985 and 1. 92 billion in 1987. In the mid 1980s, Nordstrom began expansion towards the east coast. Before setting their attention to the east, Nordstrom were already operating 53 stores in six estern states. The company’s first store in the east coast was in McLean, Virginia. This new opening drew in $1 million in sales on the first day, and more than $100 million in sales that same year.
The expansion did not slow down in the West, that same year, they opened its biggest store downtown San Francisco. By 1988, all its stores combined railed in $2. 3 billion worth of goods, earing a profit of $123 million for the corporation. Expansion in the east continued, and in 1989 they opened their second store in the east, located in the Washington D. C. , area. Nordstrom continued its efforts for an aggressive sales force and legendary customer service, but this strategy caused Nordstrom much frustration as unionized employees claimed that they were not being paid for extra services that was being performed.
In 1990, a three-month investigation took place and the company was found guilty and had to reimburse some of their employees and in 1993 Nordstrom finally settled out of court, agreeing to pay back employees who worked from 87-90. The settlement cost the firm somewhere between $20 million to $30 million. Other unforeseen events during the late 80s and arly 90s such as natural disaster and the downturn in retailing really hurt the company and in 1990 Nordstrom announced that it would cut cost by 3-12%, laying off some employees. The company’s earnings dropped 34% in the fourth quarter of 1989.
Earnings dropped 7 percent the entire year from 1989-90, but sales increased that year, 15%. Despite the recession in the 90s, Nordstrom continued to expand but at a rate that was much slower than previous decades. It was in the 90s that Nordstrom ventured into the metropolitan New York area opening a store in Paramus, New Jersey. Sales bounced back a fraction raising 8% and profit rose slightly at 0. 7%. 59% of total sales were generated from women’s apparel and accessories, while men’s apparel accounted for 16% of total sales.
Earning was slipping away, from 5. 3% in 1988 to 3. 91% in 1993. They cut cost, in selling, general, and administrative cost, which accounted for 26. 4% in sales in order to spar the drop in earnings. In 1995, the four co-chairmen, which included the third generation of Nordstrom, John, James, Bruce Nordstrom and John McMillan retired and were replaced by former co-presidents, Ray Johnson nd John Whitacre. John and Ray however retired the following year and were replaced by six of the fourth generation of Nordstrom.
Despite launching its online store in 1998, and the beginning of Nordstrom’s stocks trading on the New York Exchange began in 1999, Nordstrom continued to struggle during this period. In 2000 Bruce Nordstrom came out of retirement and took over the chairman position while his son Blake, assumed the day-to-day reins. After the return of the family, net income for 2000 totaled just $101. 9 million in earnings out of $5. 53 billion in sales. The new management team faced difficult times facing the downturn of the economy.
In 2001, the company laid off somewhere about 2,500 employees toward their cost reduction initiatives. They also held their first ever fall clearance sale to clear excessive inventory. In 2003, Nordstrom regained their presence in the market by focusing on cost containment, technology initiatives, and refocusing on its niche that were luxury goods at affordable prices. That same year, they experience their most profitable year in 10 years, streaming in $242. 8 mil profit on a $6. 49 billion in revenue.
