Case 5.3 Nordstrom Inc.
This case was prepared by Richard T. Pascale as a basis for classroom discussion.
Used with the permission of the author.
In the fall of 1990, Nordstrom opened its first store in the New York area at
the Garden State Plaza in Paramus, New Jersey. Industry experts voiced
scepticism. How could a parochial West Coast chain make inroads in the
East Coast market where entrenched competitors like Macy’s and
Bloomingdale’s held a solid franchise? How could Nordstrom launch an
expansion programme during the trough of a national recession when all
retailing was depressed and the Northeast particularly hard hit? How
could Nordstrom’s distinctive trademark of unfailingly polite salespeople
be transplanted to a region where manners of both customers and sales
personnel tended to be more perfunctory and at times abrasive?
Nordstrom had overcome similar obstacles in the past. Starting from a
base of 27 shoe stores in Oregon and Washington in 1963, they had
expanded into a full line of apparel, cosmetics and jewellery. (See Figure
5.3.1 for a brief history of the firm.) Soon Nordstrom department stores
dominated the Northwest market. Against a tide of disbelief, they invaded
California in 1978 and grabbed a 30 per cent market share in a 10-year
period. In 1988, Nordstrom chose the Washington DC suburb of Tysons
Corner for its first East Coast foray. Its stunning success helped knock
Garfinkels, a dominant local retailer, into bankruptcy. By the close of 1991,
Nordstrom had become a leading player in the capital area with three
department stores ringing Washington DC. A fourth and fifth are sched-
uled for Baltimore and Annapolis by 1995.
The Nordstrom blitzkrieg had all the appearances of repeating itself in
the Northeast. One year after opening the Paramus store, sales reached
$100 million–120 million over its projections. By way of contrast, one mall
competitor, Bloomingdale’s, sold $55 million through a store that was 20
per cent largerthan the Nordstrom outlet. Its main competitor, Macy’s, suf-
fered flat sales notwithstanding a major remodelling and aggressive price
promotions. Macy’s seven-year track record at the mall had been expected
to give it a strong advantage, yet defecting customers flocked to
Nordstrom’s doors.
In the fall of 1991, Nordstrom opened its second store in the Menlo Park
Mall, Edison, New Jersey. By all early indications, it too was a smashing
success. Nordstrom’s long-term plans, extending through 1995, committed
to a total of seven stores in the Northeast, including possible outlets in
Freehold, Short Hills or Livingston, New Jersey, and White Plains.
Nordstrom’s expansion plans also included stores in Chicago,
Minneapolis, Denver, Indianapolis and Boston.
How could Nordstrom, a late entrant in retailing, go head-to-head with
The recruitment and internal market domains 375