centralized command centres, and maximizing purchasing clout. Also
appealing was the promise of lowered overhead by spreading corporate
staff functions over a large number of outlets.
With hindsight, none of these ‘economies’ seemed to have lived up to
their promise. The Federated empire, including Abraham & Straus,
Lazarus, Rich’s, and Bloomingdale’s, entered Chapter 11. The same fate
befell Allied stores, which owns Jordan Marsh, Bon Marche and Sterns.
Macy’s, which also owns Bullocks and I. Magnin, teetered near insolvency
under the debt load of its 1986 leverage buyout. Carter Hawley Hale,
which owns The Broadway, The Emporium and Weinstocks, also found
itself in a weakened financial condition. Smaller players, including Bonwit
Teller, Bergdorf Goodman, Altmans and Garfinkels, filed for bankruptcy
and largely disappeared. Brueners, Saks Fifth Avenue and Marshall Field,
sold at a premium as a takeover defence, had slipped in execution and
merchandising identity. Even those that remained independent, such as
Dillards and Dayton-Hudson, found themselves somewhat distracted in
digesting their acquisitions. (See Table 5.3.3.)
In the meantime, Nordstrom continued to flourish, defying conventional
wisdom at every turn. While others strove for scale economies through
centralized buying, Nordstrom continued to decentralize buying decisions
to the lowest level possible. While others acquired and diversified,
Nordstrom did not. Competitors invested hundreds of millions in com-
puterized information systems; Nordstrom remained relatively unauto-
mated and added new systems only when the people closest to the
customer believed it enhanced the customer’s shopping experience (see
Figure 5.3.2). While competitors aggressively sought to cut costs,
Nordstrom addedcosts through imaginative customer services and higher
staffing levels (nearly twice Macy’s). As noted earlier, Nordstrom’s base
pay is typically 10–20 per cent higher than prevailing retail wages of its
mall competitors. At the Paramus store, Nordstrom paid $9.50 per hour;
Macy’s and Bloomingdale’s averaged $6.00–$7.00 per hour.
Nordstrom also has a profit-sharing programme, which contributes an
additional 8 per cent per year to the income of each employee, phased in
on a graduated basis and fully vested after seven years.
Nordstrom can afford its higher hourly wage rates because of its aggres-
sive use of commissions. High sales quotas require employees to earn their
wages by moving a high volume of merchandise. Employees who fall
below quota for three consecutive pay periods are dismissed. States one
former salesman: ‘The structure of their commission system makes the
$9.50/hour a draw. If you survive at Nordstrom, you actually have to earn
morethan $9.50/hour just to meet your quota.’^3
The average Nordstrom salesperson earned $23,000–$26,000 per year
while the industry average for retail clerks stood at $12,000 per year. In
1990, Nordstrom sales per square foot (the most widely used yardstick for
The recruitment and internal market domains 379