the United States, with 64 stores, annual sales of $2.89 billion and an his-
toric annual growth rate of 20 per cent per year. More remarkable yet, in a
decade of increasingly intense competition, Nordstrom had doubled its
space but tripled its sales.^6 Former sceptics were now believers: Nordstrom
was not only the most Darwinian of retailers but its formula seemed close
to invincible.
The Nordstrom formula
At face value it seems easy: value your customers, differentiate through
superior service and motivate employees with commissions. As the
Nordstrom juggernaut moved south through California and then east,
many competitors scrambled to replicate their model. Intense in-house
charm schools on service quality were offered by rival department stores.
Recast vision statements were unveiled, trumpeting the importance of cus-
tomers and the value of service. Commissions and incentives were intro-
duced. Without exception, these failed to close the gap. Illustrative of this
pattern was The Broadway, which introduced sales commissions and
offered personalized shopping services. Executives later conceded that it
was virtually impossible to reach Nordstrom standards. ‘Service is an atti-
tude of caring on the part of everybody in the store. It takes a lot of coach-
ing and leadership,’ said Phillip M. Hawley, Chairman of The Broadway’s
parent company, Los Angeles-based Carter Hawley Hale Stores.^7 The pro-
grammes were discontinued.
Boston analyst Margaret A. Gillian observes: ‘A few years ago, a lot of
retailers thought that if they put their people on commission – as
Nordstrom does – good service would automatically follow. It did not and
I am convinced that Nordstrom provides service despitethe fact that people
are on commission, not because of it. Most commission sales people give
preferential treatment to those customers making major purchases while
neglecting others. That does not happen at Nordstrom. Nordstrom
people are recognized with citations and cash prizes when they perform
superior customer service and they have the opportunity to move up the
ladder.’^8
Nordstrom executives observe a pattern among the dozens of
companies, reporters and analysts who visit them each year. ‘They attrib-
ute our success to coaching, caring, leadership, commissions, and service,’
states co-president, John Whitacre, ‘Somehow it all largely misses the
point.’^9
Nordstrom’s underlying culture (or organizational paradigm) is at the
heart of things. It is more important than its product/market strategy,
organizational structure or compensation system. States one observer:
‘Nordstrom’s secret seems to be largely inaccessible. According to man-
382 Relationship Marketing