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Nordstrom, Inc. (JWN): This Upscale Retailer Has a Balanced Growth Strategy

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When you are dealing with the rich and the famous, you need to put your best foot forward. That is why for the nation’s largest luxury department-store chain, Nordstrom, Inc. (NYSE:JWN), customer satisfaction is the mantra. And over time it has proved that with the right assortment of merchandise, exclusive brands, and convenience of Internet shopping, it can remain a preferred choice of its customers.

Nordstrom, Inc. (NYSE:JWN)

The company is all set to take its retail business to the next level. It is following a balanced expansion strategy focusing on both e-commerce and adding physical stores.

E-commerce is heating up the retail market

With e-commerce spending in the US growing by 15% last year to a huge $186.2 billion, according to ComScore’s estimates, few retailers can ignore this trend.

During the first quarter, the country’s overall retail climate was fragile on account of weather as well as weak customer spending. It is interesting to note that among the big departmental stores, Nordstrom, Inc. (NYSE:JWN) and Macy’s, Inc. (NYSE:M) – both strong in e-commerce – had better sales growth than Dillard’s, Inc. (NYSE:DDS), which is still catching up on the trend.

Nordstrom, Inc. (NYSE:JWN) grew its retail sales by 4.8% to $2.66 billion and Macy’s, Inc. (NYSE:M) posted a 4% increase to $6.39 billion. In comparison, excluding its contract business, Dillard’s, Inc. (NYSE:DDS) grew its sales by 1% to $1.53 billion. The same-store sales growth for these three retailers was 2.7%, 3.8%, and 1% respectively.

As per, which provides Internet traffic stats, Nordstrom ranks 221 on the list of all visited e-commerce site in the US. Macy’s ranks 129. It does not break out its online sales numbers, but 2012 figures indicate that Macy’s may be deriving around 14% of its total revenue from online sales.

Dillard’s, Inc. (NYSE:DDS) is also trying to increase its online presence and opened a new Internet fulfillment center in Little Rock last year. Although its online sales grew 21% in the quarter, on it ranks 1,156 in the US, and is no match for Nordstrom, Inc. (NYSE:JWN) or Macy’s, Inc. (NYSE:M).

Nordstrom’s focus on e-commerce

E-commerce has always been a thrust area for Nordstrom, Inc. (NYSE:JWN). It integrated its website with its stores way back in 2009, much ahead of most of its rivals. Nordstrom virtually offers its entire physical-store collection online.

During the first quarter it generated approximately 11% of its net sales from e-commerce. The company saw a 25% growth in this segment, which came over a 44% growth in last year’s first quarter. It added some 100 odd new features to its website, improved its mobile application, and increased the speed of fulfillment and delivery.

However, Nordstrom, Inc. (NYSE:JWN)’s main focus area is “personalization.” This would allow its visitors to also receive product recommendations based on their individual needs and have a customized experience on the website. Management has been attracting talent from, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) for taking ahead these initiatives. The company is in its early stages of implementation and stands to gain as this gathers steam.

Adding stores in the US

Nordstrom is keen on increasing its retail footage in the US. While its main area of focus is on adding discount Rack stores, it will also add full-line stores in Manhattan and Puerto Rico.

Nordstrom, Inc. (NYSE:JWN) opened five Rack stores during the quarter and another three subsequently. The company plans to open 14 more Racks in 2013 and own more than 230 locations by 2016. In addition, it extracted 20,000 square feet of incremental selling space by removing some of its fixed cash registers.

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