Swot analysis of Nordstrom Inc. Nordstrom is a luxury departmental US retail chain store. Carl F. Wallin and John W. Nordstrom were the founders of Nordstrom Inc, and they laid the foundation of the store in 1901. The headquarter of the company is on 6th Avenue Seattle, Washington, USA.
Nordstrom’s main products and services are wedding clothes, home furnishing, fragrance, cosmetics, accessories, jewelry, handbags, footwear, alteration & tailoring, stylist, nordy club, Spa, design, Espresso Bar, restaurant, gifts, home goods, shoes, and clothing. The luxury brand has a network of 468 stores across the USA, Canada, and Puerto Rico.
According to an estimate, the annual revenue of Nordstrom in Jan 2021 was 10.715 billion dollars, and it has declined by 30.98%. Out of which, the net income of the store was -0.690 billion dollars, and it has decreased by 239.11%. However, the company has employed 62000 employees to manage its worldwide operations.
Nordstrom’s top competitors are Amazon, Mercuries & Associates, Home Retail Group, Hudson Bay, Dillard’s, Darlington, Bloomingdale, Saks, TJ Maxx, Macy’s, Neiman Marcus, Kohl’s, Ross Stores Inc, JC Penny, Walmart, TESCO, Target, Primark, Marks & Spencer, and H&M.
Today, we’ll discuss the swot analysis of Nordstrom. It’s going to analyze the internal and external factors impacting the luxury retail departmental store. Here’s the swot analysis of Nordstrom as follows;
Strengths of Nordstrom
Nordstrom follows the concept of CSR (Corporate Social Responsibility) by donating millions of dollars to charities, social welfare projects, and NGOs across Puerto Rico, Canada, and the USA. It has helped the luxury brand to win the trust of customers that their retail store cares about society.
Nordstrom offers a reward and membership program in order to maintain the loyalty of customers. Such programs compel customers to earn points so that they would get personalized service and exclusive deals. According to an estimate, the store has more than 13 million members and they contribute approximately 2/3 of the total revenue.
BOPIS Strategy & Ecommerce
Nordstrom provides the service of BOIP (buy-online and pick in-store) and delivery service. It has made shopping much more convenient especially during the pandemic of covid-19. According to an estimate, Nordstrom’s digital sale in 2020 was 55%. It shows the growth of the store’s e-commerce platform.
Nordstrom has a unique competitive edge of proving free shipment to its customers regardless of their order limit if they have a valid promo code and coupons. On the other hand, competitors’ like JC Penny and Macy’s provide free shipment to those customers if they reach their minimum order limit. Free shipping has become very important during the pandemic months.
Whether it’s digital technology, Omni-experience, customized clothing, or try out virtual clothing, Nordstrom is one of these stores in the US that launched the technology at first. The objective of the luxury store was clear, and that’s to provide a better customer experience.
Nordstrom takes responsibility for its products. If customers want to return it, then the store accepts it without asking any questions. That’s why customers confidently do shopping at its stores.
Personalized Customer Service
Nordstrom’s main strength is to offer personalized VIP service to the customers. Once customers enter the store, the sales staff greets them and helps them in searching and picking the right product for them.
Partnership & Alliance
Nordstrom has developed partnerships and alliances with strategic brands like Glossier, Dot, Stella, Reformation, Greats, Allbirds, and Top Shop. Such brands are highly digitally active and directly involve with customers. They visit the store to check out those brands. In fact, the sale of the strategic brand is roundabout 30% higher than the non-strategic brands.
Luxury brand designer
Nordstrom has developed a reputation for selling luxury designer brands’ products. They range from jewelry, handbag, and shoes to clothes.
According to an estimate, the market capitalization of Nordstrom in 2020 was 6.06 billion dollars. The luxury brand store ranked at the 91st position of Just Companies 2021, and 1490th position in the list of Global 2000 Companies in 2020.
Weaknesses of Nordstrom
Many experts say that Nordstrom is moving towards brand dilution because of discounts, poor quality products, and low sales due to the pandemic and others management issues.
Nordstrom has recently invested approximately 500 million dollars in the development of its flagship store. It turned out to be a highly risky investment especially under the circumstances of online shopping, pandemic, and social distancing. That’s why the company’s profitability went negative.
Nordstrom only deals with premium and luxury accessories, footwear, clothing, and other items. In others words, the company has put all of its resources in one basket. Luxury retail should diversify its resources in order to minimize the risk.
Lower International Presence
Nordstrom is only operating its business in North and Central America. It limits the company’s ability to grow in a saturated market which a lot of competitors.
Nordstrom has established the brand image of being a luxury brand and the store charges premium prices for its products. The expensive products push away many price-conscious customers of the middle and lower class. Then they buy it from competitive stores like Walmart, TJ Maxx, and others.
Opportunities available to Nordstrom
Nordstrom should expand its product portfolio further from clothing, footwear, and accessories to home décor sports apparel (like Puma, Adidas, or Nike), and others items. The vast range of products in the portfolio would attract more customers and retain current clients.
Nordstrom has a very big financial reserve. The luxury store should find small stores that are struggling and acquire them. The acquisition and partnership with new stores would expand the brand’s customers reach.
Nordstrom should consider expanding its luxury retail chain brand into developing countries like Eastern Europe, North America, and Asia. The markets in the emerging economies have exponential growth opportunities for the store to proliferate.
Nordstrom’s shoppers are of the +42 years old, however, the young customer market ranging from 18-34 years old is growing. Therefore, the store should shift its focus to the younger customers and add more products for them.
The pandemic of covid-19 has amplified the online shopping trends. In fact, Nordstrom’s major sales came from the online store. But it’s not as good as the e-commerce platform of Amazon, Walmart, or Alibaba. The luxury chain store has to learn a lot from its competitors.
Threats Nordstrom has to face
The pandemic of covid-19 has created an environment of social and economic uncertainty. Many people have lost their jobs and their purchasing power has dropped significantly. The premium products of Nordstrom are a luxury that many can’t afford in such circumstances.
The sale of counterfeit products is increasing in the USA. According to a report by the US Government Accountability Office; the customs authorities seized the counterfeit shipment worth 1.38 billion dollars in 2016. The growth of counterfeit products poses a grave threat to the business of Nordstrom.
Rental luxury clothing brands and online luxury platforms have decreased the worth and value of luxury brands like Nordstrom.
Competitors like Amazon, Walmart, Kohl, TJ Maxx, JC Penny’s, Macy’s, Target, Tesco, and Bloomingdale have increased their market share even during the pandemic year. Their growth reduces the market share of Nordstrom.
Conclusion: Nordstrom Swot Analysis
After an in-depth study of the swot analysis of Nordstrom, we’ve concluded that Nordstrom is indeed America’s leading luxury retail chain store. The competition, rental clothes, pandemic, and limited diversification are some of the main challenges. Nordstrom should diversify its portfolio and expand its market in order to address these growing issues.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.