4 P's Analysis of Nordstrom

Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Omnichannel marketing strategies, warehouse robots, and everyday low prices are just some of what Nordstrom's (NYSE: JWN) competitors have planned for the 2012 holiday season. In response, Nordstrom has developed some initiatives of its own, some of which have already paid off last year. A look at Nordstrom's price, placement, promotion, and product strategies shows how the retailer could successfully fend off its competitors.


Department stores need to keep up on design trends to attract younger shoppers. Shan Li, at the Los Angeles Times, reports that Nordstrom has helped relatively unknown designers become famous before, and in February several young designers will get their own opportunities to impress shoppers at the retailer's new pop up stores.

Nordstrom's new styles for Millennials answer an upcoming marketing intiative by Macy's (NYSE: M) aimed at Millenial shoppers. Recent information from Macy's suggests that Nordstrom still has some time to perfect its new product lines. In Macy's 3Q 2012 earnings call transcript at Seeking Alpha, Macy's CFO Karen M. Hoguet explains that many of Macy's new youth focused designs will show up at stores in early 2013.


JC Penney (NYSE: JCP) recently showed department stores that one well known pricing strategy may work better for discount stores. Everyday low prices led to another quarter of poor results for the beleaguered retailer. Anne D' Innocenzio, at the Associated Press, reported that JC Penney's 3Q 2012 revenue fell 27% as JC Penney's popup shops didn't make up for shoppers it lost over its pricing strategy revamp.

Instead of changing prices at its regular stores, Nordstrom has added more Rack stores to attract bargain oriented shoppers. In Nordstrom's 3Q 2012 earnings call transcript at Seeking Alpha, Principal Executive Officer Blake W. Nordstrom mentioned the addition of 15 Nordstrom Rack stores this year, which included two stores that opened in 4Q 2012. Nordstrom realized that a department store shouldn't fix things that aren't broken.


Many retailers want the holiday season and its higher sales to start as soon as possible, but Nordstrom takes a different approach. Instead of annoying shoppers with very early holiday ads, Nordstrom waits until the season gets underway, rolling out its promotions after Thanksgiving. Piper Weiss, at Yahoo! Shine, reported that Nordstrom also delayed its holiday advertising campaign in 2011 and previous years. The delayed ads could mean a weaker third quarter, but a stronger fourth quarter.

In the 3Q 2012 earnings call transcript at Seeking Alpha, President of Stores, Erik B. Nordstrom, notes that Nordstrom rolls out new clothing the week after Christmas, at a time when other department stores offer discounted designs that failed to sell earlier, which boosted the retailer's 4Q 2011 results. The Puget Sound Business Journal reported that Nordstrom's 4Q 2011 earnings per share figure of $1.04 beat estimates of $1 EPS. Nordstrom's decisions to limit ads before Thanksgiving and offer new styles the week after Christmas could mean an EPS beat in 4Q 2012 as well.


Omnichannel and mobile are the trends for department stores right now. Shoppers can already pay for clothing with their smartphones at Nordstrom retail stores. Nordstrom also knows that a bit of extra convenience isn't enough. Mobile devices didn't make up for JC Penney's pricing decisions, after all. Heather Taylor, at Econsultancy, reported that Executive Vice President Jamie Nordstrom explained that shoppers already expect Nordstrom to provide a better in store shopping experience than other department stores, so these shoppers expect a superior mobile shopping experience from Nordstrom as well.

Saks (NYSE: SKS) also understands that department store shoppers expect the same level of service everywhere, and its warehouse robots could raise shoppers' expectations for speedy delivery. M. V. Greene, at NRF Stores, explained that Kiva packing robots at Saks' Maryland distribution center helped the retailer provide one day delivery on some Dec. 23, 2011 orders, helping Saks achieve 21% revenue growth in 4Q 2011. Amazon bought Kiva earlier this year, so the online retailer has its own robotic advantages. Amy Martinez, at the Seattle Times, reported that Nordstrom started offering same day delivery from some stores last year, so Nordstrom has addressed its competitors' robotic challenge to some extent.


Nordstrom's promotional decisions may have the most immediate benefits for investors, as its delayed ad campaign and product launch strategy could help it beat 4Q estimates. Nordstrom's place strategy could also show strong results next quarter because of the rapid growth of mobile. Products coming out next spring could help Nordstrom keep younger shoppers around and maintain its momentum in 1Q 2013. New Rack stores help Nordstrom's pricing support its growth. Both Nordstrom's promotional and place decisions involve long term strategies that could also boost next year's results. Nordstrom's 4P plans offer payoffs in both the short run and the long run for investors.

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