Inventory Control at Nordstrom

April 10, 2009

DISCUSSION TOPIC

Nordstrom Doing More With Less 4/3/09

TOPIC SUMMARY:

Nordstrom is all about inventory reduction. Okay, maybe not all, but as a Bloomberg report points out, the company has made a concentrated effort going back to 2000 to reduce its inventory levels. Based on the same report, Nordstrom has been successful in its endeavors, cutting days of supply to 62 days on average versus competitors such as Macy’s (119 days) and Saks (140 days).

“If Nordstrom were a car, it would be a hybrid Cadillac Escalade that gets 20 miles per gallon instead of the normal 12,” Patricia Edwards, founder of the research firm Storehouse Partners, told Bloomberg.

“Nordstrom’s investment to drive sales is lower,” said Liz Dunn, an analyst with Thomas Weisel Partners. “They are doing more with less.”

Nordstrom is also not hanging on to merchandise that won’t sell at department store rates. Instead the company looks to move the items to its Nordstrom Rack discount outlets.

“If we can identify what is not performing and move it out to bring in fresh merchandise, that’s a decision we want to make,” Peter Nordstrom, president of merchandising, told Bloomberg.

Discussion questions:  Is inventory management a greater piece of the success puzzle now than it has been in the past? What is your take on the Nordstrom approach to the challenge? Where do you see further opportunities for Nordstrom and others to get better control over the goods sold in their stores?

My post: 

Particularly in the context of American retail, Nordstrom’s ability to manage down its inventory levels over the years is impressive.  It starts with the Nordstrom senior management’s focus on inventory control as a driver of profit growth via lower inventory carrying costs and avoiding restrictive credit covenants.  With great systems, combined with an unusually talented buying and product sourcing group, Nordstrom continues to increase sales with less inventory.  Most department stores lack the focus and the tools to manage inventory effectively.  Plus, many “bought” gross margin by agreeing to ever-growing buy commitments from suppliers in exchange for season-saving margin checks.  The result is an ever-growing hangover of unsaleable merchandise sitting in stores and clearance outlets.  This is one of the reasons others have succumbed bankruptcies and liquidation.  Nordstrom has the right formula and it can be learned and implemented elsewhere.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13667

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The Retail Power of Suggestion

April 4, 2009

DISCUSSION TOPIC

Retail Customer Experience: The Retail Power of Suggestion 4/3/09

TOPIC SUMMARY:

Just down the road from my house is a great, locally owned, independent comic book shop that used to be one of my frequent haunts. Recently I’ve gone back in to reconnect with a hobby that I once loved.

The owner, an unassuming and quiet fellow named Doug, is there virtually all of the time. He has a deep love for and knowledge of his product, and is always happy to make suggestions about what to read next, based on what you’ve previously enjoyed.

Doug does something else that I didn’t notice at first, a powerful little trick of language: When he’s handing you your purchase and change, he leaves you with a phrase that, for lack of a better term, is a command to come back.

He doesn’t say, “Come see us again!” or “Thanks, please come again!” or any of the common parting shots. No, he says, confidently, “You’ll be back” or “You’ll enjoy” or “You’ll come back for more soon!”

It’s a tiny semantic difference, but a major psychological one. Like I said, I didn’t notice this at first – but when I bought the first volume of “Queen and Country” and Doug said “You’ll enjoy that, and be back soon for number two,” I immediately formed a mental picture of myself doing exactly that. About a week later, that’s precisely what I did.

Notice the level of specificity in his parting shot. He planted the seed for my next purchase by spelling it out for me. It’s not some nebulous idea of future business; it’s a description of a specific product that I’m going to buy in the coming days.

Visualization is one of the cornerstones of any flavor of self-improvement; it works because the human brain is so incredibly good at taking the things it sees and carrying out the next steps needed to make them real. This is precisely why Doug’s method is so powerful – it paints the brain a picture of the customer’s next visit, the next purchase, the next satisfying experience.

Fortune favors the brave, and business goes to the bold. A timid plea of “please, come back and see us” reaches out for pity, and sometimes that works. Much more effective is a simple and direct statement of what value the customer received, why they will want to receive it again, and what they will come back for.

Discussion questions:  What do you think about the “power of suggestion” at retail, especially around product endorsements and goodbyes? Have you experienced any similar winning suggestive practices by sales associates at retail? Is there a downside to suggestive selling strategies?

My post: 

A couple points here:  First, the key for all retailers is to keep trying various techniques for effective customer communication.  Will suggestive statements psychologically impact future customer behaviors?  Sometimes yes, sometimes no.  To dismiss this as a “trick” is shortsighted.  To rely upon the technique to be the solution is naïve.  The sales associate must be able to determine appropriate ways to greet, interact with, and end each interaction, based on the experience with each customer.  Which brings me to my second point.  Retailers must, even in difficult economic times, invest in leadership development and effective staff hiring and development efforts – including the psychology of communication and human interaction.  None of this is easy either for the managers or for the associates.  It must be hired for, developed, encouraged and rewarded.  And then, watch the magic happen.  You will go try it now, won’t you?  (How was that for the power of suggestion?)

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13654

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Thank you for visiting my blog!  Please subscribe using the RSS button and comment on my postings