Big Data: Nordstrom’s Innovation and Investment for the Future

February 4th, 2013

As Tech@Tuck fast approaches, we’ve been thinking about the different ways that big data impacts our panelists. In considering one of our visitors, Alexis Hoopes T’06 from Nordstrom, we are excited to learn more about how the company uses the data from its integrated online and store inventory systems as well as from its Fashion Rewards Program to customize shopping experiences.

Nordstrom has been a breakthrough leader in the retail space when it comes to enhancing the online shopping experience. As one the first big retailers to adopt a full-scale online channel for its customers, Nordstrom continues to innovate on its e-commerce platform to provide the best customer experience. In addition to an enhanced iPad app, Nordstrom recently updated its website, integrating not only online inventory but also in-store inventory to provide its aspiring customers with multiple options to leisurely shop. Nordstrom has taken a huge step forward in integrating the online inventory with in-store inventory, a step that few competitors have been able to follow – it shows customers in real time where a product is available and when they can expect to receive. Utilizing this real-time data service for customers has proven to increase same-store sales for Nordstrom and beaten the department store average.

But Nordstrom’s isn’t stopping there. Announced by Nordstrom’s chief financial officer on the 2011 year-end earnings call, Nordstrom is doubling down on the web, announcing $1 billion investment in its e-commerce channel over the next five years. Nordstrom has invested in partnering with JMP software to understand product and brand relationships for their customers. The idea is to figure out how to promote the right products and brands to the right customers – with goal of making customers happier but also to maximize revenue during the process. Nordstrom’s can use the analytical data from the JMP software to figure out which segments of customers are more like to buy brand Y after buying brand X – the idea is that Nordstrom can make better promotion and merchandising decisions while making it easier for customers to find exactly what they want.
At the 2012 Summit, Jamie Nordstrom, President of Nordstrom Direct, gave the keynote speech on what makes Nordstrom so successful. Nordstrom emphasized the focus on customer service and part of that customer service is personalization. Nordstrom acknowledged that five years ago using personal data to advise customers about what they might like seemed “creepy,” but now Nordstrom believes customers have shown they want a more personalized experience. Nordstrom advises that possessing knowledge about a customer will play an increasingly large role in building loyalty with her, similar to the likes of how an iTunes or Netflix builds loyalty by providing relevant recommendations.

How does Nordstrom collect that customer data? Nordstrom has a widely popular Fashion Rewards Program that allows shoppers great benefits such as free alterations and early access to anniversary sales. In order to gain these perks, a shopper must have a Nordstrom credit card or a Nordstrom Visa card that tracks the shoppers spend and rewards points. Nordstrom has upped the ante in 2012 by adding even more benefits to shoppers by lowering status thresholds and offering cash back on purchases in an effort to grow its customer base. What we’re interested to see is how Nordstrom will use this shopper information moving forward to provide even more tailored shopping experiences for its customers.

To Nordstrom, building loyalty isn’t only about miles, points and discounts; it’s about giving people something personalized and relevant that they value – that is what Nordstrom banks on for what’s going to make customers consistently loyal to its brand in the future.

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