Nordstrom Is In the Right Blue Sea: They Can Enhance Profitability – And Even Grow Revenue Slightly

Use a Value Strategy – Similar To Big Box Retailers
An example of executing and enacting a value strategy is to borrow a tactic from big box stores such as Costco and Sam’s Club – do a value-oriented store-within-a-store. To make this work effectively, they must keep the customer experience the same within this new entity. The key ingredients of this strategy are maintenance of high quality experience and fashionable new items – but at a moderate price point. It must be positioned above Target but below Neiman Marcus. To pull this off, Nordstrom would have to develop or enhance a set of private label lines that are higher than Target in “fashionability” and quality. To prevent cannibalization of sales from higher-end parts of the main store, the buyers must choose merchandise which is distinctive and does not directly compete with other merchandise within the main store.

Revenue Portfolio: “Real Stars”, “Potential Stars”, and “Cash Cows”
Nordstrom should also look to increase the number of its Nordstrom Rack Stores which offer discounted and discontinued merchandise. Its sales are increasing, and the Rack Stores’ lower-priced merchandise is allowing it to weather the recession well. The Rack Stores are “stars” within Nordstrom’s portfolio of revenue-generating entities – they are growing and kicking off substantial cash flow. Capital expenditures for “real stars” should increase, but for “potential stars” – good growth rates but less cash flow – hold off increases in funding until 2010. Nordstrom should focus capital allocation more to its “cash cows” – areas which are kicking off substantial cash flow but not necessarily growing rapidly.

Focus On Value – But Keep-Up Differentiation Qualities
Nordstrom’s profits are down and growth is receding – but so is everyone else in retail – they shouldn’t feel badly! Even in this adverse retail climate, Nordstrom can raise profitability and achieve some growth. Unlike many competitors, they are still profitable, and have kept their loyal core customers. With chains positioned below them, like Target adjusting its focus to value over “fashionability,” Nordstrom should follow this trend in the market – but maintain its value proposition and differentiating qualities. This article has revealed the Blue Ocean strategy for accomplishing this. Nordstrom’s current tagline should read: “Our Value: Great Fashions and Legendary Service without Breaking You.”