Why Nordstrom is America’s #1 Retailer in Customer Experience

Courtesy of Fortune

The situation was tense. Time was truly of the essence.

A Nordstrom housekeeping staff at Connecticut found a customer bag together with her receipt and flight itinerary in the parking lot…

As the customer probably left the store directly to catch her flight at John F. Kennedy International Airport in New York, he looked up her phone number in the company’s system.

The employee tried to call her several times while he drove to the airport with her bags.

When the customer did not answer after he got to the airport, he had the airport page her to let her know he had her bags.

Thankfully, the customer responded to the page, retrieved her belongings and hopped off happily for her flight.

Nordstrom – a multi-billion dollar American retailer

What you’ve just read is merely one of countless heroic customer service stories associated with Nordstrom – America’s most customer oriented retailer.

First established in 1901 as a small shoe retailer by a Swedish born immigrant, Nordstrom has grown over the years to become one of the leading names in fashion and apparel retail in America.

Today, Nordstrom operates a total of 109 full-line department stores, 56 Nordstrom Rack clearance stores, two Jeffrey Boutiques and two Last Chance final clearance stores.

With a presence in 28 different states in the US, the Seattle-based hires 52,000 employees around the world and generates an annual sales of some $8.6 billion a year.

While other brick-and-mortar retailers struggled against the onslaught of e-commerce, Nordstrom successfully expanded into the online retail market, becoming a truly omni-channel retailer.

What is the secret to Nordstrom’s strength in customer experience? How did they become one of the most profitable retailer and enduring retailer in America?

Only 1 Rule for Customer Service

Famed for its legendary customer service, Nordstrom has only one rule for its employees:

“…Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high.
We have great confidence in your ability to achieve them…

Rule #1: Use your good judgement in all situations. There will be no additional rules…”

Unlikely many other retailers, staff are happy in Nordstrom too. Employee turnover is low at about 35%, and top salespeople can make up to US$100,000 per year with its commission-based remuneration structure.

In fact, Nordstrom has been ranked number 72 in the 100 best companies to work for.

What sets the family-run Nordstrom (it is now helmed by fourth generation members of the Nordstrom family) apart from the rest?

Curious about this, I decided to read the book “The Nordstrom Way” by Robert Spector and Patrick D. McCarthy (a former superstar salesperson in Nordstrom). What I learned truly amazed me.

11 Principles of Great Customer Experiences

Written in an easily digestible narrative, it documented the company’s legendary corporate values and obsessive focus on their customer experience.

Here are some of the key learning points:

#1 Customer interest over company interest

Be relentless in pleasing and delighting the customer, no matter what it takes.  Nordstrom’s approach is such that sales associates should place precedence on customer interest over company interest no matter what it takes.

“When the customer talks, we jump” is a popular Nordstrom mantra.

#2 Only hire the best employees

Be stringent in hiring employees and ensure that they have the right attitude and values.  Sales skills can be taught but not a “smiling face”. Nordstrom makes it a point to only recruit extremely service oriented staff.

#3 Empower employees like entrepreneurs

Once you hire the best, you should empower them as much as possible to do everything humanly possible to ensure that a shopper leaves satisfied and happy.

Motivate them to behave like entrepreneurs running their own mini-shops in specific departments.  Offer awards, prizes, and certificates for top sales and service performers.

Creativity rather than rule following (there are no rules anyway) are valued at Nordstrom.

#4 Peg pay to sales and customer experience

Peg employees’ pay, commission, and bonuses to achieving specific sales quotas, but ensure that they never hard-sell to a customer such that the experienced is soured.

Customer experience is number one and takes precedence over sales if both are in contention.

#5 Celebrate heroic examples of customer service

Celebrate “heroics” – ie tales of superlative service. One of the most famous example happened in a store in Anchorage, Alaska.

What happened there was that a customer returned a set of tyres to a Nordstrom store even though they did not sell tyres. What the sales associate did was to find out where the original store was, and returned it for the customer while refunding him on the spot!

#6 Build deep relationships with customers

Strengthen and build customer loyalty through developing deep relationships with them.

Sales associates are account managers rather than clerks in Nordstrom. They each have a notebook to jot down key details like customer sizes, preferences, phone numbers, birthdays and other pertinent details.

The greatest selling tool is the telephone and “Nordies” use it regularly to call their clients.

#7 Offer unconditional money-back guarantees

Offer unconditional money-back guarantees for your goods sold for the 98% of customers who are honest.  Better yet, make it convenient and easy for them to return the goods by paying for postage both ways.

Back this up with a lowest priced guarantee of refunds if one can find the product being sold more cheaply anywhere else (a common practice in the States now).

#8 Decentralise management

Decentralise as much as possible – hiring of personnel to department managers, buying of merchandise, and so on.

#9 Stock inventory deep and wide

Ensure that your inventory is stocked as deeply and widely as possible.

Nordstrom offers the widest selection in the business, and ensures that customers don’t “walk” because they fail to find “the right product at the right size at the right price at the right place”.

#10 Create environments that encourage long stays

Design your shop layouts and furnishings to entice shoppers to stay as long as possible within the department store.

Make it easy for them to gain access to their respective areas of interest (men’s wear, women’s apparel, children’s etc).  Make aisles wide enough for strollers and wheelchairs and take care of the comfort of your guests by providing comfortable sofas and chairs to sit on.

#11 Reverse pyramid organisation structure

Finally, embrace the tenets of a reverse pyramidal organisation structure and truly believe in it.

Customers are at the top rung, followed by sales associates, department managers, buyers, district managers, senior managers and finally the co-chairmen at the bottom.

High Staff Standards – Boon or Bane?

While the above tenets are critical to the success of Nordstrom, they also set very high standards for its employees.  Not everybody can survive in its high pressured environment of sales, service and satisfaction par excellence and poor performers are regularly weeded out.

Unfortunately, this has also led to numerous major run-ins with the retail union. This have been costly for the company in terms of reputation and legal fees.

An Inspiring Retail Icon

The story of Nordstrom’s success as documented by the book is inspirational and energising.  Like Wal-Mart, the firm’s strong family values and cohesive corporate culture has helped it to outperform the market.

By hiring the best, giving staff freedom and empowerment, as well as providing the best customer service in the business, Nordstrom has shown that generosity can be more profitable than penny pinching both staff and customers.

As the saying goes, “pay peanuts and get monkeys”. With one of the most highly paid retail employees in the business, Nordstrom has shown that rewarding staff can reap dividends far beyond one’s expectations.

Can Our Retailers Follow Suit?

It would be great if retailers in Singapore can embrace some of these ideals by treating their retail associates as empowered entrepreneurs (with the right compensation that is commission-based) so that they in turn can treat shoppers as guests rather than intruders.

Treating one’s staff well, empowering them with a strong sense of purpose, rewarding customer-oriented behaviour, and going the extra mile for customers can make all the difference. By doing so, you create strong staff and customer loyalty. The effort you have invested will easily pay for itself through improved employee retention and customer lifetime value.