Pete Nordstrom expounds on the Nordstrom Way… forward

What’s the secret to Nordstrom’s success? Humility

It’s an interesting choice of words to explain the remarkable ascension of Seattle’s iconic upscale fashion retailer that has conquered most of North America—with the haute couture capital of New York City next in its sites—and is steaming toward a decidedly immodest five-year ambition of $20 billion in annual sales.

But humility is the quintessential trait for the retail industry, at least in the view of Nordstrom co-president Pete Nordstrom, who spoke this week at the University of Washington Foster School of Business in the latest of its “Leaders To Legends” breakfast lecture series.

Pete Nordstrom with attendees

Pete Nordstrom (aka the “tallest man in fashion”) stands out among the Foster School crowd.

“(Retail) is a very humbling business,” Nordstrom told the capacity crowd in Anthony’s Forum atop Dempsey Hall. “Because at any given minute, if you’re not doing something very well, your customers will let you know.

“But it is because of this that we evolve and move forward. If you’re open to listening, then you can do really well.”

Nordstrom has done really well. What began, humbly enough, as a Seattle shoe store has become a Fortune 500 powerhouse in the world of high-end apparel, with $14 billion in annual sales and a growing roster of more than 300 stores (its expansion is unique among its competitors). Pushing this growth is a fourth-generation of Nordstrom family leadership: brothers Pete, Erik and Blake serve as co-presidents.

The evolution of service

At the Foster School, Pete Nordstrom reinforced the most invaluable product of the company’s decades-long philosophy of humility: its legendary reputation for superlative customer service.

“Our goal is to make our customers feel good,” he said. “It’s important that every business has a center of gravity and a spirit of intent. For us, customer service has been super important. The best thing is that it’s something every single person in the company can participate in and rally around.”

Nordstrom stressed that service isn’t static. It’s a proposition that requires close attention and continual updating.

“Our best competitive advantage is giving excellent customer service—in however the customer chooses to define it,” he said. “The way people define service has changed. Fifteen years ago, very few people would have defined an excellent customer experience as something that’s convenient. It was much more about a high-touch, person-to-person relationship thing. Now it has to also be convenient.”

He acknowledged the influence of in recasting our notion of service in the digital age.

“Everything that Amazon has done has completely shifted the customer’s expectation of how they can be served,” Nordstrom said. “It used to be good enough for us to have the best selection in a geographic region. Now I can buy anything in the world at my computer, so why would I go into your store? You’ve got to be really thoughtful about how it’s all going to work. Stores aren’t going to go away—there is a social element of shopping that a lot of people like. But stores have to exist in complete lockstep with the online business.”

In-store + online

This view of online and in-store as complements rather than competitors has driven Nordstrom’s robust growth through both channels, Nordstrom said.

“As soon as you look at stores versus online, you’re in trouble,” he explained. “We don’t have a channel strategy. We have a customer strategy. Customers access brands and stores in whatever way suits them. We’ve got to be able to pivot on both of these.”

To do this, Nordstrom said the company will be investing heavily over the next five years to expand and renovate stores, to enhance the technology in those stores, and to make the online experience more convenient, transparent and dependable, with a curated catalog of products on offer.

Youth movement

This strategy is paying off in several significant ways. Nordstrom reported that the company has added six million new customers since 2010. And, perhaps more significantly, the average age of the Nordstrom customer has dropped to 43.6, while the customers of rivals Saks Fifth Avenue and Neiman Marcus average 51 years of age.

“We’ve balance our whole program to make sure that acquisition is equally important as retention,” Nordstrom said. “Previously, we spent almost all of our money and efforts around retention and loyalty, which is great. But every customer you have grows older every year. At some point, they stop buying as much. So if you don’t have a store that’s compelling to young people, you’re in trouble.”

Nordstrom is gradually shifted focus from elegance to relevance, adding service bars, mobile checkout, salesperson texting and its trunk club, among other retail innovations. It offers a broader selection of brands, and has added even more exclusive lines, such as Madewell and Topshop.

But with all of these changes in the air, the founding principles remain the polestar for this fourth-generation of Nordstrom leadership. Pete Nordstrom offers that he and his brothers are only there in service to front-line employees.

“The Nordstrom Company and our success is not defined by what I do every day,” he concluded. “It’s defined by the people out there in the stores. We have always inverted the pyramid. The most important people in our company are the people who take care of customers. Because the customer drives everything we do.”

Pete Nordstrom, a graduate of the University of Washington, was one of Dean Jim Jiambalvo’s guest speakers at the monthly Leaders to Legends Breakfast Lecture Series, which features notable leaders in an array of industries from greater Seattle and around the country.