How Nordstrom Bests Its Retail Rivals
The family-run department store places customer service above all else with easy-to-market lifestyle sections
The Nordstroms of Nordstrom Jose Mandojana for Bloomberg Businessweek 
Most popular items at Nordstrom for men and women Kareem Black for Bloomberg Businessweek Story Tools
This was the 43rd new department store to open since the fourth generation of Nordstroms retook control of the company in 2000, a run that has had investors screaming, too, or at least looking over their portfolios with approval. Last year revenue at the company grew 12 percent, to a record $9.7 billion, and while the Great Recession slowed rivals Neiman Marcus and Saks (SKS), Nordstrom gained market share. Nordstrom, it seems, is that rarity in American business: an enterprise run by a founding family that hasn’t wrecked it.
There is no chief executive officer, though the board has an outside chairman: Enrique “Rick” Hernandez Jr. Where other family-run companies, such as the Dillard’s (DDS) department-store chain, employ two classes of stock that give the founders extra voting power, the extended Nordstrom family owns the same kind of paper as any other shareholder. They own $2.5 billion worth, or about one-quarter of the outstanding shares.
Nordstrom is expanding, though in a methodical and not too daring way. With room in the U.S. for about 14 more stores—there are a limited number of ritzy Zip Codes—it is taking the enterprise abroad, starting not with Asia or the Middle East but just across the border from its Seattle headquarters, in Canada. Unlike Saks and Bloomingdale’s, which have opened stores in Mexico and the United Arab Emirates, the Nordstroms have chosen not to franchise their foreign outposts. “We’re not trying to make a buck and move on to the next thing,” says Pete, 49. “This is our life. We do not want to be the generation who screws it up.”
For the most part, say industry observers, the Nordstroms have succeeded by making customer service the good they’re really selling. Though many retailers embrace “customer centricity,” a fancy term for putting the customer first, few equal Nordstrom, which routinely ranks in the top three on Luxury Institute surveys that measure customer satisfaction.
“Nordstrom’s claim to fame has been customer service,” says Richard Dickson, president of Jones Group, which owns Jones New York, Anne Klein, and other apparel brands. “They led the charge and to some extent invented” the concept, he says.
Nordstrom was founded in 1901, when John W. Nordstrom, a Swedish immigrant, invested his Alaska gold mine stake in a downtown Seattle shoe store with his partner, Carl F. Wallin. Nordstrom moved into women’s wear in the 1960s and soon after added men’s and children’s clothes. The third generation took over in 1968, and expansion picked up. By 1990, the year Nordstrom opened its first store in the New York City area, in Paramus, N.J., the company had 46 locations in seven states.
Where rivals define store space by brand, Nordstrom breaks it up into so-called lifestyle sections. The “Individualist” corner offers midpriced contemporary goods from Theory to Trina Turk, while the “Narrative” section features less costly but classic styles from labels such as Lauren by Ralph Lauren (RL) and AK Anne Klein.
Nordstrom’s approach makes it easier for shoppers to put together outfits, says Jennifer Black, a retail analyst who once worked at Nordstrom stores in Portland, Ore. Brands covet an invitation to win shelf space. Shoe entrepreneur Steve Madden recalls the first time he was asked to a Nordstrom buyer’s meeting. “It was like an invite to the White House,” he says
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