Four secrets from retail’s billionaire royal family

It’s the retail miracle before Christmas. While Gerry Harvey and Myer’s Bernie Brookes are bracing for another tough holiday trading period – and watching their share prices bounce along near record lows – on the other side of the Pacific, one American retailer has seen its share price jump more than 16% since the start of June.

And perhaps more impressively, the stock’s rise has helped create a new retail billionaire.

According to Bloomberg, the surge in the share price of iconic US department store operator Nordstrom means 76-year-old Anne Gittinger is now a billionaire.

Gittinger is the company’s second largest shareholder behind her brother Bruce Nordstrom; Bloomberg says the pair’s combined stake is now worth $US2.5 billion.

Bruce and Anne are part of the third generation of the Nordstrom family. The pair’s grandfather, John Nordstrom, was a Swedish immigrant who decided to go into retail to invest the fortune he had made in the Alaskan gold rush.

In 1928, John and his business partner, Carl Wallin, sold their stakes in the businesses to John’s sons, Everett and Elmer. Everett would eventually pass on his stake to his children, Anne and Bruce.

Anne Gittinger remains active in the business and runs Nordstrom’s philanthropic efforts as director of corporate contributions.

Gittinger’s rise to the billionaire’s club would appear to make a mockery of the old saying that the first generation makes the fortune, the second generation grows it and the third generation squanders it.

But in the case of the Nordstrom family, the saying almost rang true. When Bruce Nordstrom retired in 1995 he handed control to the first non-family executive team in the history of the business, and the company lost its way.

But in 2000, Bruce’s sons Blake, Erik and Peter took executive control of the business, putting it back in Nordstrom family hands.

And so began an impressive retail recovery which has seen Nordstrom become one of the most envied (and imitated) retailers in America and around the world.

The company’s most recent profit result, for the September quarter, saw profit rise 15%, with same-store sales up 10.7%. What Bernie Brookes wouldn’t do for those kinds of numbers!

But the secrets of the Nordstrom’s family success aren’t just for retailers – they are an example of how a business can thrive if it understands exactly what its customers want.

Here are four secrets:

1. Technology that helps you say “yes” more often

Australia’s department stores might finally be dipping their toe into the world of online retail, but Blake, Erik and Peter Nordstrom have bet their entire company on technology.

A highly successful online sales offering (online sales leapt 38% in the third quarter) backed by a free shipping and free returns is one thing, but the really important investment has been in an inventory management system that lets every salesperson in every channel see every piece of stock across the entire business.

Say an online shopper wants a specific pair of Jimmy Choo shoes. There might be 17 pairs in stores nearby and these can be reserved and collected in-store. Or there might be none in the online warehouse, but there is a pair in a store in Ohio. The Nordstrom system doesn’t worry the customer with this – the shoes are taken off the floor of the store and sent out.

Jamie Nordstrom, a second cousin of the brothers who runs the online store, told Businessweek last year: “We hadn’t added inventory, but we had a lot more sizes. You are saying ‘yes’ to a customer more often.”

2. Understanding your customers’ lives

Like any department store, Nordstrom’s range is spread across a range of categories – from shoes and dresses to ties and kids clothes. But consider for a moment the names of the departments in women’s apparel.

There’s Savvy (“Edgy, of-the-moment looks for the confident, fashion-forward woman”); t.b.d (“Your destination for the best on-trend styles of the season”); Individualist (“A collection of the most sought-after styles that take you from desk to dinner with ease”; Narrative (“ Polished, put-together looks to keep your wardrobe current”); and Encore (“Up-to-the-minute fashion in plus sizes for the style-conscious woman”).

This is not the ordinary way to divide up different types of clothes. What Nordstrom is trying to do is to match their range to the lifestyles of their customers, in the way that an art gallery or even a media company tries to curate its content to give customers the best experience possible. It’s a smart point of difference.

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