March 13, 2012
Nordstrom Delivers with Free In-Store Shipping
Back in August when Nordstrom announced it would offer free shipping and returns for all online orders, Jamie Nordstrom, president of Nordstrom Direct, said the service was "reflective of how customers increasingly want to shop online and we hope this change makes it easier and more convenient to shop with us."
Fast forward to the present and Nordstrom is again seeking to meet the needs of its customers while gaining a competitive edge using deliveries. The difference is that this time the department store is offering the free service for any items bought in its stores.
"Shipping costs are something that have been known to stop customers in their tracks," Mr. Nordstrom told Bloomberg News. "We have tried to break down those barriers as much as we can."
"Although investors worry that free shipping is a cost, ultimately the growth opportunity in sales far surpasses that," Liz Dunn, an analyst with Macquarie Group, told Bloomberg.
Nordstrom is also testing same-day deliveries for online orders for a $10 flat rate.
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Discussion Questions
Discussion Questions: Will free shipping on all items purchased in its stores become a competitive advantage for Nordstrom? Will we see many other retailers rushing to offer the same service?
Poll
Nordstrom’s success is driven by a number of dynamic factors, with free shipping and returns being only one part of a larger composite customer image and shopper experience. I don’t know of too many retailers that are more skilled and have a greater sincerity and commitment to customers as Nordstrom’s.
I don’t think you can look at this in isolation. In and of itself, it’s a very small advantage. But put in context with Nordstrom’s brand identity — customer service over all — it makes all the sense in the world. What retailers might want to “rush to emulate” is Nordstrom’s customer service philosophy, not just its tactics.
My immediate thought was how this would be reflected in shelf price, but I can’t say if that would be a common reaction. Basically, this will be one more small advantage for Nordstrom’s, given all the other factors already in its competitive mix. I agree with David B. about Nordstrom’s skill as a marketer.
By itself the free delivery service is not a significant competitive advantage but it is a great value add. It is simply another element of the overall great Nordstrom’s shopping experience.
Great marketers keep reinforcing their brand positioning with every move. This one is a small step to be sure, but right in line for Nordstrom.
We’ve seen time and time again, that “shipping costs” are a bright red stop-sign on a consumers path to purchase. Free shipping programs seem to always test better than other promotions of equivalent value.
Nordstrom’s latest program is another logical step towards ubiquitous free shipping. Well over 50% of holiday transactions already include free shipping.
In this case, the free shipping offer is really a mandatory part of Nordstrom’s brand promise, which is unrivaled customer service. As Nordstrom has invested in its cross-channel e-commerce, “Ship to Home” has replaced their legacy practice of transferring product from adjacent stores upon customer request. Given that the inventory transfers were no cost and no risk to shoppers, it’s hard to charge them for the “ship to home” replacement and maintain a reputation for great service. Especially given all the free shipping programs Nordstrom offers from home, you never want to tell a customer that they have to leave the store to get the best deal.
As always, the challenge with free shipping programs will be making the economics work. Free shipping offers always drive incremental sales, but they can also be a major drag on profit margins.
I do think it will be copied, and I agree with many comments that it won’t necessarily translate into instant success without retailers getting the rest of their proposition right.
Household level data can really unlock a clear view of whether this is working, on which products, and for whom. However, customer loyalty metrics as well as financial metrics must be considered to get this right.
It all depends on whether other retailers have the cost structure to replicate. You have the hard cost of impact to margins offset by increase basket size and loyalty. Another point to note is that it is a good way to enhance Nordstrom’s overall customer service centric image, and recover lost sales in the store due to inventory unavailability. Chances are for most shoppers in the store, if the item is in stock, they wouldn’t opt for ship to home unless it is bulky (okay if you are carrying six shopping bags already, different story).
Great way to offset the internet shopping experience, especially for gift and holiday giving. The great part of the Amazon type experience is to be able to go and shop and have gift sent all over the country, but the down side is the personal effect of being able to see and pick out as particular item, write a hand written note and bring at least some of the personal touch back.
I don’t expect to see many chains follow Nordstrom by offering free shipping on in-store purchases. This makes sense for a higher-end retailer known for excellent customer service and serving a higher income consumer. But it makes less sense for mid-tier department store chains where such a service would likely prove a huge cost with little return. A different version of the service may work for other chains, e.g., offering free shipping to the highest level of loyalty program members, for certain higher purchase amounts or for a small fee.
And there are several reasons why I don’t think it will prove a competitive advantage for Nordstrom, including the smaller number of Nordstrom stores nationwide vs. mid-tier department store chains, the difference in the customer base at Nordstrom vs. other chains and the difference in product assortments.
This is another element that makes Nordstrom a destination and keeps shoppers loyal. Leaving the store with the purchase cmplete is a huge plus for today’s busy shoppers — so free shipping solves inventory issues, handling and more. And it is a very good differentiator against the stores with “policies” and long waits at the register while an associate tries to solve an inventory problem or other issue. It may take quite a while for other retailers to raise the bar here. Shopping should be fun — free shipping is a nice addition.
This is a great move by Nordstrom and very consistent with their overall brand and experience strategy. In hyper-competitive categories like shoes and accessories, it will help them fend off competition from online pure-plays like Zappos and Amazon. In the brick and mortar space it will serve to consolidate their advantage as the leader in customer service and convenience.
How 1950s. What’s next, I wonder; white gloves in the tearoom, Dulcetor chimes and an “Open Tonight” sign in glowing red neon out front? Surprisingly, no one has mentioned “when I was a child, J.L. Hudson — or wherever — used to send out a delivery truck for a single spool of thread….” (and look where that got them !).
I wish them the best, of course, but I suspect they view this like a company offering life insurance — a perk that is useful largely because no one will actually use it.
No, Nordstrom’s customers already have made the choice to shop there based on years of experience with Nordstrom’s customer service. I know it is difficult for many to understand, but Nordstrom’s customers don’t think they are being treated special, they EXPECT to be treated as if they are valuable — because they are! The problem with most consumers is that they don’t expect to be treated well. They put up with all kinds of mistreatment because they are ignorant of the fact that they have a right to service and can vote with their feet at any time.
It is a brilliant and brand-right move. It is only surprising they didn’t make this move sooner. It allows the in-store experience to be equal to the online experience in terms of product shipping when desired. It really is a minor addition to the Nordstrom service experience toolbox, but a necessary one: removing any found sense of a disconnect from the ultimate experience. Nordstrom, along with Ritz Carlton and a few other truly customer focused enterprises, does this daily. With this example, they are also showing the ability to utilize a move like this for the PR value it can drive.
I agree that free shipping, and ensuring ultimate customer experience, must be coupled with a reasonably high margin environment. Mid-tier and discount retailers will be unable to take the profitability hit because they are over-reliant on discounting and other short-term tactics that ensure a low-margin environment.
It’s a great idea and another way to build a loyal customer base. If customers are in store shopping and don’t want to cart the merchandise home, it’s an easy service offering to provide. For comments concerning the cost and how this impacts the chain, my bet is that this service is going to only be utilized in large metro markets where the urban shopper doesn’t have the convenience of a car. It’s a great benefit to post — especially if it tests well with consumer and isn’t going to be widely used. Nordstrom is savvy enough to have tested this and forecast the cost to provide to its customer base.
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Nordstrom’s success is driven by a number of dynamic factors, with free shipping and returns being only one part of a larger composite customer image and shopper experience. I don’t know of too many retailers that are more skilled and have a greater sincerity and commitment to customers as Nordstrom’s.
I don’t think you can look at this in isolation. In and of itself, it’s a very small advantage. But put in context with Nordstrom’s brand identity — customer service over all — it makes all the sense in the world. What retailers might want to “rush to emulate” is Nordstrom’s customer service philosophy, not just its tactics.
My immediate thought was how this would be reflected in shelf price, but I can’t say if that would be a common reaction. Basically, this will be one more small advantage for Nordstrom’s, given all the other factors already in its competitive mix. I agree with David B. about Nordstrom’s skill as a marketer.
By itself the free delivery service is not a significant competitive advantage but it is a great value add. It is simply another element of the overall great Nordstrom’s shopping experience.
Great marketers keep reinforcing their brand positioning with every move. This one is a small step to be sure, but right in line for Nordstrom.
We’ve seen time and time again, that “shipping costs” are a bright red stop-sign on a consumers path to purchase. Free shipping programs seem to always test better than other promotions of equivalent value.
Nordstrom’s latest program is another logical step towards ubiquitous free shipping. Well over 50% of holiday transactions already include free shipping.
In this case, the free shipping offer is really a mandatory part of Nordstrom’s brand promise, which is unrivaled customer service. As Nordstrom has invested in its cross-channel e-commerce, “Ship to Home” has replaced their legacy practice of transferring product from adjacent stores upon customer request. Given that the inventory transfers were no cost and no risk to shoppers, it’s hard to charge them for the “ship to home” replacement and maintain a reputation for great service. Especially given all the free shipping programs Nordstrom offers from home, you never want to tell a customer that they have to leave the store to get the best deal.
As always, the challenge with free shipping programs will be making the economics work. Free shipping offers always drive incremental sales, but they can also be a major drag on profit margins.
I do think it will be copied, and I agree with many comments that it won’t necessarily translate into instant success without retailers getting the rest of their proposition right.
Household level data can really unlock a clear view of whether this is working, on which products, and for whom. However, customer loyalty metrics as well as financial metrics must be considered to get this right.
It all depends on whether other retailers have the cost structure to replicate. You have the hard cost of impact to margins offset by increase basket size and loyalty. Another point to note is that it is a good way to enhance Nordstrom’s overall customer service centric image, and recover lost sales in the store due to inventory unavailability. Chances are for most shoppers in the store, if the item is in stock, they wouldn’t opt for ship to home unless it is bulky (okay if you are carrying six shopping bags already, different story).
Great way to offset the internet shopping experience, especially for gift and holiday giving. The great part of the Amazon type experience is to be able to go and shop and have gift sent all over the country, but the down side is the personal effect of being able to see and pick out as particular item, write a hand written note and bring at least some of the personal touch back.
I don’t expect to see many chains follow Nordstrom by offering free shipping on in-store purchases. This makes sense for a higher-end retailer known for excellent customer service and serving a higher income consumer. But it makes less sense for mid-tier department store chains where such a service would likely prove a huge cost with little return. A different version of the service may work for other chains, e.g., offering free shipping to the highest level of loyalty program members, for certain higher purchase amounts or for a small fee.
And there are several reasons why I don’t think it will prove a competitive advantage for Nordstrom, including the smaller number of Nordstrom stores nationwide vs. mid-tier department store chains, the difference in the customer base at Nordstrom vs. other chains and the difference in product assortments.
This is another element that makes Nordstrom a destination and keeps shoppers loyal. Leaving the store with the purchase cmplete is a huge plus for today’s busy shoppers — so free shipping solves inventory issues, handling and more. And it is a very good differentiator against the stores with “policies” and long waits at the register while an associate tries to solve an inventory problem or other issue. It may take quite a while for other retailers to raise the bar here. Shopping should be fun — free shipping is a nice addition.
This is a great move by Nordstrom and very consistent with their overall brand and experience strategy. In hyper-competitive categories like shoes and accessories, it will help them fend off competition from online pure-plays like Zappos and Amazon. In the brick and mortar space it will serve to consolidate their advantage as the leader in customer service and convenience.
How 1950s. What’s next, I wonder; white gloves in the tearoom, Dulcetor chimes and an “Open Tonight” sign in glowing red neon out front? Surprisingly, no one has mentioned “when I was a child, J.L. Hudson — or wherever — used to send out a delivery truck for a single spool of thread….” (and look where that got them !).
I wish them the best, of course, but I suspect they view this like a company offering life insurance — a perk that is useful largely because no one will actually use it.
No, Nordstrom’s customers already have made the choice to shop there based on years of experience with Nordstrom’s customer service. I know it is difficult for many to understand, but Nordstrom’s customers don’t think they are being treated special, they EXPECT to be treated as if they are valuable — because they are! The problem with most consumers is that they don’t expect to be treated well. They put up with all kinds of mistreatment because they are ignorant of the fact that they have a right to service and can vote with their feet at any time.
It is a brilliant and brand-right move. It is only surprising they didn’t make this move sooner. It allows the in-store experience to be equal to the online experience in terms of product shipping when desired. It really is a minor addition to the Nordstrom service experience toolbox, but a necessary one: removing any found sense of a disconnect from the ultimate experience. Nordstrom, along with Ritz Carlton and a few other truly customer focused enterprises, does this daily. With this example, they are also showing the ability to utilize a move like this for the PR value it can drive.
I agree that free shipping, and ensuring ultimate customer experience, must be coupled with a reasonably high margin environment. Mid-tier and discount retailers will be unable to take the profitability hit because they are over-reliant on discounting and other short-term tactics that ensure a low-margin environment.
It’s a great idea and another way to build a loyal customer base. If customers are in store shopping and don’t want to cart the merchandise home, it’s an easy service offering to provide. For comments concerning the cost and how this impacts the chain, my bet is that this service is going to only be utilized in large metro markets where the urban shopper doesn’t have the convenience of a car. It’s a great benefit to post — especially if it tests well with consumer and isn’t going to be widely used. Nordstrom is savvy enough to have tested this and forecast the cost to provide to its customer base.