Nordstrom gets in step with tracking its inventory
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The Nordstrom Way is getting an upgrade.
For decades, when a customer needed a size or color a store didn't have in stock, sales associates would call around to other Nordstrom stores to track down the item. It was the sort of personal touch for which the Seattle retailer became famous.
But in recent years, as retailers beefed up their in-store technology and time-pressed shoppers got used to instant answers, Nordstrom's inventory-tracking systems lagged behind the competition's. The time-honored practice of working the phones came to be seen as charming but antiquated.
Now, Nordstrom's systems are going high-tech. On the sales floor at its stores across the Pacific Northwest, the company has quietly introduced its "perpetual inventory" system, a cornerstone of President Blake Nordstrom's plan to make the high-end retailer more efficient and profitable.
Perpetual inventory enables employees to quickly find sizes, styles and colors at other Nordstrom stores by computer, providing customers with prompt answers and freeing salespeople to help other customers. The new system, which will cost between $150 million and $200 million, was unveiled three weeks ago at Northwest stores and will be rolled out nationwide through June.
Most of Nordstrom's competitors made the switch to similar inventory-management systems years ago. To many customers, employees and observers, the overhaul is long overdue.
"It's something where they're pretty much behind everybody else in the industry," said Dan Geiman, retail analyst for McAdams Wright Ragen in Seattle. "It's a little late in coming, but better late than never."
Robert Spector, a Seattle retail expert and co-author of the 1995 book "The Nordstrom Way," said the new technology will help Nordstrom carry out its customer-service mission in an era when speed counts.
"Customer service is not just a friendly, helpful, knowledgeable salesperson helping you buy something," Spector said. "Part of customer service is having the right item at the right size at the right price at the right time. And that's something perpetual inventory will help with."
Since taking the helm of the business in late 2000, Blake Nordstrom has emphasized perpetual inventory, often stressing its significance during conference calls with analysts. But company officials declined requests for interviews about the introduction of the system.
"It's still too soon for us to talk about what's going on with perpetual inventory," spokeswoman Shasha Richardson said. The company wants more time for employees to adapt to the system before discussing it publicly, she said.
Sales associates at several local stores praised the system, saying it will make finding items less cumbersome and will allow them to sell more merchandise. In November, the company told retail analysts that a four-month pilot at stores in Denver and Salt Lake City went smoothly.
Analysts say perpetual inventory will help Nordstrom get a better handle on an issue that has hounded the company in recent years. In 2000, inventory rose 14.4 percent at stores open longer than a year, and Nordstrom often turned to markdowns last year to clear out excess merchandise. (It has been making strides lately with its inventory management. On Oct. 31, inventory per square foot was down 8 percent compared with a year earlier.)
Computers have been on the sales floor at Nordstrom stores for years, but their inventory-tracking capabilities were limited. Jamie Nordstrom, 29, a member of the company's information-technology team, said last year that a stint on the sales floor showed him Nordstrom's computers needed an update.
"We'd say (to the customer), 'We have to call around and find it for you,' and the customer would say, 'Why can't you just look it up in your computer?' " he said. "Well, we didn't have any computer like that. It would frustrate me that other retailers are able to do things for their customers that we can't do."
Perpetual inventory will give the company and its sales staff more precise, up-to-date knowledge about where merchandise is and what is and isn't selling at particular stores. That will give Nordstrom a better idea of what it needs to order and reorder.
Such information can play a critical role in a major retailer's quest to meet the needs of its customers, said Dan Edelman, chairman of The Bon Marché. The Bon's computers track individual items but also automatically reorder such basic merchandise as dress shirts and underwear. Orders are tailored to the shoppers in different areas; for instance, Bon stores in Montana tend to sell larger sizes of clothes than do their counterparts in the Puget Sound region.
"We believe at The Bon that customers will come back to us if they have a satisfying experience," Edelman said. "There's many components to that, but perhaps most important is that we have the item that they're looking for."
Edelman declined to talk specifically about Nordstrom's current inventory systems, but he said The Bon has been increasingly capturing market share in the Northwest in the past three years.
"As a general statement, I'd say that's because we more often have the merchandise that our customers are looking for than our competition," Edelman said.
The arrival of perpetual inventory at Nordstrom comes after years of anticipation. Efforts to upgrade the company's inventory systems began under former Chairman John Whitacre in the mid- to late 1990s.
In December 2000, three months after Whitacre's departure, Nordstrom's new management team announced perpetual inventory would be delayed. But since then, Blake Nordstrom has made the system a priority.
The company doesn't expect the system to improve the bottom line until later this year, but it has created somewhat of a stir among retail analysts. On Jan. 23, Banc of America Securities analyst Dana Cohen made frequent references to perpetual inventory in a favorable report that pushed Nordstrom stock up 9 percent in one day.
When discussing Nordstrom's new inventory system, one question always seems to surface: Why did one of the nation's leading retailers wait until 2002 to install a state-of-the-art inventory system?
The answer lies in Nordstrom's culture of customer service. Observers say previous executives had been reluctant to adopt costly technology, preferring to invest in people.
"The old, classic Nordstrom way is that if you sell more stuff, that compensates for any deficiency you may have in terms of technology," Spector said. "They didn't want to replace the high touch with the high-tech.
"The challenge, not only for Nordstrom, but for other retailers, is how you strike that balance between having up-to-date systems and giving that personal service."
Jake Batsell can be reached at 206-464-2718 or jbatsell@seattletimes.com.