In its second-largest acquisition, Amazon buys the company for $970 million.
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Until recently Nordstrom Direct’s web and catalog business used an inventory system from a different vendor that left the retailer’s managers to pull reports from separate systems to get a complete look at inventory levels. With the new system, as customer orders are entered online, on the phone or at a store point-of-sale terminal, the transactions automatically update a single repository of inventory records. Likewise, inventory gets updated as Nordstrom scans in new merchandise received at its distribution centers.
Focusing on Nordstrom’s customer-centric strategy, the software suite also will be used to integrate sales and inventory data with multiple applications, including customer relationship management, merchandising, human resources and supply chain management, Lau adds. That will enable the retailer to order and allocate the right amount of inventory to individual stores and the warehouses supporting the web and catalog channels. It also will enable Nordstrom to analyze and plan labor schedules around areas and times of peak demand, coordinate merchandising promotions and inventory levels, and respond to customer demand in a more personalized way. It will enable more personalization by backing customer service agents and web pages with data on customer shopping behavior and inventory movement.
Putting all this technology to work requires training merchandise and inventory managers. Nordstrom will provide the training in house, though Oracle also offers courses that explain how to view and use data models and reports. While inventory integration and record updating are largely automatic, retail managers still must take time to check that inventory records coincide with sales and purchase order activity.
The broad scope of Nordstrom’s systems integration effort is enabling the merchant to heighten inventory management effectiveness, Lau says. “You can have a good inventory management system for transferring inventory to stores and warehouses,” she adds, “but without systems integration it just moves inventory to locations without knowing what customers want.”
Linking up the store and direct business inventory systems will provide a single view of inventory across all channels, Jamie Nordstrom says, that will not only make for more efficient inventory management but ultimately give salespeople and customers a view into inventory availability throughout Nordstrom.
At this stage of the integration project, store clerks now can place special orders from POS terminals for products not available in store, though they cannot yet view the current availability of the online channel’s inventory. Likewise, online shoppers cannot yet view in-store inventory in case they’d prefer to pick up an item at a Nordstrom store. The retailer plans to finish integration of these data sets within two years.
Other future benefits from inventory integration will be the ability to leverage additional capabilities of the Oracle retail suite. For example, the suite includes ProfitLogic pricing optimization software, which traditionally has been used to help retailers decide when to change pricing on products sold in stores to realize the best combination of profit margin and inventory turns. Pricing optimization software has been intended mostly for inventory already in stores, where multichannel retailers do the lion’s share of their business.
But as the web channel has become more important both in terms of sales volume and its impact on other channels, retailers recognize the importance of pricing optimization for online inventory as well as store inventory, Lau says. “A lot of apparel retailers in particular are looking at pricing optimization as just as important on the web as in stores,” she says.
In addition to these back-end benefits, Nordstrom is expecting the finished project’s integrated systems will better support its strategy of emphasizing customer service. “If a customer does live chat, we can look up their order histories and make recommendations armed with a tremendous amount of product knowledge,” Nordstrom says. “We measure our success in the call center on how well we answer customers’ questions rather than by how little time we spend in a chat session or on the phone. We’re trying every day to make the customer experience online and on the phone as close to the personalized in-store experience as possible.”
Keeping it personal
In its stores, Nordstrom salespeople access their best customers’ records of past purchases and shopping interests and recommend something new and complementary. The merchant’s cross-channel inventory integration is enabling it to extend such personalized service to the web and call center, supporting its strategy of excelling in personalized service across channels and helping to distinguish it from other retailers, Gartner’s Alvarez says.
While improving customer service through better inventory management, Nordstrom also is improving the way it sources products in the first place to better support cross-channel shopping, Jamie Nordstrom says. Separate product-buying teams for Nordstrom Direct and its stores now report to a single general merchandise manager who coordinates merchandise selection for the web and stores. This set-up has replaced a former strategy of offering completely separate merchandise in the direct channel and in stores.
“That had been confusing for our customers and our salespeople,” Nordstrom says. “The main thing is this: It’s clear to us that our customers no longer look at the web site and store as two separate entities. They want the best stuff and the best service no matter how they shop.”