SAN FRANCISCO (Reuters) - The future of retail came to Jamie Nordstrom not in a dream, but though his email inbox from Amazon.com Inc, the online retailer that Nordstrom now targets as his biggest rival.
The 40 year-old, great-grandson of Nordstrom Inc founder John W. Nordstrom and president of Nordstrom Direct ordered a fishing tackle box from Amazon last year. And then he received emails from Amazon about other tackle boxes for five straight days.
On the sixth day, Amazon sent an email to buy an additive that is often used to preserve gasoline in boats stored over the winter — an example of Amazon’s strength crunching customer data to provide more relevant recommendations.
“I was like, ‘Crap, I need some of that.’ They got me and all I had to do was literally hit a button. That’s incredibly valuable,” Nordstrom said during an appearance at the Milken Institute Global Conference earlier this year.
Nordstrom, who already has his company’s online business growing at a greater pace than its rivals, sees this “personalization” as the new front in the retail wars, delivering the high levels of customer service that the department store is already known for.
That’s why Nordstrom is going on the offensive against Amazon, spending heavily on technology and luring talent from Amazon and Microsoft Corp. to super-charge his family department store chain’s growth.
At a time when others are still playing defense or trying to match Amazon, Jamie Nordstrom is seen as a leader in the retail industry’s attempts to grow online.
“I really respect a lot of what’s going on at Nordstrom online and Jamie Nordstrom runs that,” said Scot Wingo, chief executive of e-commerce firm ChannelAdvisor. “He’s focused on putting customers first and that’s led him into these new areas.”
The scion of the Seattle-based retailing family led a multi-year integration of Nordstrom’s stores and website that was completed in 2009 - years before most retailers.
Now, in addition to personalization, he’s going after the world’s largest Internet retailer with a mobile device strategy and broader online selection.
“E-commerce is going to be where the majority of our future growth comes from, period,” Nordstrom said in September at a National Retail Federation conference. “We’re building a foundation to be successful in that environment. That’s where the battle will be won or lost.”
Retailers like Best Buy Co Inc and Barnes & Noble Inc are losing sales to Internet rivals as more people shop online, lured by low prices, vast selection and the convenience of faster shipping.
This year on Black Friday, traditionally the most important shopping day in the United States, online sales surged 26 percent, while store sales dropped an estimated 1.8 percent, according to comScore Inc and ShopperTrak, respectively.
For Nordstrom, such rapid online sales growth is business as usual. Third-quarter sales at the company’s department stores rose 8.1 percent compared to the same period a year earlier, while sales at Nordstrom Direct, as the online business is known, jumped 38 percent. While it’s from a much smaller base, that growth outstripped the rate of Amazon’s third-quarter sales, which climbed 27 percent.
“They have always been on the forefront and Jamie knows his stuff, knows the competition and remains humble,” said Jennifer Black, a retail analyst at Jennifer Black & Associates who has covered Nordstrom for more than a decade, who began her career there and meets with Jamie Nordstrom at least once a year.
“If you ask Jamie what he wants to be when he grows up, he wants to compete with the likes of Amazon,” she added. “That’s setting the bar high and I think that’s good.”
The main difference between Jamie Nordstrom and other retail executives is his willingness to spend heavily on long-term projects, another Amazon trait, according to Josh Berman, co-founder of MySpace and CEO of online fashion start-up BeachMint.
At the start of 2012, Nordstrom unveiled a $3.3 billion, five-year capital plan of which about 30 percent was to be spent on e-commerce and technology. That is double the amount Nordstrom allocated to those areas in its capital plan a year earlier.
When Berman and Nordstrom met at the Milken conference in Los Angeles in May, they reminisced about their first jobs as stock boys at Nordstrom.
Berman had a holiday job in the stockroom of the Nordstrom in Woodland Hills, California, when he was 16, while Jamie Nordstrom began his career as a teenager in the stockroom of a Nordstrom store.
“This was about 27 years ago and he was very familiar, not only with the mall I worked at, but with the ins and outs of the specific department I worked in,” Berman said.
Jamie Nordstrom is now part of a nine-person team that runs the company. He’s the second cousin of three other Nordstroms on the team: Blake, president of Nordstrom; Erik, president of stores; and Peter, who runs merchandising.
Before 2005, Nordstrom.com and the company’s physical stores had different products and prices and separate marketing, human resources and accounting departments.
Jamie Nordstrom combined the two, giving sales staff and customers access to any product in inventory at any time. Nordstrom can also fulfill online orders from stores, or order an item online that has run out in stores.
The system can also route online orders to stores where items are selling slowly, keeping turnover high and limiting price mark downs, according Kimberly Greenberger, an analyst at Morgan Stanley.
Most retailers, including Wal-Mart Stores Inc and Macy’s Inc, have only recently set up such systems, known as multi-channel fulfillment.
Now Nordstrom plans to show more relevant recommendations to customers online and to their smartphones. The best selling online categories include: women’s and men’s apparel, jewelry, and cosmetics. Such information will also show up in Nordstrom stores through sales staff using Apple Inc iPads and iPod Touch devices.
“Retailers that are investing in the back end of that - to deliver that personalized information - are the ones that are going to win,” Nordstrom said, noting that the company has more than 10,000 mobile point-of-sale devices in its stores. “We’re betting pretty hard on that.”
To get all this done, he has hired more than 400 new employees with experience in areas such as software engineering and website development.
Last year, Nordstrom hired Kirk Beardsley, an e-commerce executive from Microsoft, who was director of business development at Amazon for over seven years.
Other Microsoft and Amazon employees have followed Beardsley to Nordstrom Direct.
“We’ve been on an online growth strategy, you could say, for eight years now,” Nordstrom said. “At different steps along the way we see opportunities to make a step change in our capabilities. In 2012, we saw an opportunity.”
Editing by Leslie Gevirtz