Will Nordstrom succeed in Canada? – It’s all about becoming a destination
While it’s true that the cross border shopping experience is an integral part of Canadians love affair with U.S. retailers, U.S. retailers need to create this sense of adventure at their Canadian stores. The challenge is to create an experience that will sway Canadians to part with their hard earned dollars. For Nordstrom, are things like exceptional customer service, always in stock top name brands, restaurants and cocktail lounges going to be enough for them to succeed or will it take something more?
Would Target really have been a success in Canada if they had offered the same products as they do in the U.S. and had them in stock at a competitive price? Could it be that the only reason we shopped at Target in the first place (before they came to Canada) was the excitement of cross border shopping and that that customer experience is impossible to replicate? Let’s face it; if you’re going to drive two hours with friends over the border to go shopping, chances are you’re not going to arrive home empty handed. But putting Target right in our own backyard takes the fun out of it. Who wants to drive into the same parking lot where there used to be a Zellers only to get out of the car and see the sign has changed to a red target? Similarly, will Nordstrom have the same problem… just like the Target cross border shopping trend, Canadians first exposure to Nordstrom was Vancouver shoppers driving over the border to the Seattle location. Will Nordstrom be able to replace the excitement of that cross border shopping experience with a better in store experience at the Vancouver store?
So far Nordstrom has done a pretty good job of making sure their Canadian stores will deliver the same experience shoppers get south of the border. They are well positioned not to make the same mistakes Target did, launching much more slowly, rolling out one store at a time, making sure they get it right as they go. Over a two year period, they have stores in Calgary, Ottawa, Vancouver and now Toronto. Target tried to launch 133 stores across Canada in 6 months. Staff is trained months in advance of Nordstrom store openings. Target hastily hired staff giving them little or no training.
Nordstrom has exposure to high end MVP real estate (Toronto Eaton Centre, Ottawa Rideau Centre) making it more attractive for customers to visit, unlike Target that simply tried to take over dated Zellers outlets. No matter how much Target tried to change the physical appearance of their stores, you still felt like you were walking into a Zellers.
Nordstrom also plans to offer the same merchandise in Canada as they do in the U.S., something Target failed to do because of supply chain and inventory software management issues. They will also have less competition in Canada than Target did because they are not a discount store. Pricing won’t be as big an issue because Nordstrom has more private label, narrowly distributed brands that are less subject to priced comparison. In order to get product into as many stores as fast as possible, Target was forced to carry many brands that other retailers (Walmart) already had. Nordstrom also has much more experience with ecommerce than Target did and their online presence integrates well with their in store purchasing process. They are also going to offer a better customer experience than Target did: A restaurant, cocktail lounges, kid’s playgrounds, a concierge service, personal stylist and personal shopper just to name a few.
Perhaps the biggest difference is Nordstrom’s above average customer service. Stories abound of employees going out of their way for their customers. (The lady who lost her ring in the store and the employees who tirelessly helped her find it – eventually turning up in the cleaning crew’s vacuum cleaner)
Part of Target’s demise was that the middle income demographic that they were trying to attract is rapidly disappearing. It seems that department stores are either catering to the very wealthy or lower income. This is supported by the fact that stores on the extreme ends of the income spectrum have succeeded (Walmart and Holt Renfrew) while other in between stores like Sears are struggling. The rich will always have money to spend and Nordstrom targets this market effectively.
However all of this does not mean Nordstrom will have an easy go of it in Canada. Higher end U.S. department stores are opening all the time. Saks Fifth Avenue, the already dominant Holt Renfrew and you can add to the mix Quebec based Simons who are expanding in Ontario. Canadian customers are also more frugal their US counterparts making Nordstrom’s higher end pricing potentially problematic. There is also the trend of “showrooming” where customers will decide on a purchase in-store and end up buying somewhere else based on price. This could particularly be a problem for Nordstrom if customers take advantage of their customer service but don’t buy.
While all this seems as if Nordstrom is well positioned to succeed in Canada it really depends on whether they can deliver an exceptional customer experience. This is even more relevant in the Canadian market where shoppers are more frugal, economies of scale are smaller, competition is stiffer and now the adventure of the cross border shopping experience is removed.
One of the ways to deliver this experience is by making your store a “destination” Here are few examples:
Allow customers to become familiar with your products before they buy them
Let people take your products off the shelves and interact with them. Provide space in the store where customers can try your products (e.g. a video game franchise that allows people to play games in the store)
Offer in-store classes and services
These sessions allow you to interact with your customers and learn more about them. They also encourage customers to stay in your store longer and maybe buy something. (e.g. Loblaws offering cooking classes)
Make it a fun place to spend time
Find out what the qualities are of your customer’s favorite places and destinations and try incorporating them into your store. (artwork, store colors)
Make sure customers enjoy themselves
Give your customers a reason to come back to your store besides your great products and customer service. (e.g. A men’s clothing store that has big leather sofas, a stocked bar and a flat screen TV where shoppers can watch the game)
Nordstrom and other retailers planning on heading north are going to have to deliver an exceptional customer experience by becoming a destination if they hope to succeed in the Canadian market place.