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112-Year-Old Nordstrom Back in the Mining Business?

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The Nordstrom flagship Seattle department store's off-white exterior is simple and clean (thanks largely to the endless rain) and understated, in stark contrast to the colorful, charged atmosphere going on inside the building, where the dollar bills are flying. These are good times for Nordstrom. Its stock price is high, its investments in technology are industry-leading and its customers are happy. And that's the key part of the equation -- its hip and stylish customers are enthralled with a 112-year-old brand, in large part because Nordstrom listens to them and analyzes their behavior behind the scenes with slick technology, and then implements their wants and needs in-store.

Nordstrom customer service is, in some people's minds, the best in the world, but being the best at what some companies consider a thankless task doesn't come easy, and being customer-centric in a wired world requires the even more thankless task of tapping customer data, which adds the ethical burden of potentially violating customer privacy. As a cost of doing business, most companies today are involved in measuring and analyzing customer data on some level. At least the successful ones. Yet, if a story breaks publicly about a brand's attempts to collect customer data sensational headlines ensue, such as this one from the New York Times that ensnared Nordstrom: "Attention Shoppers: Store Tracking Your Cell!"

In summary, the story exposes a program Nordstrom had implemented in the fall of 2012 to track its customers' in-store movements via the Wi-Fi on their smartphones. When a sign had been posted in-store announcing the program, customers revolted against the invasion of privacy without their consent. As a result, the program was shut down last May. The Times headline generated readers, but was misleading in terms of how deep this data collection by Nordstrom really went, considering it only tracked movement. It was minimally invasive as opposed to what happens when a customer visits Amazon.com, eBay or even Nordstrom.com.

Nordstrom's efforts to better understand its customers provides those customers with a shopping experience that is a department store best. Name a better shoe selection for men at any store, much less a department store! Its kids department stocks cooler stuff than some of the hippest kid boutiques in Manhattan. Is there a better department store café? Has Nordstrom ever questioned a return of your merchandise, regardless of the situation? These customer experience enhancements don't necessarily spring from the data collected from secret shopper surveys, but rather in large part from Nordstrom's heavy investments in technology tools over the years that capture data.

In 2011 and 2012, Nordstrom spent over $300 million investing in startup companies Bonobos and Hautelook, along with creating a slick website partnership with Wantful, all in an effort to better understand its customers through data mining. The brand has also invested its own money to create two technology startup companies; the Nordstrom Innovation Lab and the Nordstrom People Lab. Ideally these technology investments will serve returns of immediate financial revenue from products being created and sold, but also improve the customer experience at the brick and mortar level for Nordstrom by mining potential customer data in all possible channels.

In this day and age, who would have thought a 112-year-old department store chain would be the leading innovator in retail technology? Nordstrom's brand is famously understated and conservative, but behind the flagship's off-white exterior this brick and mortar stalwart employs some of the retail web industry's most colorful and innovative thinkers, strategists and technologists, who are in place solely to improve your shopping experience.

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