Nordstrom's Aurasma Catalog Initiative

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CONTENTS

EXECUTIVE SUMMARY COMPANY SUMMARY NEW STRATEGIC INITIATIVE MARKET ANALYSIS TARGET CONSUMER COMMUNICATION & PROMOTIONS FINANCIAL PLAN CONCLUSION APPENDIX 2

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EXECUTIVE SUMMARY

Nordstrom is excited to present its “Rediscover the Way You Shop” new strategic initiative.

This initiative will breathe life into the pages of Nordstrom’s catalogs by engaging the consumer through rich, digital content which will be triggered through Nordstrom’s mobile application. Through its partnership with Aurasma, Nordstrom will embed augmented reality technology into its native mobile app in an effort to strengthen the bond with pre-existing customers, and also attract the young Millennial. Customers will be delighted to experience interactive animations, videos and feature fashion films when they scan the pages of their latest Nordstrom catalog with their smartphone. In addition, customers will have the convenient option of in-app checkout. Not only will this initiative revive the static distribution channel of the catalog, but it will also firmly establish Nordstrom at the forefront of the competitive fashion retail market. To measure the results of the “Rediscover the Way You Shop” initiative, Nordstrom will analyze the following key success factors: the number of catalogs distributed, the rate of customer conversions and the rate of click-through.

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COMPANY SUMMARY HISTORY In 1901, John W. Nordstrom and Carl Wallin opened Wallin & Nordstrom, a small shoe store in downtown Seattle. John’s approach to business was to provide exceptional service, selection, quality and value.

In 1928, John retired and sold his share of the company to his sons Everett and Elmer. Carl Wallin retired a year later and also sold his share to the Nordstrom sons. John’s third son, Lloyd, joined the team in 1933.

By 1960, the Seattle shoe shop had become the largest shoe store in the country, and the company was the largest independent shoe chain in the United States. Looking to expand, Nordstrom ventured into the women’s clothing market with the purchase of Seattle-based Best Apparel in 1963. With the purchase of a Portland, Oregon, fashion retailer three years later, Nordstrom now offered Northwest customers a selection of shoes and apparel under the new name Nordstrom Best. Men’s and children’s wear were added in 1966.

In 1968 the three Nordstrom brothers handed the company over to the third generation: Bruce, James and John, Jack and family friend Bob Bender. The company went public in 1971, and was formally renamed Nordstrom, Inc. Two years later, annual sales surpassed $100 million and the company was recognized as the largest-volume fashion specialty store on the West Coast. In 1978 Nordstrom entered the California market and by 1988 had opened its first East Coast store in Virginia.

In 2012, Nordstrom became the only major U.S. retailer to sell a broad assortment from the renowned British fashion brands Topshop and Topman. Today, a fourth generation of the Nordstrom family, along with an executive team, helms the company in partnership with a talented team of innovators and fashion leaders. Nordstrom currently operates 117 full-line stores. Nordstrom is owned by Nordstrom Inc. which includes other stores Nordstrom Rack, Jeffrey, and HauteLook.

MISSION In store or online, Nordstrom works relentlessly to give customers the most compelling shopping experience possible. The one constant? John W. Nordstrom’s founding philosophy: offer the customer the best possible service, selection, quality and value. Nordstrom’s mission is to provide outstanding service every day, one customer at a time.”

OWNERSHIP STRUCTURE Nordstrom, Inc. (JWN) is publicly traded on the New York Stock Exchange. Today, a fourth generation of the Nordstrom family, including Blake, Erik and Peter Nordstrom, along with an executive team, directs the company in partnership with a talented team of innovators and fashion leaders. The approximate number of holders of common stock as of March 10, 2014 was 215,000, based upon the number of registered and beneficial shareholders, as well as the number of employee shareholders in the Nordstrom 401(k) Plan and Profit Sharing Plan.

REVENUE The company did $12,166,000 USD in total company sales as of 2013, which includes Nordstrom fullline stores, direct business, Nordstrom Rack, HauteLook and Jeffrey sales. 38% of total company sales came from E-commerce and Nordstrom Rack. Nordstrom net sales, which consist of the full-line and Direct businesses, were $9,327 USD in 2013, an increase of 1.0% compared with 2012, with same-store sales up 2.3%. $7,705 million USD in net sales for Nordstrom full-line stores and $1,622 million USD in net sales for Direct occurred. Strong growth in the Direct channel was partially offset by sales decreases at our full-line stores. Both the average selling price and number of items sold increased on a same-store basis in 2013 compared with 2012. Category highlights included Cosmetics, Men’s Shoes and Women’s Apparel.Our Direct business continues to be our fastest-growing customer channel. Direct finished its third consecutive year of approximately 30% or more of same-store sales growth.

(Left to Right): Blake, Peter and Erik Nordstrom.

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FUTURE GROWTH PLANS

OPPORTUNITIES

Nordstrom plans to open three new stores in 2014, followed by the opening of its first Manhattan store in 2018. Plans are under way to open Nordstrom’s first stores in Canada at premier shopping centers in Calgary, Ottawa, Toronto and Vancouver. Nordstrom recently increased the initial planned openings from four stores to six. Our first store is scheduled to open in Calgary at Chinook Centre on September 19, 2014 followed by Ottawa, Vancouver and three in Toronto, through 2017.

Entering the international market, especially emerging economies

Other planned openings include our second store in the Houston market at The Woodlands Mall on September 5, and a new store in Jacksonville, Florida, at the St. Johns Town Center on October 10.

Nordstrom has begun a two-year remodel of the flagship store in downtown Seattle. During the next few years, we will open stores in Milwaukee, Puerto Rico and Minneapolis, in addition to the planned opening of our first store in Manhattan in 2018. The company has begun work on a second fulfillment center to open in 2015 in Elizabethtown, Pennsylvania. In January of 2015 stores in Vancouver, Washington, and in Portland, Oregon will be closed.

Opening additional fulfillment centers to increase customer service

SWOT ANALYSIS

Acquisition of smaller retail chains Improving and developing the Nordstrom catalog as a direct marketing tool

Collaborating with new/current private-label brands

THREATS Unauthorized access to customer data could lead to decline in consumer confidence A downturn in economic conditions Competitive market forces and changes in consumer behavior

ST R E N GT H S

Supply chain disruptions due to severe weather patterns, natural disasters, etc.

Strong brand equity, customer loyalty, customer service and operational network

Omni-channel retailer competition

Free shipping and returns with a flexible return policy

Fast-changing, consistent technological advances

Diverse product categories and styles attracting a range of consumers Seamless omni-channel presence Offers many additional services, i.e. Nordstrom Bistro, Spa, Nordstrom Rewards Linked online and in-store inventory Ability to successfully target Millennial customers through brand partnerships Transition to a global brick-and-mortar retailer as it transitions into the Canadian market Increased same store sales performance

WE A K N E SSE S Presence in other continents/countries is very low Products and merchandise is also sold by many other companies Decreasing in-store sales Free shipping and returns add extra expenditures 8

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POSITIONING IN MARKET With 164 channels of distribution and a more moderate pricing structure than its luxury department store counterparts, Nordstrom is competitively positioned in the market. Its direct competitors range from Belk and Dillard’s on the lower price end of the spectrum, to Barneys and Bergdorf Goodman on the higher end. Nordstrom’s closest competitor in terms of pricing is Bloomingdale’s with a total average price point of $1,986 to Nordstrom’s $2,571. What Bloomingdale’s lacks in breadth of brickand-mortar store locations (it has 37 stores, including one in Dubai) it makes up for with its shipping services to over 100 countries (Nordstrom currently only ships to forty-four countries). Another close competitor, Neiman Marcus, is similarly positioned in terms of accessibility to Bloomingdale’s; however, it attracts more affluent, established customers due to its higher price points.

HIGH ACCESSIBILITY

LOW ACCESSIBILITY

HIGH PRICE

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DISTRIBUTION CHANNELS Nordstrom’s channels of distribution include in-store, direct mail catalog, e-commerce and m-commerce. Through these channels, Nordstrom sells merchandise in the following categories: women’s apparel, shoes, men’s apparel, women’s accessories, cosmetics, children’s apparel, and other (Nordstrom). As of April 24, 2014, Nordstrom operates 117 full-line stores in the United States. Sales associates on the floor carry mobile devices to run credit and debit transactions from anywhere in the store. Many also have tablets which allow them to search inventory levels both in local stores and online to help answer customer questions. In 2013, Nordstrom full-line stores generated $7,705 million USD in net sales and direct sales (mostly online) reached $1,622 million USD (Nordstrom). Nordstrom operates a user friendly website, serving forty-four countries, where a customer’s needs are met at any time. The online shop is easy to navigate, and between the hours of 7am and 1am, customers can live chat with a Nordstrom customer service specialist, beauty stylist, wedding stylist or even a designer specialist. In 2013, Nordstrom expanded its online selection by 30% to cater to consumer preferences.

Furthermore, customers can always expect free standard shipping and free returns when ordering online, where most in-stock items will arrive three to six days after purchase. To facilitate ease of shipping, Nordstrom has six distribution centers in Portland, Oregon; Dubuque, Iowa; Ontario, California; Newark, California; Upper Marlboro, Maryland and Gainesville, Florida. It also operates two fulfillment centers located in Cedar Rapids, Iowa and Hiawatha, Iowa. Cedar Rapids is the main fulfillment center from which the majority of online purchases are shipped. Products may also be shipped from the other distribution centers or from one of the Nordstrom stores. While the majority of purchases shipped from stores are from that store’s inventory, if that store is out of a specific product it can be shipped to the customer from one of the distribution centers, or from other 12

Nordstrom stores. To ensure the customer always gets what they want, Nordstrom’s employees have access to the online website as well so a product can be ordered from the store and delivered to the customer’s home free of charge. Additionally, Nordstrom announced the opening of its first east coast distribution center slated for summer 2015 in Elizabeth Town, Pennsylvania. Apart from e-commerce, Nordstrom has seen success in its m-commerce initiatives. On a typical day, more than 100,000 unique customers access Nordstrom on a mobile device, with nearly twice that amount during the holidays. In 2012, sales from a mobile device accounted for over 20%— more than $260 million—of the company’s total direct sales. This statistic come from Nordstrom Inc., which includes Nordstrom Rack,

“On a typical day, more than 100,000 unique customers access Nordstrom on a mobile device, with nearly twice that amount during the holidays.”

HauteLook, and Jeffrey stores (Briggs). Another channel generating direct sales is the catalog.

The Nordstrom catalog can be received through the mail, browsed online or browsed through the interactive Nordstrom catalog iPad app. The catalog is released every month, with two catalogs focused on the half yearly sale, resulting in twelve catalogs distributed per year. Seasonal catalogs for men’s and plus size are released as well. When it comes to distribution models, Nordstrom has set up a joint venture with TOPSHOP, part of the Arcadia retail conglomerate. As of August 2013, there are forty-two TOPSHOP at Nordstrom locations and eighteen TOPMAN at Nordstrom locations. TOPSHOP and TOPMAN are also available through Nordstrom’s m-commerce and e-commerce channels (Davey).

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Catalog Application

E-Commerce

Browse—and shop—the newest styles of the season as soon as our catalogs come out.

Discover the latest trends and fashion-forward merchandise thorugh Nordstrom’s easy to navigate online site.

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M-Commerce Shop new looks and favorite brands, read customer reviews, scan bar codes, share events, check availability at your nearest store and more.

OMNI CHANNEL PRESENCE

Brick and Mortar Nordstrom operates 117 fullline stores across the United States. Sales associates are on -hand to provide one-of-a-kind personalized service.

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COMMUNICATION AND PROMOTIONS Nordstrom employs direct marketing through the use of e-mail marketing and the monthly direct mail Nordstrom catalogs. Nordstrom e-mails include promotional sales information, styling tips, new product assortments, and often promote the retailer’s free shipping and free returns policy. These emails share what customers want now and encourage customers to make purchases. During the e-mail signup process, customers can add personalized information and mark their specific area of interest i.e. men’s, women’s. The catalog features changing themes and new products month to month. The catalog encourages customers to purchase items and connect with the brand via online platforms and mobile platforms. In addition, Nordstrom sends customers postcard mailings. These mailings act as a connection between the customer and brand and include information about new merchandise assortments occurring in-store as well as upcoming events. For a personalized touch, addresses and customer names are handwritten on the postcards (Katz). Unlike other department stores, Nordstrom does not offer coupons for sales or discounts and instead offers promotions like gifts with purchase or buy and save. Some of the retailer’s most popular promotions are complimentary gifts with purchase and are typically associated with a specific brand, item or minimum order amount (Nordstrom Coupon). Other promotional initiatives include various store events and PopIn@Nordstrom, a theme changing boutique at select Nordstrom locations (and online).

Launched last fall, Pop-In@Nordstrom is an ever-changing, apartment-sized “in-store” shop where Olivia Kim, Nordstrom’s Director of Creative Projects, is bringing new designers to a new audience. It is currently in eight cities with plans to expand in to many other locations.

Social media plays a key role in engaging with Nordstrom customers of all ages and allows 14

the retailer to better listen and respond to customers’ needs. Nordstrom is active on the following social media platforms through community posts as well as web advertisements: Pinterest (largest community with 4.4 million followers), Facebook, YouTube, Twitter and Instagram. Nordstrom also operates an innovative and engaging online blog, called “The Thread” to connect with its customers.

Features on the blog include, but are not limited to: Stylist Picks, Street Style, Designer Collections, Behind the Scenes, Inspiration, Interviews, Food & Drink, and Most Wanted.

This platform is used for consumer engagement and is not focused on product offerings. When it comes to Customer Relationship Management, exceptional customer service is the basis of Nordstrom operations. While serving the customer face-to-face is the foundation, today customers seek out service in new ways. Speed, convenience, innovation and personalization have become cornerstones of the customer experience. In addition to being able to connect with Nordstrom customer service representatives from 7am to 1am EST seven days a week, customers are given access to the following perks: personal stylists, the NEXT app and Nordstrom True Fit. With a Fashion Rewards® credit or debit card, customers have access to Anniversary Sale Early Access, alterations, Personal Triple Points Day, exclusive holiday events, VIP access to in-store events and “Most Extraordinary Experiences” (Benefits). Advertising production costs for Internet, magazines, store events and other media are expensed the first time the advertisement is run. Online marketing costs are expensed when incurred. Total advertising expenses, net of vendor allowances, were $167 million USD in 2013, $161 million USD in 2012 and $128 million USD in 2011. Cooperative advertising and promotion costs in 2013 were $103 million USD (Nordstrom).

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THE NEW STRATEGIC INITIATIVE 2 IN STOCK

DURHAM,NC TRY IT ON BUY IT NOW

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BEST PRACTICES

NEW STRATEGIC INITIATIVE KEY OBJECTIVES Revival of the catalog as a distribution channel through augmented reality technology Creation of an innovative strategy to engage consumers through direct marketing Increase consumer loyalty through catalog interaction Gain insight into consumer preferences by measuring click through rate Promote high levels of social media engagement and improved conversion rates

RATIONALE

OFFICE DEPOT ANTI-BULLYING CAMPAIGN

The “Rediscover the Way You Shop” initiative involves the integration of augmented reality technology into the Nordstrom catalog and mobile application in order to create a stimulating experience for the consumer. Long gone are the days when mail order catalogs with static images defined “engagement,” and in today’s competitive marketplace, consumers seek immediacy and rich content.

A recent focus for marketers has been the Millennial customer. According to Oracle Financial Services, the annual spend of Millennials is projected to be $2.45 trillion USD by 2015. By 2018, not only will Millennials overshadow the Baby Boomer generation with spending power of $3.39 trillion USD, but they will in fact have the most spending power of any generation (Oracle). What sets the Millennial spending habits apart from previous generations is the role of technology. In a report released by L2ThinkTank, American Millennials spent 44% of their electronics use time interacting with their smart phones, versus 43% on personal computers and 12% on tablets (Mobile). Both e-commerce and m-commerce have proven to be extremely popular for shopping when it comes to the Millennial customer and these channels are only expected to grow in the future.

KIA/AUSTRALIAN OPEN BROADCAST

When examining the Millennial customer, retailers must consider that these mobile, tech-savvy individuals need to be fully engaged. Retailers face a number of direct marketing challenges when it comes to converting Millennial targets into purchasers and loyal customers. The top three challenges marketers face include motivating Millennials to open emails, engage with the email and other direct mail content and then share the content via social channels (Think).

Through the “Rediscover the Way You Shop” initiative for Nordstrom, the catalog will be transformed into a completely immsersive experience which invites consumers to discover its pages. Using augmented reality, static images will spring into life through imaginative animations, “behind-the-scenes” videos of photoshoots and editorial content, and feature fashion films. The customer’s need for immediacy will also be addressed through the augmented reality-powered mobile app by allowing customers to view an item in the catalog and click to buy, or click to request to try on an item at their local Nordstrom store.

Consumers will also be encouraged to share catalog content on social media platforms with the simple click of a social media icon via the Nordstrom app.

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For a long time, augmented reality sounded like a futuristic concept out of a science fiction movie; however, the technology has in fact been around for decades. With each year the technology becomes more advanced and seamless, allowing for a “means of superimposing computergenerated images atop a user’s view of reality, thus creating a composite view rooted in both real and virtual worlds” (Widder). Though augmented reality mobile applications range from utilizing interactive map overlays and virtual showrooms to massive multiplayer games, each has software which focuses on GPS and camera functionality to create a more immersive experience (Widder). Some examples of augmented reality best practices include: Office Depot’s Anti-Bullying campaign, Kia’s Australian Open broadcast and Airwalk’s Invisible Pop-Up Shop. For its Anti-Bullying campaign, Office Depot partnered with One Direction and Aurasma SDK to create unique digital content. Office Depot utilized the Aurasma SDK within their own branded app so that consumers did not have to download an additional app to access the augmented reality feature. The Anti-Bullying campaign saw a 300% increase in the Office Depot app usage after adding the augmented reality functionality (Borison). Longtime sponsor of the Australian Open, Kia Motors, created a mobile app which coincided with the live broadcast of the tennis matches. Australian Open viewers were invited to download the KIA Optima augmented reality application to their smart phone via the live broadcast for exclusive content on Kia and the Australian Open. Kia’s app “recorded 12,630

AIRWALK INVISIBLE POP-UP SHOP 19

downloads and there was an increase in Optima searches of 58%” (Moth). In addition, Kia achieved 57% more sales than expected of the new Optima the following January (Moth). Lastly, Airwalk’s invisible pop-up shop in New York City’s Washington Square Park was a hit with the young, urban population.

The invisible pop-up shop was made possible through the use of mobile app GoldRun, and it generated $5 million USD in earned media for the retailer (Austin).

LONG TERM BENEFITS

Deeper social integration. “HP Aurasma 3.0 lets users link to and more seamlessly share augmented reality experiences on Facebook and Twitter. Updated software development kit (SDK). Developers will now enjoy a more flexible way to customize the HP Aurasma experience within their third-party apps, helping them keep up with the latest trends and demands. The new SDK also enables digital agencies to leverage HP Aurasma’s powerful augmented reality capabilities to build campaigns that increase mobile customer engagement” (Weinberger).

OPERATIONAL CONSIDERATIONS

Increasing effectiveness of catalog as a direct marketing tool

Integration of Aurasma SDK technology into pre-existing Nordstrom mobile app

Promoting a strong brand image through technological advances

Sourcing and hiring design talent to create digital content

Securing consumer loyalty through engagement

Planning and production of editorial content, films, animations, photoshoots, etc.

Strengthened return on investment

Inventory management and linking of inventories for “try on in store” feature

Revenue growth through increased mobile commerce purchases

Community management for user generated content

TECHNOLOGY AND IMPLEMENTATION To implement the “Rediscover the Way You Shop” initiative, Nordstrom will partner with augmented reality platform, Aurasma, through its Aurasma SDK commercial account. Aurasma is powered by HP and is “the world’s leading augmented reality platform. Aurasma uses advanced image and pattern recognition to blend the real-world with rich interactive content such as videos and animations called Auras” (About). Aurasma SDK contains the full functionality of Aurasma technology and will be provided as a package to embed into Nordstrom’s own application to bring the full augmented reality experience to consumers. By embedding the Aurasma SDK technology into Nordstrom’s native app, consumers will be able to enjoy the full benefits of an augmented reality catalog without having to download and use a separate app. Likewise, consumers will stay within the native Nordstrom app when clicking the “Try It On” or “Buy It Now” features thanks to the linking of inventories across Nordstrom’s distribution channels. Currently, consumers will be able to download Nordstrom’s mobile app on iOS powered devices.

As a commercial partner of Aurasma, Nordstrom will have access to “measurable business results in the form of greater mobile engagement, conversion rates and click-through rates” (Iserson). To date, Aurasma has generated tremendous momentum with over 40,000 customers as of March 2014- twice its total customers from the previous six months (Iserson). To help businesses and digital marketing agencies accelerate the creation and delivery of powerful mobile experiences, Aurasma’s 3.0 update includes several significant enhancements and new capabilities, including: A new cloud-based studio. “The new Aurasma web portal user interface simplifies the creation of augmented reality experiences for marketers with a streamlined and visual platform for launching, managing and reporting on augmented reality campaigns. You can now create an Aurasma Aura in just seconds” (Weinberger).

A new targeted rules engine. “Within the new HP Aurasma Studio, marketers can manage customer segments and target Auras based on geography, providing a unique experience depending on the location where the Aura is viewed” (Weinberger).

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A customer enjoying the Nordstrom catalog with Aurasma enabled technology.

2 I N S TO C K

D UR H A M, N C T RY I T ON B U Y IT N O W

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Aurasma enabled augmented reality via the Nordstrom mobile app.

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EXECUTION PLAN The first Nordstrom catalog featuring the Aurasma technology is set to be distributed in November of 2014. This will be the Nordstrom holiday catalog released as the holiday season is kicking off.

The execution plan to implement Aurasma technology into the Nordstrom catalog begins with market April

May

June

July Pre Launch

August

September

October

November Launch

December

Marketing & Advertising R&D

research and development to lead the Nordstrom Marketing and Advertising teams in the right direction.

This includes discovering information on what the customer wants to see in the catalog, how other companies have utilized Aurasma technology and how Nordstrom should best approach integrating this technology. This process will begin in April of 2014 and continue through May of 2014, taking roughly two months. Aurasma studio account creation and registration will take place in May of 2014 to allow for adequate time before connecting generated overlays and triggering images. This also allows the Nordstrom Technical Integration team to become well acquainted with the technology. At this time the January February March April May request for Aurasma SDK technology will take place through the Nordstrom Aurasma Studio account.

Post Launch This process can take up to 72 hours.

TP team & SP team planning and creation of content

The Nordstrom Technical Projects and Special Projects teams will help create the featured content for the new catalog. This process of creation will begin in June of 2014 and will continue through July of 2014, lasting about two months. While Nordstrom already employs models, photographers, stylists, make-up artists, and video producers, the company will need to source and hire an animation team to create specific animations for the catalog. Hiring will begin in June and be finalized by the end of July.

Scheduling for the creation of all featured material will take place in July of 2014.

Hiring of animation team Animation, graphic design and technical integration design Scheduling of photoshoot* Scheduling of miniature fashion films** Creation & editing of featured fashion film Creation & editing of featured animations Creation & editing of featured fashion photography Creation & editing of featured editorial content Aurasma Studio Account and registering

A fashion film is created for the catalog. Three different versions of this film will be created. Each film will be cut in to three different sections, and only one section will be displayed in the November catalog.

The first fashion film to launch will be centered on the catalog theme of “Home for the Holidays.”

Nordstrom customers will have the option to vote for which section of the video they would like to see next through the Aurasma technology. The second section of the fashion film will be displayed in the December catalog, with the “crowd-sourced” ending featured in the January catalog. The filming and editing of the fashion film will take place over the months of September and October.

Aurasma Technology Implementation*** Printing of Nordstrom Catalog Distribution of Nordstrom Catalog Pre Launch Promotional Activities Launch Promotional Activities Analysis of customer feedback and necessary reaction Post Launch Promotional Activities TP: Technical Projects; SP: Special Projects * Includes: models, photographers, stylists, make-up artists, etc. ** Includes: Video Producer, models, actors/actresses/stylists, make-up artists *** Includes: Trigger images, overlays, auras, Nordstrom Innovation Lab Team app integration June

July Pre Launch

August

September

October

November Launch

April December April

May January May

June July February June March July Pre Post Launch Pre Launch Launch

August August April

September September May

October October

November November Launch Launch

December December

Creation of featured animations will take place during the months of September and October. These animations will include the progress of the construction of the NYC flagship store, quick-motion behindFebruary March April May February March April May Post the-scenes photographs of the catalog shoot accompanied by a camera “snapshot” noise, etc.

Post Launch Launch

January January

Marketing Marketing & & Advertising Advertising R&D R&D TP TP team team & & SP SP team team planning planning and and creation creation of of content content Hiring Hiring of of animation animation team team Animation, Animation, graphic graphic design design and and technical technical integration integration design design Scheduling Scheduling of of photoshoot* photoshoot*

Creation of the photography showcased in the November catalog will take place in September and October. Editorial content for the catalog will also be created and edited in October. This will include featured beauty tips, recipes, geographic information, etc.

Scheduling Scheduling of of miniature miniature fashion fashion films** films** Creation Creation & & editing editing of of featured featured fashion fashion film film Creation Creation & & editing editing of of featured featured animations animations

During the month of October, the implementation of the Aurasma technology will take place. This includes connecting selected trigger images with created overlays and integration of

Creation Creation & & editing editing of of featured featured fashion fashion photography photography Creation Creation & & editing editing of of featured featured editorial editorial content content Aurasma Aurasma Studio Studio Account Account and and registering registering Aurasma Aurasma Technology Technology Implementation*** Implementation*** Printing Printing of of Nordstrom Nordstrom Catalog Catalog Distribution Distribution of of Nordstrom Nordstrom Catalog Catalog Pre Pre Launch Launch Promotional Promotional Activities Activities Launch Launch Promotional Promotional Activities Activities Analysis Analysis of of customer customer feedback feedback and and necessary necessary reaction reaction Post Post Launch Launch Promotional Promotional Activities Activities TP: TP: Technical Technical Projects; Projects; SP: SP: Special Special Projects Projects ** Includes: Includes: models, models, photographers, photographers, stylists, stylists, make-up make-up artists, artists, etc. etc. ** ** Includes: Includes: Video Video Producer, Producer, models, models, actors/actresses/stylists, actors/actresses/stylists, make-up make-up artists artists *** *** Includes: Includes: Trigger Trigger images, images, overlays, overlays, auras, auras, Nordstrom Nordstrom Innovation Innovation Lab Lab Team Team app app integration integration

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Aurasma technology in to the already existing Nordstrom application. Since the Aurasma technology will sit aside as an add-on feature to the app as opposed to being part of the native code, the impact of integration is minimal. The already existing Nordstrom Innovation Lab team, which focuses on developing rapid prototypes and creating apps in one week, will be able to seamlessly integrate the Aurasma SDK coding in to the Nordstrom app for iOS systems in a couple of hours.

Printing of the November catalog will take place in October, with the catalog being distributed to Nordstrom customers during the month of November.

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Pre-launch activities for Nordstrom’s new customer initiative will begin in September and carry out through the month of October. This allows customers adequate time to be informed about the release of the “reinvented” catalog and sign-up to receive the November issue in time for the full experience.

Launch activities will take place during November simultaneously with the release of the “Home for the Holidays” catalog. Post-launch activities will occur during the months of December, January and February. Some activities will include updates on voting and polls involving the next sequence in the fashion film and generating information from customers to offer further satisfaction.

Given that Nordstrom releases a catalog each month, consistent actions will be necessary to consistently implement the new Aurasma technology. The Technical Project and Special Projects teams will have to continuously create content month by month in conjunction with the Nordstrom Innovation Lab team. Animation, graphic design and technical integration design is required each month. Photoshoots will continue to be scheduled and executed. Since Nordstrom already produces a catalog, this will not require a large change. Nordstrom already successfully executes the producing and editing of catalog photographs. Editorial content will be produced each month. Nordstrom’s Online Editorial team and User Experience teams are well established and able to produce this information without large operational changes. Members of the Innovation Lab Team will need to continuously carry through updates to the Aurasma technology month by month. Printing and distribution of the Nordstrom catalog will continue to occur and require no change in operational or strategic planning.

With the customer consistently being the focus and driver of the Nordstrom business, generating and reacting to customer feedback about the new “reinvented” distribution channel is absolute. Nordstrom will continue to do this and strategically implement any necessary changes to continue the legacy of outstanding customer service.

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MARKET ANALYSIS

Commission in the United States has tightened its regulation on corporate compliance after the Enron accounting scandal of 2001 (How).

MARKET SIZE The US apparel retail industry has grown moderately in recent years and this trend is expected to continue. The US apparel retail industry had total revenue of $329.4 billion USD in 2011, representing a compound annual growth rate (CAGR) of 2.7% between 2007 and 2011. The United States accounts for 28% of the global apparel retail industry value. The apparel retail industry consists of the sale of all menswear, womenswear and childrenswear. The womenswear segment was the industry’s most lucrative in 2011, with total revenue of $170.4 billion USD, equivalent to 51.7% of the industry’s overall value (Apparel). In 2012, US retail e-commerce sales totaled $225.5 billion USD. Digital sales are expected to increase at a 14% compound annual growth rate (CAGR) from 2012 to 2017. Only 6% of US retail sales came from e-commerce in 2012. The e-commerce apparel and accessories market generated a total revenue of $45.6 billion USD in 2012, up from $37.6 billion USD in 2011. Apparel and accessories e-commerce sales are projected to reach $87.8 billion USD by 2016. Apparel and accessories is the second highest purchased product category online. A projected compound annual growth rate of 17.2% is projected up until the year of 2016. Mobile already accounts for 11% of e-commerce sales, and its share will jump to 25% by 2017 (Retail).

In order for Nordstrom to successfully integrate the “Rediscover the Way You Shop” initiative into its direct mail catalog, it is important to review the size of the US fashion retail e-commerce market and the effects on the company’s initiative. With apparel and accessories being the second largest product category of purchases through e-commerce, Nordstrom is well equipped to succeed. Customers are familiar with online shopping and do not need to be convinced to do so. The most profitable segment of US fashion retail is womenswear. This means that Nordstrom must place emphasis on this product category throughout this initiative (Retail).

PESTEL ANALYSIS

POLITICAL Currently, Nordstrom operates its 117 full-line stores solely in the United States- a country with a stable political scenario and no serious threats. Nonetheless, considerable differences can be noted in Democratic and Republican policies. The two political parties have been in opposition for years in regards to their rules and regulations. This may have implications for government spending and tax rates, which in turn can affect economic stability. Presently, the federal rates on corporate taxable income range from 15% to 35% (Puzzanghera). At 35%, the corporate tax rate in the United States is the highest among the world’s developed economies (Puzzanghera). Lowering corporate tax rates would attract new businesses and prevent existing ones from leaving the United States (Puzzanghera). Another known factor which can affect businesses is the change in government regulation. For example, the Securities and Exchange 28

ECONOMIC The United States has the world’s largest economy with an estimated GDP of $17.1 trillion USD as of Q1 2014 (United States). At the same time, the United States has a national debt of $17.48 trillion USD (The). Although it has been the largest economy since the 19th century, it has been closely followed by China in recent years “when measured using purchasing power parity” (Monaghan). Based on expectations from the International Monetary Fund, China will surpass the United States as the world’s largest economy this year (Monaghan). Nonetheless, research shows that the United States economy is poised for at least moderate growth in 2014. According to Kiplinger’s Economic Outlook for 2014, United States GDP growth is expected to rebound to a rate of 2.5% to 3% after a “weather – and inventory – related slowdown in the first quarter” (Payne). Consumer confidence is returning to a higher level than was recorded before the government shutdown and polar vortex affected spending.

Disposable income (adjusted for inflation) grew a solid 3.8% from January to March 2014 (Payne). In addition, unemployment rates are expected to decline with an estimated 2.6 million workers being added to payrolls this year (Payne). What’s more, retail sales are expected to accelerate this year, gaining roughly 5% from December 2013 to December 2014 (Payne).

SO CI A L Income distribution in the United States is characterized by vast inequalities, resulting in low social mobility. A 2011 study by the Congressional Budget Office found that “the top earning 1% of households increased their income by about 275% after federal taxes and income transfers over a period between 1979 and 2007, compared to a gain of just under 40% for the 60% in the middle of America’s income distribution” (United States Congress). Data from the Census Bureau shows that Americans’ median household income was $51,017 a year in 2012, down 8.3% from 2007. The ensuing economic recession pushed many more Americans into poverty. In 2010, the poverty rate peaked at 15.1%, and has barely decreased since then (Hargreaves). Additionally, the United States is experiencing a shift in demographics with an aging population and the rise of a new Millennial generation. According to the Administration 29

on Aging, the older population – persons sixty-five years or older – is expected to increase from 39.6 million in 2009 to 72.1 million by 2030 (United). At the other end of the spectrum is the Millennial generation which boasts a population of over 80 million persons aged fifteen to thirty-four. With this change in demographics comes lifestyle changes, and Millennials are characterized by their active, and often healthy, lifestyles.

TECHN OL OGICAL The United States is the world leader in the development of science and technology (S&T), closely followed in the last decade by Asian nations such as China and South Korea. Although the United States has been challenged by the “increased innovation capacity of emerging economies,” it still invests “twice as much as any other single nation in Research and Development (R&D), despite slipping to tenth in the world ranking of the percentage of its GDP it devotes to R&D” (“United”). In 2011, the United States spent $429 billion USD on R&D, while China only spent $208 billion USD and Japan spent $146 billion USD (“United”). On the whole, Americans have a penchant for technology, with the Consumer Electronics Association reporting that there are approximately twenty-four electronic products per household (McCue). To support the use of these electronics, 70% of American adults, aged 18 and older, reported having high-speed internet broadband access at home as of May 2013 (Zickuhr). Smartphones have become extremely popular as an alternative way to access the internet, with 58% of Americans reporting ownership of a smartphone as of January 2014 (Zickuhr). The surge in at-home internet broadband usage on personal computers, as well as the increase in smartphone ownership, has led to strong sales performance via e-commerce and m-commerce. eMarketer predicts that by 2017 there will be $440 billion USD in United States e-commerce sales for a CAGR of 13.8% (Jones). Likewise, m-commerce sales are predicted to reach $113 billion USD for a CAGR of 28% by 2017 (Jones).

Apart from technological advances in regard to electronic and mobile channels of purchase, the retail sector has seen innovations in brick-and-mortar store technologies. From sales associates equipped with mobile point-of-sale devices and merchandise tagged with QR codes, to in-store displays equipped with augmented reality technology and crowdsourcing merchandise based on consumer preferences- the twenty-first century shopping experience is all about convenience and engagement (Kreinczes).

ENVIRONMENTAL 30

The United States Environmental Protection Agency (EPA) is an agency of the U.S. federal government which was created with a mission to protect human health and the environment by writing and enforcing regulations based on laws passed by Congress. The United States Environmental Protection Agency executed a budget of $8.2 billion USD for FY 2014, down from $10.29 billion USD in 2010 (United States Environmental). This can be compared to the approximate $21.7 billion USD budgeted for environmental protection in the United Kingdom (UK). When measuring Americans’ impact on the environment, it can be noted that “the average American has an Ecological Footprint of 9.0 global hectares (23 acres) – the size of 17½ American football fields. The average Ecological Footprint per person worldwide is 2.6 global hectares (6.5 global acres)” (Humanity). In an effort to curb pollution emitted by American businesses, the EPA released a ruling in 2009 requiring certain companies to report their greenhouse gas pollution (“Companies”). A greenhouse gas registry was created which “compiles the emissions data from the largest emitters [with a threshold of 25,000 tons] across the country” (“Companies”). Furthermore, the United States has regulations on air, energy, waste, recycling and hazardous materials among others things.

LEGAL On May 20, 2014, Democrats in the House and Senate introduced legislation to increase restrictions on corporate tax inversions by limiting the ability of United States-based companies to circumvent taxes by merging with a smaller foreign business and shifting their tax domicile overseas (Cohn). According to the bill’s proponents, the last decade has seen over forty corporate inversions, costing the United States tax base billions of dollars. The United States Treasury Department estimates that President Obama’s FY 2015 budget proposal on corporate tax inversions would raise $17 billion USD in revenue over the next ten years (Cohn). As mentioned previously, the United States has tightened its regulation on corporate compliance after the Enron accounting scandal of 2001. As a result, the Sarbanes-Oxley compliance was introduced in 2002 and requires that all companies which file periodic reports with the Securities and Exchange Commission (SEC) to follow strict guidelines for reporting company information. Noncompliance results in severe penalties (Simon). Another legal consideration is debate over the federal minimum wage of $7.25 USD an hour. One of the most debated questions about the minimum wage is whether businesses will choose to make do with fewer workers if they are obligated to pay them more.

When detailing the United States market through PESTEL analysis, Nordstrom should hone in on key components to ensure maximum success and profitability. The stable political scenario and low barriers to entry allow for ease of doing business in the United States;feturn of consumer confidence and the expected lowering of the unemployment rate show progress for the economy as it emerges from one of the worst economic periods in history. Additionally, strong sales performance via e-commerce and 31

m-commerce is only predicted to grow exponentially in the coming years. This technological change in purchasing behavior is largely due to the rise of the young, tech-savvy Millennial generation. Nordstrom’s “Rediscover the Way You Shop” initiative plans to take market share when it comes to targeting the Millennial consumer through the m-commerce channel. Moreover, the Millennial consumer is socially and environmentally conscious and Nordstrom will want to ensure that its corporate responsibility initiatives are aimed at reducing its carbon footprint. Lastly, Nordstrom should consider the imminent minimum wage debate and how a spike in the federal minimum wage may affect human resources and profit and loss figures.

KEY PLAYERS

HARRODS HISTORY

ASOS MAGAZINE

Other retailers in the market who are already employing a similar augmented reality initiative are: Harrod’s, ASOS, and IKEA. Iconic London department store, Harrods, embedded Aurasma into its native mobile app to bring merchandise to life. Shoppers were able to scan limitededition Christmas themed products to reveal rich digital content about the retailer’s storied history (Harrods). Global pure play e-tailer, ASOS, partnered with Aurasma to launch its first augmented magazine which reached over 450,000 readers. Customers were able to download ASOS’s “Scan to Shop” Aurasmapowered mobile app to experience the magazine through interactive video content. Customers could “click to buy” featured magazine products and would be transferred to ASOS’s mobile site to make a purchase. Additionally, ASOS incorporated a digital treasure hunt where hidden clues and symbols could be unlocked in exchange for exclusive offers (ASOS). One of the more well-known – and successful – examples of augmented reality used with print is the IKEA catalog. In the 2013 edition of the global publication, static images came alive when scanned with IKEA’s mobile app, revealing engaging content such as 3-D models of furniture, expert advice and product videos.

The IKEA app was named the United States’ most successful app, used chiefly for promotion, generating nearly “10% of YouTube downloads in the United States in September 2012” (IKEA).

Moreover, the “average dwell time on the app was eight minutes, which compares well with the usual marketing app time of three minutes” (IKEA).

IKEA CATALOG 32

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DIRECT COMPETITION

INDIRECT COMPETITION

There are few fashion retailers in existence which are implementing augmented reality technology similar to Nordstrom’s proposed “Rediscover the Way You Shop” initiative. Of Nordstrom’s direct competitors, only two have implemented notable augmented reality campaigns - those being Macy’s and Bloomingdale’s. Macy’s used augmented reality to supplement its holiday Believe campaign - an initiative to support the Make-A-Wish Foundation. As part of the Believe campaign, Macy’s customers mail their letters every year to Santa Claus. In 2011, customers who mailed their letters at Macy’s instore “Believe Stations” were able to take photos with the campaign’s animated characters Virginia, Ollie, and friends by using augmented reality technology. To take part in the campaign, consumers were prompted to download the Macy’s “Believe-o-Magic” mobile app which allowed them to “step into” an augmented reality picture frame, take a photo with augmented characters and upload the photo to a holiday card template which could then be shared via email or Facebook. Consumers at home could also participate in the Believe campaign’s augmented reality by printing out a “marker” image and activating an animated video of Virginia ice skating through the mobile app (Kats). Macy’s counterpart, Bloomingdale’s, also introduced augmented reality technology into stores through a partnership with television network NBC. The Bloomingdale’s-NBC campaign utilized the Goldrun app to “place virtual goods in real-world locations using augmented reality” (Lamb). Bloomingdale’s customers could also use the app to take photos with characters from NBC’s fall television lineup and then share the photos via social media (Lamb). Unlike the “Rediscover the Way You Shop” initiative, the augmented reality campaigns implemented by Macy’s and Bloomingdale’s show no direct correlation between improved sales performance and growth in m-commerce and mobile app usage.

When examining retailers who compete with Nordstrom indirectly through strong m-commerce sales performance – not necessarily enabled by augmented reality technology – it is no surprise that some of the world’s largest and most profitable retailers lead the way. According to a 2012 article from Internet Retailer-

Macy’s “Believe-o-Magic” campaign.

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An analysis of the data of the U.S. retailers ranked in the Mobile 400 shows a high degree of concentration among the biggest merchants in retailing, especially Amazon, No. 1 in Mobile 400. Mobile sales for Amazon.com Inc. will reach $4 billion USD in mobile sales in 2012, Internet Retailer estimates, and Apple Inc. (No. 2) will hit $1.17 billion USD in web-only sales of apps, music, video and e-books. Other pure play online merchants bring plenty to the table, including One Kings Lane (No. 36) coming in at $44 million USD and Overstock.com (No. 24) at $63.1 million USD (Brohan).

The Amazon and Apple app store mobile applications.

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PORTER’S FIVE FORCES ANALYSIS: AUGMENTED REALITY AND MOBILE COMMERCE BA RGA I N I N G P OWE R OF CUSTOMERS: M ODERATE

BA RGA I N I N G P OWE R OF SUPPL IER S: L OW

- Not many suppliers available - Suppliers yearn for market dominance in an immature industry - Easy to switch from one supplier to another - Acquisition of top customers can make or break suppliers due to immaturity of market

- Not many suppliers exist within the industry - Competition between existing suppliers is extremely fierce - Suppliers are vying for market dominance and business - Costs fluctuate due to strive for market dominance

CO MP E T I T I V E RIVALRY: L OW - Companies are not up-to-date with the newest technologies - Not many fashion companies utilize augmented reality technology - Supplying companies are fighting to stay in the industry

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THREATS OF NEW ENTRANTS: HIGH

THREAT S OF SU B ST I T U T I O N : H I G H

- Many augmented reality technologies are available for free - No economies of scale necessary - Barriers to entry are low - Little specialty knowledge necessary - Technologies are easily accessible

- Many options exist which provide a heightened digital experience - Virtually every fashion company operates in a digital space in some form - Websites, tablets, smartphones and gaming systems all provide heightened digital experience

The augmented reality and mobile commerce industry is characterized by low rivalry amongst fashion companies. Augmented reality in conjunction with mobile commerce is not yet established as a concrete consumer expectation, yet companies are fighting to stay in the industry.

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TARGET CONSUMER Nordstrom is first testing the “Rediscover the Way You Shop” initiative in the women’s version of the catalog. Upon completion of the communications/promotional campaign, we will analyze sales and user engagement data and will determine whether the Aurasma technology will be implemented into the men’s catalog. For the purpose of this report, the target consumer data will focus on the Millennial customer.

Nordstrom already attracts a large number of consumers from the Baby Boomer and Gen X populations; therefore, the “Rediscover the Way You Shop” initiative will focus its attention on attracting young adults aged eighteen to thirty-four. This approach is in line with Nordstrom’s current strategy of attracting Millennial customers through a range of initiatives including its joint venture with TOPSHOP and TOPMAN, the revamp of its Savvy department and the launch of its Youphoria marketing campaign.

THE MILLENNIAL The Millennial generation was born between 1980 and 1999 and is characterized by their tech prowess and social connectivity. The focus of the “Rediscover the Way You Shop” initiative will be female Millennials, ages fifteen to thirty-four, who are college educated and have a median household income of $50,863 USD (“The Millennial”).

KARA DAVENPORT The Urban Dweller 28 years old In a Relationship No Children Bachelor’s Degree Marketing Analyst Makes $78,000 annually

Young Digerati

Avid online shopper

Up-and-Comers

Theater lover

Innovators

Addicted to Pinterest

Experiencers “As of January 2014, eighteen to twenty-four year olds spent nearly two-thirds (64%) of their online time using smartphones (54%) and tablets (10%). Women spent more of their online time accessing via smartphones (54%) than PCs (32%). The eighteen to twenty-four age bracket emerges as the most mobile-only, at 15% of the connected population” (“Mobile”). In addition to being socially connected via their mobile smartphones, Millennials are changing the face of consumer purchasing behavior.

According to the United States Chamber of Commerce, reports on Millennial annual purchasing power vary widely between $125 billion USD and $890 billion USD. However, a “more consistent estimate (as of 2012) is $200 billion USD of direct purchasing power and $500 billion USD of indirect spending, largely due to the influence on the spending of their mostly baby boomer parents” (“The Millennial”).

With Millennials’ peak buying power still decades away from the present, it is imperative that Nordstrom engage with and build brand loyalty with the Millennial consumer. Not only do Millennials contribute directly to the marketplace, but as early adopters, and often vocal consumers, they are influencing the purchases of others as well. Millennials often contribute user-generated content through their constant connectedness and the popularity of social media platforms, often using these platforms as a means to engage with brands. It is interesting, then, to note that although the majority of Millennials use social media to connect with brands, “most companies still allocate a disproportionate percentage of marketing budgets to nondigital channels” (“The Millennial”). The “Rediscover the Way You Shop” initiative aims to strengthen Nordstrom’s relationship with Millennials by providing an interactive, technology driven catalog which encourages social engagement, mobile commerce and user-generated content - all key components which enable the Millennial shopping experience.

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PHILADELPHIA, PA Zip Code: 19106 Population: 11,605 Median Age: 39.1 Median Income: $70,900 Consumer Spend: $387 MM Consumer Spend ($/HH): $56,048 Source: Nielsen Pop-Facts Demographics 2013

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ALANA CHRISTENSEN The Suburbanite 32 years old Married One child Bachelor’s Degree Sales Consultant Makes $62,000 annually

The Small Town Girl 23 years old Single No Children Bachelor’s Degree Human Resources Associate Makes $32,000 annually

Fitness enthusiast

Follows fashion bloggers

Reads books on iPad

Posts videos to YouTube

Shops at Whole Foods

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JESSICA DANIELS

Connected to social media

ALEXANDRIA, VA

GREENACRES, WA

Zip Code: 22311 Population: 19,350 Median Age: 34.1 Median Income: $64,600 Consumer Spend: $450 MM Consumer Spend ($/HH): $50,824

Zip Code: 99016 Population: 13, 529 Median Age: 38.5 Median Income: $58,500 Consumer Spend: $265 MM Consumer Spend ($/HH): $51,349

Source: Nielsen Pop-Facts Demographics 2013

Source: Nielsen Pop-Facts Demographics 2013

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COMMUNICATION AND PROMO PLAN Clackamas Town Center 11900 SE 82nd Portland, OR 97266 (503) 652-1810

12 Month Promotional Activity Plan Pre Launch

Launch

Post Launch Store 24 SALE

Reg# 5712 Rng# 8371726

Tran# 2334 Sel# 8371726

e-Receipt

RAIL BOTTO: FLOYD PANT 882933038899

231.00

SHIPPING & HANDLING STAND SHIP 5-8 DAYS

RC#6

0.00N

10.00

SU SUBTOTAL Es mated SALES TAX

231.00 18.94

159826 0000000000-0 ************4579

249.94

ESTIMATED TOTAL

249.94

Total Items Purchased = 1

Pre-launch Initiatives As noted previously, more than three-quarters of Millennials have a profile on a social networking site and spend almost two hours of the eight-hour workday on the sites (“The Millennial”). The importance of promotion across strong social media channels in exponential when marketing to the Millennial consumer.

In preparation for the “Rediscover the Way You Shop” catalog launch in November, Nordstrom will implement extensive promotion across all social media platforms including: Instagram, Facebook, YouTube, Twitter and Pinterest. These platforms will showcase sneak peeks of the soon to be released fashion film in order to generate customer interest and excitement. Behind-the-scenes snapshots of the making of the new catalog will also be released across all channels.

E-receipts, in-store receipts and shipping confirmation e-mails will feature a promotion to prepare preexisting Nordstrom consumers for the release of the new catalog. This encourages already existing Nordstrom customers to reconsider the way they shop. It is assumed that many Nordstrom customers, especially Millennials, do not shop with any help from the catalog. This aims to peak their interest about Nordstrom and its possibilities.

Three varying versions of a T.V. commercial will air during the pre-launch phase, September and October.

These commercials will air during high-viewing times on high-watched networks. Each commercial will air fifteen times, for a combined total of forty-five commercials displayed. The Nordstrom commercials will portray a holiday themed story, focused on both families and Millennials, with the exhilarating catalog experience of course being the core. Actors will be home by the fire, in their pajamas and opening the Nordstrom catalog for the entire family to enjoy. The younger Millennial female will finally be home for the holidays and will be enjoying the new Nordstrom catalog, and another Millennial female will be woken up by her dog in bed as she reaches for the new Nordstrom catalog.

All pre-launch initiatives will take place during the two months prior to the November release. This gives adequate time to order the catalog and receive it before the release via mail.

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WOMEN

MEN

JUNIORS

KIDS

BRANDS

SALE

SPECIALY SHOPS

YOUR ORDER HAS SHIPPED Good news, Hannah — your items are on their way!

CHECK YOUR SHIPPING STATUS >

Your Order Number: XSJ70K36

From top left: Instore receipt, E-receipt notification and Shipping confirmation email.

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REDISCOVER THE WAY YOU SHOP

Are you ready to Rediscover the Way You Shop? Access a sneak peek of our new catalog here: bit.ly/1nx8FUE

#thenewcatalog

For its pre-launch communications activities, Nordstrom will heavily promote the revamped catalog across its social media platforms: Instagram, Twitter, Facebook, Pinterest and YouTube.

NORDSTROM + AURASMA TV COMMERCIAL 1

NORDSTROM + AURASMA TV COMMERCIAL 2

Top Pins: Catalog

Rediscover the Way You Shop

Rediscover the Way You Shop. Access a sneak peek of our new catalog here: The New Catalog: Part 1

The New Catalog: Part 2

NORDSTROM + AURASMA TV COMMERCIAL 3

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Launch Initiatives

Post Launch Initiatives

The Millennial customer is no newcomer when it comes to technology. Millennials are 2.5 times more likely to be early adopters of technology than are older generations. As of January 2014, 18-24-yearolds spent 64% of their online time using smartphones (54%) and tablets (10%) (“The Millennial”). The “Rediscover the Way You Shop” campaign will easily captivate and engage this targeted customer.

During the month of November, the catalog will be available in-store. Three table displays will be located within each store. Each display will posses many catalogs for pickup, three iPads on iPad stands and an Aurasma enabled sign. The sign “Rediscover the Way You Shop” will be a trigger image for an overlay video that presents Olivia Kim, Nordstrom’s Creative Projects Director and coinciding female Millennial, demonstrating the Aurasma technology and how to use it. Creative directions to “begin the Aurasma experience” will also be present. This hopes to easily transition the consumer into the augmented reality world. iPads are present to ensure easy catalog sign-up and assistance with engaging in the new initiative. For the month of November, customers can try out the new catalog in store with the use of the Nordstrom iPads and catalogs present, or of course, with their own smartphones. Three full table displays will be present at every Nordstrom (one next to the TOPSHOP store, and two by each of the entrances), accompanied by two freestanding signs (located by the escalators and/or elevators) within the store.

These numbers are based on rough estimates and will be modified for specific locations as necessary.

The table displays will be positioned far enough inside the entrances to not conflict with any traffic-flow operations or pose a threat for theft.

Although Nordstrom does not typically invest in television advertising, the company feels that it is a good idea due to the scale of the new initiative. A commercial featuring the release of the new catalog will be released, showcasing some of the specific features in the November catalog. Promotion across all social media sites will continue during the launch phase of the initiative, responding to customer feedback and showcasing features within the catalog.

Olivia Kim Aurasma campaign instructional video and in-store catalog display.

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The post launch phase of the new catalog initiative will focus primarily on the Nordstrom customer’s experience with the catalog. Generation of direct feedback is imperative to ensure successful campaigns with future catalogs. The company will ask for feedback from its customers and respond as necessary.

Future catalogs will reflect this feedback.

Within the catalog itself, the featured fashion film released will showcase one piece of a three-piece series. Through Aurasma technology, customers are able to vote for which route they want the fashion film to take. Post launch, the polling statistics will be released across social media channels, along with the next scene in the series. Snippets of the various possible ending will be released across social media channels prior to the announcement of the winning ending. After the winner is announced, the alternative endings will also be released.

Millennials stand out when it comes to producing and uploading online content (60%) (“The Millennial”).

In 25% of searches for the top twenty brands, results are links to user-generated content (“The Millennial”). Given the Millennials attitudes toward user generated content and becoming an important part in a brand, Nordstrom will also promote the use of customer generated feedback throughout its social media channels. Customers can send in their own personal stories with the new catalog experience and be featured in the upcoming issues. Other user generated content can include: “How did you style Kate Moss for TOPSHOP”, favorite holiday gift picks, etc. User generated content opens a huge opportunity in a multitude of ways. Consumers will be more engaged and feel as though they have input in the company creating a strong brand connection. This also generates free collateral for Nordstrom, potentially saving money, time and effort.

Customers will be able to select which ending they want to see from the Nordstrom feature fashion film.

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FINANCIAL PLAN

etc., the company does not need to hire extensive outside help, helping expenses stay low. The company will need to hire an animation team to create specific animations for the catalog. This animation team will include four individuals, each being paid a salary of $69,000 USD per year (“Salary”). Due to the hiring timing on the animation team, only five months of pay are included in 2014.

SALES FORECAST AND BUDGET REVENUE

According to Caroline Aylward at Whitehouse Post, the creation of each fashion film will cost approximately $50,000 USD to create and edit. This cost reflects the amount of resources that Nordstrom possesses as well as the short duration (3-5 minutes) of each film. Fashion films are completed within two months, with a new film being created every three months. The year 2014 accounts for 2 fashion films, one which finishes production in 2015.

EXPENSES

A quote from Aurasma states that initial integration of the SDK technology into the Nordstrom mobile application results in costs of $30,000 USD, with additional monthly fees of $10,000 USD.

2014

2015

NOTES

Although Nordstrom employs many teams of talent, it is not within the company resources to create and edit a television commercial. According to Jonathan Braun at Full Contact Advertising, the cost of creating a suitable commercial for the new Nordstrom initiative is approximately $150,000 USD. Three television commercials promoting the new initiative will air 15 times each during prime time television on highly watched networks. The cost for this is $11,700,000 USD (Mahapatra). An additional television commercial will be created and released in the year 2015, allowing for a cohesive promotional initiative.

This commercial will air ten times during similar hours, assuming that prior commercials are received positively. The cost for this is $2,600,000 USD (Mahapatra).

TOTAL EXPENSES

$ 19,816,910

$ 44,613,200

$64,430,110

EARNINGS

$ (9,070,244) $ 19,866,800

$10,796,556

In order to determine the revenue due to the new “Rediscover the Way You Shop” catalog initiative, Nordstrom took into consideration the amount of mobile sales generated by the company in past years.

As noted previously, in 2012, sales from a mobile device accounted for over 20% of Nordstrom Inc.’s total direct sales (Briggs). Direct has recently finished its third consecutive year of approximately 30% or more of same-store sales growth (Nordstrom, 2). Using these statistics, the mobile sales organic growth for Nordstrom were calculated.

In 2013, Best Western International launched several social, mobile and online initiatives to boost brand awareness and bookings. These initiatives resulted in an overall increase of 31% in reservations, with 50% of all reservation revenue generated from the web. First-time web bookers increased by 42% as well (“Press Releases”). Based on the general benchmark of an increase of 30% in sales, Nordstrom calculated the revenue generated by the new initiative. Conservatively, the company based its additional revenue on a growth rate of 15.5%. The year 2014 reflects two months revenue due to the new initiative, given that the catalog is released in November.

During Nordstrom’s launch promotional activities, in-store displays will showcase the new catalog. three of the five displays in each Nordstrom store will contain three iPads on iPad stands, bringing the total number of both iPads and iPad stands to 1,053. Each table display will showcase a large sign promoting the initiative, with 351 signs needed. The other two in-store displays will comprise of tall, freestanding displays promoting the initiative, with 234 needed. Nordstrom already possesses tables for each display, so no additional cost is necessary.

Nordstrom employs some of the best in the industry. Employees are already familiar with mobile commerce due to the current roaming POS systems available in-store. No additional employees will be necessary.

Total expenses including all previously noted costs totals $19,816,910 USD in 2014 and $44,613,200 USD in 2015. Due to Nordstrom’s strong earnings in the year of 2015, the “Rediscover the Way You Shop” initiative does prove profitable. Earnings due to the new company initiative total $10,796,556 USD by the end of the year 2015.

Cost of goods sold is based on a reported company average gross margin of 36% (Nordstrom, 14).

By adding all of the necessary expenses for the company initiative, total expenses and earning were calculated.

Due to Nordstrom’s plethora of company talent including models, photographers, stylists, make-up artists, video producers, marketing team, advertising team, technical projects team, special projects team, 48

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CONCLUSION

There is no doubt that technology is taking the fashion industry by storm. With Nordstrom in a top position within the market, a new technology driven initiative is logical. E-commerce and m-commerce are often the most successful distribution channels within companies today.

Nordstrom’s direct channel, which includes both online and catalog, has shown growth of approximately 30% for the last three years in a row. This growth rate is largely driven by the online sector (Nordstrom, 2). In addition to Nordstrom, the US e-commerce and m-commerce markets show strong sales performance. Incorporating each section in to one new company initiative will generate the attention of Nordstrom customers both new and old, while potentially reviving a withering distribution channel.

The “Rediscover the Way You Shop” new catalog initiative presents an engaging, attentiongrabbing initiative for Nordstrom full-line stores. This new catalog will utilize the Aurasma augmented reality technology to “reinvent” the catalog. Stories within the catalog will be brought to life using animations, editorials, videos, photographs, etc. With Millennial customers possessing a purchasing power close to $700 billion USD annually, Nordstrom aims to entice and build relationships with this target consumer (“The Millennial”).

Nordstrom has most of the necessary resources to administer and highly execute such ambitions. In addition to large sums of money and talent, Nordstrom possesses a successful mobile commerce channel with in-app checkout and linked company inventory. This allows for easier implementation of the proposed initiative.

With customers at the heart of the Nordstrom business plan, the presentation of an engaging, fun and innovative spin on a company classic will surely assimilate with the Nordstrom brand.

The Nordstrom “Rediscover the Way You Shop” initiative will increase consumer loyalty through catalog interaction, promote high levels of social media engagement and improved conversion rates, gain insight into consumer preferences by measuring click through rate, revive the catalog distribution channel and excite customers everywhere.

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51

APPENDIX I. COMPANY SUMMARY

Source: (Nordstrom, 14).

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II. DISTRIBUTION CHANNELS

customer while offering tips, tricks, updates and fun information.

Shipping Policy:

TWITTER

FREE SHIPPING AND RETURNS Nordstrom ships almost anything on the Nordstrom website to anywhere in the United States for free.

No minimums. Customers can return anything for free as well. Items are being delivered to customers faster with the addition of a new fulfillment center in 2013 in San Bernardino, California. Customers can decide where to shop, pick up or have delivered, and return items at their convenience. Salespeople in every Nordstrom and are armed with hand-held mobile registers so customers can check out how and where they prefer.

The Nordstrom Twitter pages features pictures and information showcasing seasonal trends, featured interviews, specific products, fashion tips and beauty tips.

The retailer also offers two business day shipping for only fifteen dollars, next business day shipping for twenty-five dollars and Saturday arrival shipping for thirty-five dollars. Currently, Nordstrom ships to forty-four countries. The retailer employs a few rules when it comes to shipping product. For example, fine jewelry and watches valued over $1,500 USD are shipped and insured through expedited delivery at no additional charge. In an effort to minimize waste and generate positive impact on the environment, the company will ship products in slightly used or recycled shipping boxes (Nordstrom).

Fulfillment Center: Elizabethtown Distribution Center: This will bring 369 jobs to Lancaster County and will delivery goods faster to east coast customers.

III. COMMUNICATION AND PROMOTIONS PINTEREST Nordstrom has 4.4 million Pinterest followers, one of the largest followings of any Fortune 500 company, and Instagram is the fastest-growing social networking platform at Nordstrom. In 2013, Nordstrom bridged the gap between social media and the shopping experience by testing ‘crowd-sourced’ in-store Pinterest merchandising. Customers were able to shop popular ‘Top Pinned’ items in certain departments marked with Pinterest signage. To support the multi-channel shopping experience, Nordstrom also integrated top pinned items at nordstrom.com. It is important for the company to incorporate social feedback into the shopping experience. The Nordstrom Pinterest page is used to receive feedback, better connect the in-store and online experience and engage customers. Pinterest boards include information on suggested products and directly link customers to the Nordstrom product-specific webpage where purchasing can occur. Boards and pins also include other engaging information including recipes, D.I.Y projects, decorating ideas, inspiring photographs and behind the scenes information.

FACEBOOK This page was designed for customers to share comments, pictures and links with Nordstrom and the other members of the community. Thoughts and feedback allow Nordstrom to better serve the customer.

YOUTUBE Nordstrom’s many curated playlists include: Nordstrom Personal Stylists, Nordstrom Beauty: Trending Now and How To, Nordstrom Men’s Shop, Style and Technology, Savvy Trends, Nordstrom YOUphoria, Nordstrom Fit Fundamentals, BP.@Nordstrom, Nordstrom Wedding Suite, Nordstrom Presents: Conversations, Style & How-To, ZellaPRO: Inspire. Empower., Nordstrom Cares and Nordstrom Beauty: 2014 Spring Trend Insider. Through the YouTube channel, Nordstrom engages and connects with its 54

While Nordstrom has not invested in television advertising in recent years, it does invest significantly in digital marketing. In 2012 Nordstrom spent some $36 million on paid Internet display (Beltrone).

Nordstrom uses third-party service providers to serve advertisements (banners or links) on its behalf across the Internet.

FACEBOOK ADVERTISEMENTS Nordstrom displays interest-based ads to Facebook users through a tool offered by Facebook called the Custom Audience Tool. This tool allows us to personalize our ads based on your shopping experience with us. These advertisements show customized products and promotion information and are also portrayed on a mobile platform via the Facebook mobile app.

MAGAZINE ADVERTISEMENTS Nordstrom advertises with magazines such as Allure, Harper’s Bazaar, GQ, Vogue, US Magazine via both traditional print and digital channels. These advertisements feature product line specific information, upcoming sale information, seasonal collection information, etc. Accompanying advertisements are available on mobile platforms provided by these companies.

WEB ADVERTISEMENTS Digital advertising is placed on many different websites aimed at individuals in Nordstrom’s demographic and geographic target markets and include: Vevo, Glam Network, Pandora, Zimbio, eBay and Latina. com. These advertisements are present on mobile platforms and optimized for such (Levere).

PROMOTIONAL/ADVERTISING ACTIVITIES: STORE EVENTS Each individual Nordstrom store hosts many different events of all kinds throughout each year. Events are of many different genres and can include one-on-one attention with beauty brand stylists to help with customized application, customized samples, tips from beauty and fashion experts, product reviews and consultations, etc.

CRM ACTIVITIES: Customers are able to connect with Nordstrom’s customer service representatives from 7a.m. to 1a.m.

EST seven days a week via online Live Chat, e-mail or telephone. Specific options are available for both International and hearing impaired customers as well. Nordstrom provides assistance with Nordstrom Fashion Rewards®, Nordstrom Visa® check cards, Nordstrom debit cards or Nordstrom credit cards 24 hours, 7 days a week via telephone. The Nordstrom.com website offers assistance online with detailed information about ordering, gift cards, tracking orders, shipping, payment options, gift orders, online bill payment, etc (Nordstrom Customer).

Nordstrom personal stylists curate pieces from the entire store based on customers’ preferences. Wedding stylists create special looks for entire wedding parties. Beauty stylists help customers choose the best in makeup and skincare across all brands. These services are complimentary for all Nordstrom customers.

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All stylists can be reached via Live Chat, e-mail and telephone.

NEXT APP With the Nordstrom NEXT app, salespeople can send customers who enroll with them easy-to-check text messages about fashion news, recommendations, and reminders for upcoming sales and events. The secure app protects personal information and saves time, while seamlessly allowing customers to opt in and out.

NORDSTROM TRUE FIT True Fit is a service that helps shoppers find merchandise that fits. By answering questions concerning body shape and brands that fit best, customers are informed about how items in various brands will fit.

NORDSTROM REWARDS With a Nordstrom Fashion RewardsÂŽ credit or debit card, customers earn two points per net dollar spent at Nordstrom. Every 2,000 points earns the customer a $20 Nordstrom Note to spend on anything at Nordstrom. Nordstrom rewards include: customers receive benefits and privileged access including exclusive early access to shop the Anniversary Sale.

Alterations Level 1, 2 and 3 members are reimbursed for alterations on Nordstrom purchases with a Nordstrom Level 4 members enjoy unlimited complimentary alterations.

Personal Triple Points Day Nordstrom Rewards members receive Personal Triple Points Day where they are able to earn points three times as fast for all Nordstrom card purchases at Nordstrom, Nordstrom Rack and Nordstrom.com on any day you choose. Different levels are allowed different amounts of “personal days�.

Exclusive Holiday Events and VIP access to in-store events Level 2, 3, and 4 members are invited to an exclusive holiday event. Level 4 members receive priority access to exclusive shopping experiences and events at Nordstrom stores (Benefits).

Up-and-Comers Up-and-Comers are mobile adults living in second-tier cities among other young, upper-midscale singles.

This lifestage includes a large number of recent college graduates who participate in athletic activities, shop the latest technology and enjoy nightlife entertainment (2013 PRIZM).

Innovators Innovators are confident, prosperous, and cultured leaders in all aspects of their lives. Ground-breaking ideas and technologies have high appeal with Innovators, and they are the most receptive to new-age thinking. Innovators have expendable budgets and are extremely active consumers who purchase a wide variety of products that display their sophisticated taste for the finer things in life. They hold image in high regard and are interested in revealing their individuality, multi-faceted personalities, and taste level to their peers (Innovators).

Experiencers Experiencers are young, enthusiastic and primarily motivated by self-expression. They are known for their impulsive shopping habits and tend to seek out unexpected, innovative, and eccentric opportunities.

It is through social events and activities, physical exercise, and open-air recreation that experiencers release their energy. When it comes to the marketplace, Experiencers are eager consumers and willingly spend a large portion of their income on fashion, entertainment, and social outings. Experiencers highly value aesthetics and place precedence on owning the latest, trendy products (Experiencers).

Statistics for Philadelphia, Pennsylvania population (Zip Code 19106): Population: 11,605 Median Age: 39.1 Median Income: $70,900 Consumer Spend: $387 MM Consumer Spend ($/HH): $56,048

The Most Extraordinary Experiences Twice per year, Nordstrom offers unique, unforgettable experiences for level 2 and 3 members. From far-off destinations and behind-the-scenes adventures to exclusive access to top designers, each package is one of a kind.

With promotional costs totaling $64,430,110 USD and revenue due to the catalog initiative totaling $75,226,667, the projected ROI is 16.8%. With such a high return on investment, this communication and promotional plan is easily justifiable. Receipt notifications and social media promotional assist in driving down promotional costs for the catalog initiative.

IV. TARGET CONSUMER Young Digerati Tech-savvy and living on the urban fringe in fashionable neighborhoods, Young Digerati are highly educated, affluent and ethnically mixed. Young Digerati communities are made up of trendy condos and apartments, boutiques, fitness clubs and mix of restaurants and bars (2013).

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Source: Nielsen Pop-Facts Demog raphics 2013

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Statistics for Alexandria, VA population (Zip Code 22311): Population: 19,350 Median Age: 34.1 Median Income: $64,600 Consumer Spend: $450 MM Consumer Spend ($/HH): $50,824

Source: Nielsen Pop-Facts Demog raphics 2013

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Source: Nielsen Pop-Facts Demog raphics 2013

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Source: Nielsen Pop-Facts Demog raphics 2013

Statistics for Greenacres, WA population (Zip Code 99016): Population: 13,529 Median Age: 38.5 Median Income: $58,500 Consumer Spend: $265 MM Consumer Spend ($/HH): $51,349

Source: Nielsen Pop-Facts Demog raphics 2013

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Excerpt from The United States Chamber of Commerce Millennial Generation Research Review: Millennials are considered multitaskers extraordinaire, though brain science tells us that multitasking is a myth. More likely, they are apt to switching tasks quickly enough to appear to be doing them simultaneously. When it comes to heavy media multitasking, studies show greater vulnerability to interference, leading to decreased performance. Some studies suggest that this generation is rewiring the brain with extensive multitasking training, evidenced by the teenager who can simultaneously play video games, watch TV, and do homework. They are retraining the brain to reduce the performance deterioration of multitasking by increasing the speed of information the brain processes. This rewiring allows multiple tasks to be processed in more rapid succession. This activity and research suggest that our brains are evolving (“The Millennial”).

The biggest lesson when marketing to Millennials is that organizations must know and use social media. More than three-quarters of Millennials have created a profile on a social networking site. In an eight-hour workday, people spend approximately one hour on social media sites. This seems like a large percentage of the workday, but it is even larger for Millennials who spend about 1.8 hours on social media sites (“The Millennial”).

The majority of Gen Yers use social media to connect with brands, though most firms still allocate a disproportionate percentage of marketing budgets to nondigital channels. Gen Yers also connect to a brand through affiliation with a cause. This is more important to Gen Y than to previous generations. A brand that shows it cares is attractive to this generation. To be effective, advertising should be placed around engaging content. On average, engagement is higher among Millennials than other generations for television and websites; on a percentage basis, it is greater on the Web than on TV. It appears that Millennials are highly engaged with content they chose to view online and on TV, which amplifies the effectiveness of ads for Millennials (“The Millennial”).

Millennials’ relationship with technology has completely changed their relationships with most everything. With brands and services, what used to be a one-way conversation is now a multifaceted, 24-hour-a-day, seven-day-a-week dialogue between brands and their customers and among their customers. They have the confidence to stand up for what they believe and the confidence, technology, and network to voice their opinions. With Millennials, brands know where they stand, sometimes even minute to minute. According to one survey, 86% of Millennials are willing to share information about their brand preferences online, making it a top personal identifier (“The Millennial”).

read user reviews and explore information on social networks. Having grown up with mobile and digital technology as part of their everyday lives, they switch their attention between media platforms 27 times per hour. This tells advertisers that they need to engage Millennials quickly before they lose their attention. Millennials also seek peer affirmation. Seventy percent of Millennials are more excited about a decision they’ve made when their friends agree, compared with 48% of non-Millennials. (“The Millennial”).

Reports on Millennial annual purchasing power widely range between $125 billion and $890 billion. A more consistent estimate (as of 2012) is $200 billion of direct purchasing power and $500 billion of indirect spending, largely due to the influence on the spending of their mostly baby boomer parents. With Millennials’ peak buying power still decades away, marketers would do well to establish relationships with this consumer force (“The Millennial”).

This generation is large and with their numbers come substantial buying power, both through their own increasing earnings as they age and through the financial support of their Baby Boomer and Gen X parents. Not only do Millennials contribute to the market directly, but also as vocal consumers and early adopters they influence purchases of others. They are also changing the means and speed by which marketplace information is exchanged. Millennials add content through constant connectedness and the popularity of social media, keeping marketers on their toes. This generation’s connectedness also demands that brands ensure or influence that the user experience is positive. Additionally, this generation will continue to change the marketplace through the blurring of traditional gender roles. Savvy marketers will broaden their reach across gender lines to take advantage of the larger, more diverse potential market for their products (“The Millennial”).

As of January 2014, 18-24-year-olds spent almost two-thirds (64%) of their online time using smartphones (54%) and tablets (10%). Women spent more of their online time accessing via smartphones (54%) than PCs (32%), while for men, online time spent with PCs (49% share) outpaced time spent with smartphones (41% share). The 18-24 age bracket emerges as the most mobile-only, at 15% of the connected population. Two-thirds access the internet via PC and mobile, while 18% are PC-only. http://www.marketingcharts.com/wp/online/mobile-nears-two-thirds-of-time-spent-online-by-1824-year-olds-42512/

Millennials are 2.5 times more likely to be early adopters of technology than are older generations. They are more likely to use the Internet, broadcast thoughts, and contribute content. Millennials stand out when it comes to producing and uploading online content (60%) compared with non-Millennials (20%). In 25% of searches for the top 20 brands, results are links to user-generated content. This has huge implications for brands to become aware of others’ experiences of their product or service and ensure that it is in harmony with their brand strategy (“The Millennial”).

With the Internet and social media, the number of sources for information has increased dramatically. When gathering information and making buying decisions, Millennials rely on recommendations from peers and friends more than from experts. They use mobile devices to 62

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FASM 415 PROFESSOR MEETA ROY HANNAH AYLWARD CAROLYNN ISKYAN JESSICA WILLARD

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