WITH the proliferation of malls in the metropolis, the retail trade industry in the Philippines has never been better.
Looking at the 1995 figures of the top 5,000 companies, sales of retail trade companies comprised around 9 percent of the total combined sales of these companies. This reflected a growth of about 28 percent since 1994. With 657 of the top 5,000 companies in 1995 doing business in retail, it seems that businessmen have found gold mine in this industry.
However, with the impending liberalization of the retail trade, this rosy bubble may soon show cracks. With the possible entry of foreign-based retailers, easy profits pickings may no longer be the reality. For on the other side of the globe, retailers play a different ball game.
In the Philippines, the retail industry is dominated by big players like Shoe Mart Inc., Rustan Commercial Corp. and Uniwide Sales Inc. Their marketing strategy is focused on media advertising. Little attention has been given to the actual selling on the shop floor. From the ubiquitous “Sari-Sari” stand to the large department store, the persons behind the counter waits for a customer to approach, often times with nary a glance if a smile, to take an order. In some stores, there may not even be sales personnel on the floor, just cashiers.
New Way of Retailing
On the other side of the ocean, in the US, the retail industry is jam packed with big and small players who play by a different set of rules. A new wave of retailing is being molded by market forces. From factory outlets to high-end department stores, sales people on the floor are sales makers and not mere order takers. Customer service is not a desk but a service actually performed.
Calling the shots in this field is a retailer well-known for the extraordinary service its sales people provide its customers.
Their remarkable story is laid out in a book, “The Nordstrom Way” by author Robert Spector and Patrick D. McCarthy.
If retailers in the Philippines would like to know what they may be playing against in a “Globalization” Philippine market economy, they can read this book on the inside story of America’s number one customer service company. After almost a century, Nordstrom has attained a stature where the “Nordstrom Way” is the shoppers’ gold standard by which all department stores in the US are now being measured.
The Nordstrom Way
Like Shoe Mart, Nordstrom, was a shoe store before it ventured into apparel. Unlike Shoe Mart, which quickly became a department store in a few years, Nordstrom, sold only shoes for 62 years. In 1963, when it diversified and bought a women’s apparel store, it already had 12 stores in various states and an annual sales of $12 million. By that time, the “Nordstrom way of doing things was already a company culture.”
Spector and McCarthy write that in Nordstrom “The Customer is First”. Although a lot of companies lay claim to this policy, Nordstrom is able to translate this pronouncement into performance, the precept into profit. Organizationally, Nordstrom’s structure is an inverted pyramid with the customers at the top and the rest of the organization supporting the customers. In line with this, Nordstrom empowered its employees to make decisions on how best to service the customer.
Nordstrom provides support mechanisms that show in all areas of operations that the customer is given the highest priority.
Nordstrom maintains the highest inventory level per square foot just to ensure that an item which a customer wants to buy is never out of stock.
Its store and parking layout provide wide open spaces for the shopper for enhanced comfort and convenience.
Nordstrom has a liberal return policy. They provide an unconditional, money-back guarantee on all items sold. Returns are accepted at any store, even when bought at another branch, and even months after the purchase.
Nordstrom makes sure that they offer the widest variety of products, Their buyers are given the freedom to acquire merchandise that customers in their area want. They can buy what they think suits the lifestyles and tastes of their particular customers.
The sales people are given the authority to sell an item at a lower price to match the price of the competition.
Motivated Sales Army
Spector and McCarthy write that since these mechanisms can be easily adopted by competition, what sets Nordstrom apart, is its “army” of motivated, self-empowered entrepreneurial men and women. How are they able to move this “army” to action? A major motivation is the reward system. Their sales people are given opportunities to earn income based on performance in the same way that an entrepreneur’s success is dependent on his hard work and creativity.
The authors reveal that Nordstrom is the first apparel retailer in the US to adopt a different way of compensating sales people. They are paid sales commissions as performance incentive rather than a fixed salary. They are assigned what is called a “draw” (which is like sales target) on a sales per hour basis. If the sales person is not able to meet the “draw,” the company makes up the difference. The sales person is then coached on how to do better. This system enables the Nordstrom sales person to earn, on the average, as much as $24,000 a year. Some Nordstrom sales persons get to earn more than $50,000 a year; a few, more than $100,000 a year.
Another motivator is the system of giving sales people the freedom to sell throughout the store and perform to sell throughout the store and perform whatever service is necessary to assist the customer. For example, if the sales person is assigned in the shoes department and the customer needs a suit, the sales person can assist the customer in purchasing the suit from the apparel section. Numerous tales on sales people’s “heroics” abound. “Heroics” can mean a range of extraordinary feats performed by ordinary sales personnel for customers such as writing personal thank you notes, delivering merchandise to the customer’s home, in a blizzard, buying matching clothes for a wedding entourage, or even making telephone calls for a customer. In Nordstrom, employees are criticized not for doing too much for the customer but rather for doing too little for them.
Clash of Values
With such a free-wheeling and unique set-up, conflict with the union was inevitable. Spector and McCarthy narrated the intense struggle between the union and Nordstrom management. The two local chapters of the United Food and Commercial Workers Union (UFCW), Local 1001 and Local 367, represented workers in six Nordstrom stores which comprised less than 5 percent of Nordstrom’s total nationwide work force. In 1989, the chapters battled with Nordstrom management, over the issue of employees giving extra time to “non-selling” business and support activities the very services that the sales people voluntarily rendered to customers to provide better customer service.
Author: Regina Galang Reyes. First published in the Philippine Daily Inquirer June 23, 1997
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