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FASM 415 Lewis Davis Morgan Davis Brittany Stafford
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TABLE OF CONTENTS
I II III IV V VI VII IIX
EXECUTIVE SUMMARY
COMPANY OVERVIEW
INITIATIVE
MARKET ANALYSIS
TARGET MARKET
COMMUNICATION PLAN
FINANCIAL PLAN
CONCLUSION 3
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EXECUTIVE SUMMARY 5
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EXECUTIVE SUMMARY
Prism Skylabs is software used in retail environments to track consumer habits and journeys throughout a store. Brick and Mortar locations are implementing this technology because it gives them access to data that allows them to optimize their visual merchandising and in store displays. They are also able to have access to data that before only e-commerce based retailers would have access to. This allows brick and mortar retailers to create a unique in store experience that suits the consumers’ needs and wants. Prism Skylabs has many other benefits along with optimized visual merchandising. One of these benefits is cut labor costs. If an employer is able to see what time of day and what days they are consistently slow or not busy, then they can cut shifts that would not be needed. They can also add shifts where they definitely need to be added. It takes the guessing game out of scheduling and therefore improves human resources as well. We are implementing Prism Skylabs into Nordstrom’s current server and surveillance system. This initiative will be achieved through during the 2015 fiscal year. This will improve Nordstrom’s visual merchandising, improve the consumer experience, and ultimately increase profits.
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COMPANY OVERVIEW 9
MISSION STATEMENT “At Nordstrom, our goal is to provide outstanding service every day, one customer at a time” (Nordstrom).
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HISTORY
In 1887, John Nordstrom traveled from Sweden to land in New York City with $5.00 to his name. In 1897, he read a headline in the newspaper about gold being found in Alaska. He then went to Alaska and within two years earned $13,000 from the gold mine stake (Nordstrom). John Nordstrom then decided to move to Seattle Washington; here, he reunited with friend from Alaska, Carl Wallin, who owned a shoe repair shop in downtown Seattle. In 1901, the two became partners and opened a small shoe store in Seattle, Washington. In 1928, the company was passed down to Nordstrom’s sons who led the company to be the largest shoe store in the country in 1960. Over the years, the Nordstrom family of employees built a thriving business on the principles of quality, value, selection and service (Nordstrom). Today, Nordstrom is one of the nation’s leading fashion retailers, offering a wide variety of fine quality apparel, shoes, and accessories for men, women and children at stores across the country. Nordstrom remains committed to the simple idea the company was founded on, earning the trust of their customers, one at a time (Nordstrom).
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OWNERSHIP STRUCTURE Nordstrom became “publicly� traded in 1971 (Nordstrom). However, the company continues to be family controlled. The top five direct holders of the company are all Nordstrom family members (Nordstrom, Inc).
Institutional Holdings
54.36%
Total Number of Holders 588 Total Shares Held 104,706,468
Major Direct Holders Holder Nordstrom Bruce A Nordstrom Blake W Nordstrom Peter E Nordstrom Erik B Nordstrom James F Jr. 12
Shares 11,267,235 1,903,378 2,101,551 2,182,110 573,271
Reported Dec 31, 2013 Jul 9, 2014 May 12, 2014 May 2, 2014 Aug 26, 2014
REVENUE
As of October 2014, Nordstrom’s current revenue is 12,540 Million USD (Nordstrom). This number includes income from Nordstrom, Nordstrom Rack, Hautelook, and Jeffrey. Since the 2013 annual report, Nordstrom has increased their revenue by 374 Million USD (Nordstrom). Prism is focusing to target just Nordstrom full line stores and their revenues. Below is a chart that shows Nordstrom full line store revenues from 2010 to October 2014. On Average, Nordstrom increases approximately 5.4% in revenue each fiscal year.
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The Nordstrom Company is expecting substantial growth in the next four years, 2015-2018. They plan to execute growth in a variety of ways such as: open more doors, expand to new markets, improve online platforms, invest in new technology, and leverage the loyalty program. Nordstrom plans to dedicate 40% of future spending on technology to support growth plans for brick-and-mortar stores, 40% in support of online growth, and 20% to increase relevance in stores with new tools for employees (Mucklai). As of November 2014, Nordstrom has 119 full line stores and 167 Rack stores. In the next four years the company will open an additional 34 stores. In 2015, there will be 5 full line store openings and 24 Rack openings. In 2016, 3 additional full line stores will open as well as 2 Rack stores. In 2017 and 2018, there will be 1 full line store opening each year and no new Rack openings (Future Store Openings). The full line store opening in 2018 is the long awaited “Nordstrom Tower” that is opening in New York City near Columbus Square. The Tower will be Nordstrom’s first residential building, and the tallest residential building in the world; The Tower structure is estimated to be 208 feet taller than the Empire State Building (Clark). Out of these new store openings, about 71% are new Rack stores; Nordstrom Rack currently plays an important part as a key contributor. Consumers are attracted to finding deals at Rack while also purchasing brands that are offered in the full line stores. As of 2013, the Rack stores have a higher productivity- at $525 per square foot, above Nordstrom’s very productive full line stores that earn about $415 per square feet. Nordstrom plans to attract more customers to Rack Stores who are looking for great fashion at affordable prices (Leob). While opening new stores in the US, Nordstrom is also expanding into the new markets. Nordstrom plans to open a full line store in Puerto Rico in 2015, following their first opening into the Canadian market in Calgary this fall (September 2014). The company plans to open 5 stores in Canada throughout the next four years, 2015-2018, in Ottawa, Vancouver, and Toronto (Future Store Openings). Unlike Target, Nordstrom is planning to slowly enter the Canadian market to adjust and correctly target this new market. The measured growth in the Canadian market is planned to continue adding value and increasing revenues to the Nordstrom Company. As of 2013, the annual report quotes that “38% of total company sales came from e-commerce and Rack stores” (Investor Relations). Therefore, in May of this year (2014), Nordstrom unveiled an e-commerce site for its Rack division (Brohan). While e-commerce has become a popular channel for all retailers, Nordstrom plans to heavily invest on e-commerce improvements over the next 5 years. Since Rack stores sales have substantially increased- 20% sales increase in quarter one in 2014 compared to quarter one in 2013, Nordstrom plans to focus exclusively on the new Rack e-commerce platform (Brohan). As Nordstrom enhances its online presence, they continue to offer online purchase incentives such as buying online and picking up in-store, free shipping and returns, and special private sales to e-commerce customers; the company also plans to increase delivery speed and create a personalized experience.
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GROWTH PLANS
Nordstrom plans to invest $3.9 billion in capital over the next five years to focus on in-store and online growth (Brohan). While focusing on a five year plan for online growth, Nordstrom also strives to serve more consumers while influencing in-store sales. By enhancing in-store experience for consumers, Nordstrom plans to invest in new technology in the next 5 years. President of the company, Blake Nordstrom, states, “An important element is our technology investments, which represent $1.2 billion or 30% of our capital plan, and approximately 40% of our technology capital relates to infrastructure to support our growth plans” (Mucklai). The remaining 20% of future spending is to implement new innovative tools for employees. This can include technology and/or new programs to enhance pointof-sales. Nordstrom is currently focused on a five year growth plan that in return is expected to attract new and existing customers as well as increase sales through new store openings in the US as well as Puerto Rico, and Canada. Nordstrom plans to increase online sales through their e-commerce platform. As being one of the top innovative retailers, Nordstrom expects to implement new technologies into their retail spaces to enhance in store experience. Nordstrom’s priorities for growth within the next 5 years all translate into the company’s ability to build loyalty and drive superior growth. Nordstrom will continue to stick to its core value of great customer service while focusing on future growth plans. As Blake Nordstrom says, “ This is a company that knows who they are and what they stand for—past, present, and future” (Leob). 15
Nordstrom has nine main competitors within the United States. These include Macy’s, Kohls, Sears, Bloomingdales, JC Penny, Dillards, Neiman Marcus, Belk, and Sakes Fifth Avenue. Nordstrom is unique because they are in a much more high-end price point, similar to Bloomingdale’s, however unlike most other high-end retailers, they have high accessibility. They currently have 119 brick and mortar locations along with 167 Nordstrom Rack locations across the country (Nordstrom). Competitors with a high price point including Saks Fifth Avenue, Neiman Marcus, and Bloomingdales, have very few brick and mortar locations. Whereas competitors with a lower price point have a larger number of locations. An example of this is Kohls with over one thousand stores in forty-nine US states (Sears).
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POSITIONING
high accessibility
low price
high price
low accessibility
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STRENGTHS:
WEAKNESS:
-Legendary customer service
-Presence in other continents is low
-Strong revenue performance
-Competition
-Variety of products
-Increasing number of Rack stores
-Innovation team -Strong supply chain
OPPORTUNITIES: -International expansion -Adapt new technology -E-commerce growth
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THREATS: -Evolution of technology -Competitive environment -Inability to direct trend data in stores
SWOT
Nordstrom has many qualities that make it one of the leading innovators in retailing. The company has 119 full-line Nordstrom stores, 167 Nordstrom Rack stores and operates in 38 states; just recently opened up their first Canadian store this fall. While having such a large amount of stores, one of Nordstrom’s strengths is their strong revenue performance leading to a good market reputation among customers. They offer a variety of product categories and brands, such as clothing, footwear, jewelry, beauty, café, furniture, and house ware. Nordstrom is known for their legendary customer service. The company strives to please consumers through kind acts of free shipping, greeting customers by name at the retail doors, sending thank you notes to customers after a purchase, and provide a no-question return policy. Nordstrom also has an innovation team that consistently is looking for opportunities in innovation and technological advancements to strengthen the company. Nordstrom has a strong supply chain; the company obtains the correct resources from suppliers and deliver the right product to consumers in a timely manner. Nordstrom will get the product to the consumer in the quickest way; they can pull from the stock room from any stores to ship out, or ship from the distribution channel (Walk). Nordstrom internally faces some weaknesses. The company’s presence in other continents is low. Nordstrom currently is operating in the US and recently in Canada. Being a high-end fashion retailer, Nordstrom faces competition, which can result to stagnant market share. There are currently 48 more Rack Stores than full-line stores; this could possibly be a negative impact on Nordstrom’s full-line stores. The steadily increasing number of Rack stores can be changing the name of Nordstrom. For example, in South Dakota there is only a Rack store in the state (Walk). Therefore, when the residents of South Dakota hear Nordstrom, they immediately think discount. Opportunities that Nordstrom currently has are tapping into international markets. In October, Nordstrom opened their first store in Canada and plans to open a store in Puerto Rico 2015. Depending on the success rate of the new market, the company has the opportunity to then begin to reach out to other countries. With technology advancing, consumer behavior is changing and shoppers are adapting to new technology and expect retailers to keep up. As technology is advancing, Nordstrom has the opportunity to implement new updated technologies into their stores. As e-commerce is becoming a popular channel, Nordstrom has the opportunity for continual growth through this platform. Threats that Nordstrom needs to be aware of is the evolution of technology. Technology is advancing at a rapid pace, and as one of the leading innovative retailers, Nordstrom must keep updated with new technology coming out. As a higher price, large retailer, Nordstrom is part of a competitive environment. The company must stay alert to their competition at all times. Another threat Nordstrom might face is the inability to direct trend data in stores in brick and mortar. E-commerce has the ability to track traffic, data, cookies, and average basket. However, Nordstrom does not have this information 19
Nordstrom offers a wide variety of products that appeal to all age ranges and demographics. Whether you are looking for a new suit or to ransack their beauty department, Nordstrom “offers service with a smile.” (Nordstrom) As a multi channel retailer, Nordstrom provides several means for their customers to procure the products they desire. The methods are brick-andmortar, e-commerce, m-commerce, and mail order catalogues. With these channels, Nordstrom offers a variety of product categories that include Women’s Apparel, Men’s Apparel, Women’s Shoes, Men’s Shoes, Women’s Accessories, Cosmetics, Children’s Apparel, and additional odds and ends. After recenty opening a new store in Jacksonville, Florida, the company has a total of 119 full line stores in the United States. Nordstrom soon realized that the idea of long waiting lines, especially for those who had large purchases worth several hundreds of dollars, had no appeal to anyone. Not only did this tie up associates behind a register instead of allowing them to assist customers, it gave the customers who were waiting a chance to rethink and back out of a part, if not all, of their intended purchase. To combat this problem, Nordstrom implemented a technology very similar to square that would allow associates to check out their customers anywhere in the store through an iPod or iPhone outfitted with a debit/ credit card reader (Forbes). Many associates also carry tablets and use them to access in store and online inventories to assist their customers with any questions.
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“Nordstrom has deployed over 6,000 of these devices throughout their 117 full- line stores, and at some Nordstrom locations, there are more mobile POS devices than regular registers. Colin Johnson, a spokesperson for Nordstrom, says that these devices are part of a larger plan for Nordstrom to help “provide a more technology enabled store experience.” He notes that in 2005, Nordstrom began offering the option to ship merchandise directly to customers, and in 2009 the company integrated inventory with its online store. In 2010, Nordstrom then introduced Wi-Fi into stores to ‘make it easier for customers to stay connected in the stores by using their mobile devices to shop and to compare and learn more about merchandise.’” (Forbes)
DISTRIBUTION
When it comes to numbers, Nordstrom is ahead of the competition. From 2013, their brick-and-mortar full time stores generated 7,700 Million USD and their online stores generated 1,600 Million USD; Nordstrom once again set a record. Even though these Nordstrom brick-and-mortar stores generated 7,900 Million USD in 2012, their online store generated 1.3 Billion USD. Even though it seems that online sales increased and in store sales decreased, Nordstrom intends to open a total of 240 full time stores by 2016, a venture that will surely boosts sales substantially from their 2013 profit margin. To ensure that the 118 stores in existence to date remain functional, Nordstrom operates and maintains 6 distribution centers across the US. The centers are located in Portland, Oregon; Dubuque, Iowa; Ontario, California; Newark, California, Upper Marlboro, Maryland; and Gainesville, Florida. While these distribution centers have experienced
success as shown through Nordstrom’s revenues, there is a lack on the east coast since most of the centers are located on the west coast. Nordstrom however, recently released news of a new distribution center set to be constructed and operational in Elizabeth Town, Pennsylvania by Summer 2015. Though when you order something offline, that does not necessarily mean that it will be coming from the distribution center nearest you. To ensure quick and efficient delivery, Nordstrom has implemented a system that allows the consumer’s product to come from anywhere along the supply chain. It can come from a distribution center, one of the two fulfillment centers, or even directly from a Nordstrom brick-and-mortar store. Nordstrom operates on e-commerce and m-commerce platforms aside from their brick-and- mortar stores. On mobile devices, sales accounted for 20%, more than 200 million of the company’s direct sales in 2012, and jump from less than 4% from 2011. This number also accounts for Nordstrom Rack, HauteLook, and Jeffery Stores. (Internetretailer.com) The final channel that Nordstrom utilizes in their omni-channel business model is the mail order catalogue. While these are starting to get less popular in the retail world, the Nordstrom catalogue has remained strong. One catalogue is released every month with 2 catalogues focusing on the half-year sale, a total of 12 catalogues. Nordstrom also releases men’s and plus sizes catalogues at various points throughout the year. These catalogues can be mailed to the consumer, viewed in store, or on mobile devices. While purchases can be made from the catalogue online, it is still viewed as a catalogue order. Online orders are only classified as when made directly from the Nordstrom website.
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Nordstrom participates in many different advertising and promotional activities. In 2013, Nordstrom spent $167 Million USD on advertising alone (Nordstrom). They use both print and digital media for advertising as well as event marketing. Print Media Examples of Nordstrom’s print advertising include their monthly catalogue and postcard mailings. Their monthly catalogue has an ever-changing theme and features new products of the month. It also incorporates their online platforms through encouraging readers to connect and participate in the online and mobile platforms (shop). Another way they use print media is through postcard mailings. This offers a unique way for consumers to engage with the brand. Postcards provide information on new product assortments and upcoming events. Nordstrom postcards are personalized with a hand written name and address (Katz).
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COMMUNICATION
Digital Media Nordstrom uses digital media through online videos, e-mails, social media, and their blog. Nordstrom is known for their unique and eye-catching digital media. They are also known to cause a lot of controversy. An advertisement that gained a lot of publicity in 2013 was their advertisement featuring same sex couples (Peeples). Nordstrom also uses e-mail as a way of marketing digitally. Their direct emails are used to provide styling tips, inform consumers of promotional sales and new product assortments, and are also used to promote free shipping and their free return policy. Their direct e-mails are unique to each consumer because when a consumer signs up for their e-mail, they also provide Nordstrom with their preferences and interests. Therefore each e-mail is directed towards something that consumer is interested in and creates value in their e-mail marketing initiative (Gilbreath).
Social Media Nordstrom also takes full advantage of social media. They have a presence on Facebook, YouTube, Twitter, Instagram, Pinterest, and Google+. This allows them to engage with consumer of all ages on multiple platforms. This also allows them to quickly react to consumer’s needs and concerns (Moth).
Blog Nordstrom also ha their own blog called, “The Thread.� They use this blog to generate content that is not product driven. Instead, the blog is used to reinforce brand identity to consumers through other topics. Some features on the blog include: Stylist Picks, Street Style, Behind the Scenes, and Interviews (Thread). 23
Events They are also known for creating many events for their consumers to attend. Some unique events that Nordstrom has created include DIY events where guests can create their own item to take home such as a friendship bracelet. They also have educational events where they inform consumers on new merchandise and often give away free samples. Nordstrom is also very unique because they create a lot of events specifically geared towards children (Stores).
Pop-In at Nordstrom Pop-In at Nordstrom is an in store shop that Nordstrom has created. Olivia Kim, Nordstrom’s Director of Creative Projects brings new designers to Nordstrom through this shop. It creates new merchandise for Nordstrom’s consumers and also broadens the new designers audience. The Pop-In shops are ever changing and are always featuring new designers (Pop-In). 24
COMMUNICATION Customer Relations Marketing Nordstrom really takes value in their consumer and offers a lot of consumer relations marketing. One of the main ways Nordstrom builds consumer relations is through their rewards program. With a fashion rewards credit or debit card, a consumer can have early access to the Anniversary Sale, take part in Personal Triple Points Day, gain access to exclusive holiday events, and have VIP access to instore events (Rewards). Nordstrom also offers many services to all of its consumers. These include: free shipping, free returns, buy online and pick up in store, international shipping, gift cards and gift boxing, access to customer service representatives seven days a week, free personal stylists, their NEXT app, Nordstrom True Fit, shoe fitters, bra fitters, alterations, mens tailoring, extended sizes, Nordstrom Restaurants, Spa Nordstrom, and a Wishlist (Services).
Promotions Nordstrom also creates special promotions for its consumers as well as unique events. Instead of offering a promotional discount off an item, Nordstrom often will offer a free gift with a certain purchase (Nordstrom). This is a unique way of creating an incentive for a consumer to make a purchase.
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INITIATIVE 27
KEY OBJECTIVES Nordstrom is going to be implementing Prism into its current visual merchandising process in 2015. The key objective is to meet consumer’s need for a personalized shopping experience by optimizing visual merchandising.
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RATIONALE Industry Trends There are several industry trends that support the implementation of Prism in Nordstrom stores. The first is that more and more brick and mortar retailers are implementing technology into the retail environment (Dalkin). Another industry trend is that brick and mortar is preferred among consumers. Although e-commerce sales continue to rise, there are still many benefits to shopping in a brick and mortar store. These benefits include being able to try clothes on, using all five senses to take in the merchandise, and having an in-store experience. As much as e-commerce platforms are convenient for shoppers, they cannot provide the consumer with an experience that incorporates all five senses. This is something that today’s consumer values and therefore most of Nordstrom’s revenue is still from their brick and mortar locations (Lesonsky).
Consumer Behavioral Trends There has also been a shift in consumer behavior and expectations that supports the use of Prism in Nordstrom locations. With the shift towards technology and retailers becoming more aware of what their consumer wants, consumers are beginning to expect a personalized shopping experience. This is more than personal shoppers and stylists, but consumer also expects the retailer to know already what they like through past purchases. Personalized E-mails are becoming expected with products exclusively targeted towards them (Trend). Prism will help meet these expectations because Nordstrom will be able to tailor the in-store experience to their customers needs on a day-to-day basis.
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RATIONALE
Long Term Benefits Nordstrom will benefit both internally and externally through using Prism. Although Prism is not a consumer-facing product, ultimately the consumer will benefit from the use of Prism in the retail environment. The consumer will experience a more visually appealing store experience. They will also experience new visual display each time they come into the retail environment, therefore creating interest regardless if new merchandise has been added to the assortment or not. Merchandise that is in high demand will also be more easily accessible to the consumer. All of the factors will ultimately create an easier and more efficient consumer journey throughout the retail space. There are also many internal benefits to implementing Prism into the retail environment. Prism gives an incite into consumer behavior that was otherwise inaccessible. Retailers will gain concrete data on how consumers move through a space, which displays catch their eye, and at which points they spend the most time (Prism). This is crucial data that up until now was only accessible through hosting an e-commerce platform. Visual merchandisers can then optimize their visual displays according to consumer data. This will ultimately lead to an increase in sales and revenue. Prism is not only a benefit for existing stores, but also stores that have yet to be built. Visual merchandisers, architects, and interior designers can all work together to create the ultimate visual in-store experience for consumers based off of Prism data at existing stores. Overall, Prism creates a more visually pleasing in store experience for customers and optimizing selling space for retailers. 30
KEY PLAYERS Retailers such as Alex and Ani, have already implemented Prism into their stores. Alex and Ani is an American retailer and producer of fine jewelry located in Cranston, Rhode Island. Ryan Bonifacino, the Vice President of the company, states “Prism makes the data understandable. It lets us look behind the numbers and see why things are happening” (Prism). When first testing Prism, Alex and Ani were most concerned with measuring foot traffic over the holiday period. They used the Prism technology for a three-week period in 2013-holiday season, mostly analyzing the heat maps. Results were surprising; the chief technology officer, Joe Lezon, learned that there was a specific are in the store that was populated. “We also realized that 98% of the people turned right when they first entered the store” (Alex and Ani). With this information, the head merchandiser and sales operator were able to adjust product placement to please the consumers. The communication and marketer of Prism Skylabs states, “Alex and Ani have had an estimated 6% increase in sales while using Prism technology” (Morin)
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Belk is a retail department store that has recently tested out Prism Skylab. Like Alex and Ani, Belk found the heat maps most beneficial. The company used the heat maps to maximize the value of staffing. The heat maps allowed Belk to always make sure customers have a salesperson to assist them, as well as bringing more employees on the sales floor during busy times. Belk’s Vice President of Innovation found that collecting and having visualizations of data helped the company test out instore assumptions quickly. “It’s not about building out big, long-term solutions. It’s about building a foundation in our stores so we can move as our customer moves” (Gavett). Belk was able to benefit from Prism technology and create a more personalized selling space for their consumers.
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KEY PLAYERS
Lolli and Pops is a candy retailer with a growing presence nationwide, and focuses on driving customer delight (Fiorletta). Lolli and Pops is one of the first public companies to implement Prism into not only one, but ten retail spaces. The Vice President of Visual Merchandising, Marc Schwarzbart, appreciates Prism’s convenience of having access to detailed analytic data from all his store locations anytime, anywhere. Prism allows Schwarzbart to be in all of his stores, everyday, through a constant live video feed where he can analyze specific trends of each retail space such as shopping patterns and dwell time. In an interview with Retail Touchpoints, Schwarzbart says “I can very easily give feedback to stores or operations and buying teams to indicate what looks great in a specific store, what should be replicated across the chain or even what inventory may be in the wrong place” (Fiorletta). With Prism, visual merchandisers has full time access to view information such as store design, inventory management and even customer service. Therefore, store managers are not having to make as many calls to report hourly updated data to visual merchandisers. According to an interview with Prism Analytics Expert, it is estimated that Lolli and Pops has seen approximately a 3% increase in sales since implementing Prism into their 10 store locations(Morin). Lolli and Pops is constantly viewing trends in there stores, specifically through the heat maps. While viewing heat map activity, Lolli and Pops noticed that a specific product was not being interacted with. The company then adjusted table fixtures to the populated traffic area that was documented in the heat maps and Schwarzbart explains, “we immediately saw an uptick in sales for that product” (Fiorletta).Prisms analytics provide Lolli and Pops a comprehensive view of store traffic on an hourly, daily, weekly, and monthly basis. Lolli and Pops is using Prism to it’s full advantage while discovering new data to create a better experience to the consumers, offering them exactly what they want on the sales floor. 33
Prism Skylab exists to create a better experience for customers as well as assist visual merchandisers and store managers with in-store display decisions. “Prism is a cloud-based service platform that transforms video cameras into visual merchandising, auditing, and business intelligence tools “(Prism Skylabs). The platform helps businesses use existing video infrastructures to view, understand, and share actual, live places. Across the entire retail industry, over 2 million hours of video are being recorded (Palmieri).With Prism, retailers can measure offline conversion, understand long-term trends, and have access to analytics using the existing cameras they already have. The technology that Prism uses when executing their software into existing surveillance cameras includes computer vision, computational imaging, and data visualization. Through these technologies, Prism is able to capture valuable information such as how many people are walking into the store, the specific areas they go to, how long they spend there, what products they interact with, and hot spots. Through these technologies, Prism Skylab is able to create live constant updates of data to employees such as visual merchandisers, CEO, store managers, and even logistics team. Through these powerful analytics, employees are able to view where customers are walking and exactly what they are doing, resulting in ideas of creating more positive customer experience through visual merchandising and future store openings.
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TECHNOLOGY
“Computer vision teaches computers to “see, and mind the store in ways you can’t” -Stephen Russell
Computer vision allows Prism to use methods such as acquiring, processing, and analyzing to understand images from the live cameras to produce numerical and symbolical information. The computer vision technology goes through this process by acting similar to a human eye’s perception, while it focuses on the recognition and detection of motion.
Computational imaging is a process to “make pretty photographs of store that combine imagery and data,”
-Stephen Russell
Computational imaging is all about creating a better image than that of the original (Palmieri). People use computational everyday when either clicking the HDR button on the I-phone or using a filter on an instagram picture. Prism does just this through retailer’s surveillance cameras. Cameras in retail spaces are not always of the best quality, but computational imaging turns grainy images and videos into high-res, well-composed photos. Prism is the only technology that has the power to reduce bandwidth to 1/100th the size of HD video (Prism). The computational imaging technology provides users with seamless rich data through turning their cameras into sensors for detailed information. 35
TECHNOLOGY Data visualization allows a retailer to extract “interesting and relevant insights and tidbits of data in a form that us mere mortals can understand� -Stephen Russell
Data visualization is all about monitoring and tracking consumer behavior and reactions as soon as they enter the door of the retail space. Through data visualization, the computer generates a course map to determine where and when consumers walk in, and the main paths they take (Prism). The technology also has the ability to create heat maps to track where people are standing in the store, and what specific products they are interacting with.
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IMPLEMENTATION NORDSTROM Nordstrom is one of the top retailers that are always first in innovation (Nordstrom). Through their innovation lab, employees are researching every day for opportunities that can benefit their company. Prism Skylab is a technology that will seamlessly integrate with Nordstrom’s company. Nordstrom already has the technology needed to implement Prism into their system; all employees are supplied with an I-pad through which Prism can be viewed, and all 119 locations have surveillance cameras installed. Prism Skylab will benefit Nordstrom through its advanced technology and ability to share live data to visual merchandisers and store managers to discover new ways to drive engagement and maximize sales. Prism Skylab will allow Nordstrom to optimize everything, ensure the perfect customer experience, and build better brands. Nordstrom will use the computational imaging technology to “bridge the gaps between people who are making decisions about stores but can’t always be in stores, and benefit from the data visualization to take complicated data and bundle it in a way that is simple and easy enough to use” (Palmieri). Nordstrom already uses Wi-Fi to track their customers in the store and their location, but Prism Skylab will take this technology to the next level. Nordstrom employees will be able to retrieve exact data as to where the consumers are going, what they interact with the most, and the exact hot spots in the store. From this data, the in-store visual merchandise team can move around visuals and displays according to customers reactions with specific products.
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Activities
January
February
March
April
May
June
Hire Prism Consultant Research Analytics Expert Technology Sourcing License Implementation (In Seattle Store) Implementation (In next 4 locations) Data Reaction Analyze Sales Volume
January 2015-June 2015 In January of 2015, Nordstrom is setting up a meeting with Prism Retail Analytics Expert, David Morin. He will be meeting with Blake W. Nordstrom (current CEO of Nordstrom), Kelsie Nance (Corporate Visual Operations Director at Nordstrom), Beth Fleming (the manager at Nordstrom in Seattle), Kristen Carden (Vice President of Human Resources), and Ben Grossman-Kahn (the Director at Nordstrom Technology People Lab) (Linkedin). The meeting will take place on January 10th of 2015. During the first half of January, Nordstrom will be doing research on Prism and how they will benefit from using this technology in their brick and mortar stores. During the third week of January, Nordstrom will acquire the basic and advanced licenses need to implement Prism into their Seattle flagship store. This process takes about a week (Morin). Once the required licenses are acquired, Nordstrom will download the Prism software onto their current surveillance cameras in the Seattle flagship store. They will also be downloading the software onto their local server. This would take approximately thirty-five minutes (Morin). Starting in February, Nordstrom will implement the technology into the retail environment. David Morin, the Retail Analytic Expert, will work directly with the flagship store in Seattle to make sure they fully understand how to use the software. He will fly to Seattle to work with them in person on the first of each month and will be available to contact through Skype and telephone (Morin). Once the software is downloaded, it is permanently on the local server. Therefore, Nordstrom can not “turn off� the software. However, for the first two months, they will only be using the technology to improve visual merchandising every two weeks. During the two weeks they use the technology, they will analyze sales volume and compare it to the two weeks they do not use Prism. Starting in April, they will begin to use Prism daily to improve their visual merchandising.
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EXECUTION PLAN July
August
September
October
November
December
January
July 2015-Beyond Starting in July, Nordstrom will stop reacting to the data Prism provides them and they will intensely start to analyze the benefits and increase/potentially decrease of sales. Nordstrom will then decide which four flagship stores they will implement Prism in next. Nordstrom will be using Prism in five flagship stores throughout the US, including the flagship store in Seattle, until January of 2016. Starting in 2016, Nordstrom will then implement Prism into fifteen more flagship stores. This will be a total of twenty flagship stores in 2016. In 2017, Nordstrom will implement it in twenty more stores, making for a total of forty flagship stores throughout the US. In 2018, Nordstrom will implement Prism in thirty more stores, making a total of seventy flagship stores using this technology. If Prism continues to prove beneficial and have a positive impact on sales, Nordstrom will then begin to implement Prism into Nordstrom Rack locations. Nordstrom’s annual report states that “Previous technology investments have been a key part of our strategy to enhance the customer experience at the rack (Investor Relations).”
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VISUALIZATIONS
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VISUALIZATIONS
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VISUALIZATIONS
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MARKET ANALYSIS 49
Downtown Seattle features a blend of nationally recognized retail stores as well as hundreds of independent retailers. These store locations are sprinkled throughout the neighborhoods, offering apparel, gifts and merchandise unique to Seattle. Of the 3,840 occupied street level businesses in Downtown, 1,139 are retail and 2,568 are services such as restaurants, fitness centers and salons that create a vibrant, unique pedestrian experience. (Burt, Steve, and Keri Davis) Nordstrom’s headquarters is located in downtown Seattle, as well as the companies first store. “Flagship stores include Ben Bridge Jewele, Filson, Gene Juarez Salon and Spa, Nordstrom, REI, Starbucks, Top Pot Donuts, Utilikilts and Uwajimaya.” (Burt, Steve, and Keri Davis) Downtown Seattle is also home to Pike Place Market: a farmers market that today remains the number one destination for tourists. Overall, retail occupancy has been on a downward decline since 2007. This could be due to a constant 5% increase in lease rates, averaging an addition $6.00 USD per square foot. However, Downtown Seattle lease rates have remained relatively constant, only fluctuating about $0.30 USD in the past three years. “Retail businesses make up about 30% of all street level businesses on Downtown Seattle.” (Burt, Steve, and Keri Davis) This totals 1, 139 stores. Of those stores, 212 (19%) of them are clothing and accessories stores.
50
MARKET SIZE
51
Since Prism Skylab is still a new technology it is only recently being adapted by companies. New adapters are using this technology to monitor traffic and hot spots in store; Nordstrom would have a competitive advantage in being an early adopter. However, with Nordstrom being the leading luxury department store, it stands to follow that other department stores across the country would be quick to adapt this technology for their own benefit (assuming it is a success). With Nordstrom being an early adopter of this technology, they are ahead of their competition. However, if other department stores begin to implement this type of technology into their spaces, Nordstrom would be at high risk of competition. Two department stores stand out the most when assessing future adopters of Prism technology. The first is Macy’s (at 27.77 billion in 2013 with a lower price point and high sales volume compared to Nordstrom) (Statista) and the second is Neiman Marcus (at 4.22 billion in 2013 with a higher price point and low sales volume compared to Nordstrom) (Statista). Macy’s is one of the nation’s premier omni-channel retailers operating about 840 stores in 45 states, the District of Columbia, Guam, and Puerto Rico. Macy’s even has a location in Dubai that is operated by Al Tayer Group LLC under a license agreement (Macysinc). Due to Macy’s high sales volume and store count, the company could benefit greatly by implementing Prism into their flagship stores and rest to follow. This would allow Macy’s to adapt their workforce on an as needed basis cutting labor cost and change their floorsets and layouts based off of the customer traffic and hot spots. 52
FUTURE COMPETITION Neiman Marcus is the main name of Luxury department stores. The Neiman Marcus group operates the Neiman Marcus department stores, Bergdorf Goodman, and Last Call. With annual revenues of over 4 billion since 2010, Neiman Marcus appeals to a different customer demographic than that of Macy’s of Nordstom (Forbes). Due to Neiman Marcus’s product mix, the company would benefit by implementing Prism technology. This would allow the visual merchandising to adapt all their floor sets and product displays based on their customer traffic and hot spots. Where Prism would have an added benefit of decreasing labor force via sales associates in other Nordstrom stores, which would not apply to Neiman Marcus’s associates. Sales associates there have regular clients who like consistency. Therefore, Neiman Marcus would only adjust their labor force based off of the need to add or remove employees. As long as Nordstrom utilizes Prism technology to enhance their sales strategy and labor force by analyzing customer traffic and hot spots throughout the customer journey, Nordstrom will be able to boost sales significantly as noted in the budget. While Macy’s and Neiman Marcus would be able to use Prism to do the same, Nordstrom would have the advantage of being an early adapter and having more experience and knowledge of the technology.
53
Apparel Retailers Employing Technology to Enhance Visual Merchandising Practices
Threat of New Entrants: High
Bargaining Power of Suppliers: Medium
Rivalry Among Existing Competitors: Low
Threat of Substitute Products or Services: Medium
Outcome: Medium-Low
54
Bargaining Power of Buyers: Medium
PORTER’S 5 FORCES Threat of New Entrants Threat of New Entrants is very High because there are many apparel retailers who could potentially implement this technology into their stores in the future.
Bargaining Power of Suppliers The Bargaining Power of Suppliers is Medium. It is initially very high because there are very few companies who have developed this technology so far. However, the companies that own the technology are new to the market and the apparel retailers who are implementing them into their retail space are large corporations with substantial presence in the market.
Bargaining Power of Buyers Bargaining Power of Buyers is Medium. It is initially low because there are so many apparel brands that could potentially implement this kind of technology into their retail environment. However the apparel brands are so much larger than the companies who own the technology therefore their buying power is high.
Threat of Substitute Products or Services The Threat of Substitute Products or Services is Medium because there are other ways of achieving the same end result through different technologies.
Rivalry Among Existing Competitors Rivalry Among Existing Competitors is Low because technology is just starting to be implemented into visual merchandising practices. There are few apparel retailers currently testing these technologies in their brick and mortar locations.
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56
TARGET MARKET 57
DEMOGRAPHICS
Seattle’s population as of 2013 is 652,405. The median age of residents in Seattle is 36.1. There are an equal amount of females and males in Seattle, with a 50/50. In 2010, the average number of people per household in Seattle was 2.06. The average household income is $63,470. 92.9% of Seattle residents are high school graduates and 56.5% have at least a bachelor’s degree. 37.63% of the population affiliates with a religion, with Catholicism being the majority of that percentage. Seattle is 69.5% white, 13.8% Asian, 7.9% African American, and 6.6% Hispanic.
58
PSYCHOGRAPHICS Seattle is home to Urban Uptown consumers, Young Achievers, and Young Accumulators. Urban Uptown consumers love the arts, love shopping at unique and exclusive retailers, tend to travel abroad, and spend heavily on technology. Young Achievers are usually hip and single twenty-somethings who’ve recently settled into metro neighborhoods. Young Accumulators favor outdoor sports and love buying adult toys like campers, powerboats, and motorcycles. Seattle may be the unofficial coffee capitol of the US but it was also named the 8th Greenest City and the 8th Greatest City for Outdoor Enthusiasts. There are more than twenty public buildings in Seattle are LEED-certified or under construction for LEED certification. Through an incentive program, residents are encouraged to install solar panels on their homes for energy conservation. Sustainable Ballard, a green neighborhood group and sustainability festival host, offers ongoing workshops about how to live in harmony with the environment (Top). Residents of Seattle can kayak in the San Juan Islands, climb snowy peaks, explore the nearby temperate rain forests, enjoy the scenery and seafood of the Puget Sound, or embark for day visits to the Olympic National Park or Mount Rainier National Park. It’s also a very health conscious city. Seattle residents can run a stretch of the city’s seventy-five miles of trails. These paths run through the Washington Park Arboretum, the sandy beaches along Elliot Bay and a grassy, secluded park with a view of the city’s skyline (Forbes).
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-28 years old -Business man -Loves the outdoors -Journalist for The Seattle Times -47k a year -Single -Loves hiking and climbing mountains -Climbs Mount Rainier once a year
ADAM SCOTT
60
CONSUMER PROFILE
SARAH WILLIAMS -37 years old -Works at Lush Corporate Office in Seattle -Retail Marketing Specialist -Married -2 kids -Household income of 120,000k -Does yoga in her free time 61
TAYLOR MOORE -16 years old -Uses instagram daily -Follows all her favorite fashion brands -Stays on top of trends -Loves to take OOTD pictures -Gets Starbucks weekly
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CONSUMER PROFILE -5 years old -Loves arts and crafts -Attends Nordstrom’s children’s DIY events -Loves accessorizing and wearing bows -Likes to wonder off while mom shops and pick out her own clothes
MICHELLE STEVENS
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64
COMMUNICATION PLAN 65
Activities
November
December
January
February
March
Cost
Convention Digital Summit
$
1,925.00
Leave Behind
$
216.00
Table Banner
$
144.00
Signage
$
128.00
Total
$
2,413.00
Flight
$
983
Hotel
$
3,760
Food
$
1,350
Cab
$
346
Total
$
6,439
Overall Total
$
8,852
Meeting
66
COMMUNICATION PLAN
Digital Summit Prism will be renting a booth and speaking at Shop.org NRF’s Digital Retail Division Summit in Seattle in December of 2014. Devon Safran (the Retail Engagement Executive at Prism), Brian Hanson (the Partnership Relationship Manager at Prism), and Stephen Russel (the CEO and Founder of Prism) will all travel to the Digital Summit. The Digital Summit is from December 5th-7th. They will fly to Seattle on the 4th and fly back to San Francisco, where Prism is located, on the 8th of December. During their stay, they will stay at the Westin Seattle, approximately .4 miles away from the convention center. During December 5th and 6th, Prism will have a booth set up at the convention. For this, they will create a banner, signage, and a leave behind. The leave behind will be a ten page booklet explaining what Prism is and how they can benefit retailers. One December 8th, Stephen Russel will give a presentation to retailers about Prism. There will also be a panel discussion afterwards including Devon Safran and Brian Hanson. Peter Smith, a member of the Nordstrom Innovation Lab be attending the summit and will speak with them one on one about how Prism could potentially benefit Nordstrom. They will then set up a date for an Analytics Expert from Prism to meet with Nordstrom in the beginning on January in order to implement Prism for the begging of Nordstrom’s fiscal year in February.
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Meeting With Nordstrom Headquarters In January of 2015, Nordstrom is setting up a meeting with Prism Retail Analytics Expert, David Morin. He will be meeting with Blake W. Nordstrom (current CEO of Nordstrom), Kelsie Nance (Corporate Visual Operations Director at Nordstrom), Beth Fleming (the manager at Nordstrom in Seattle), Kristen Carden (Vice President of Human Resources), and Ben Grossman-Kahn (the Director at Nordstrom Technology People Lab) (LinkedIn). The meeting will take place on January 10th of 2015. David will fly from San Francisco to Seattle on January 9th and he will fly back on January 11th. He will be staying at the Westin Seattle hotel, approximately .2 miles away from the Nordstrom headquarters where the meeting will take place. They will discuss the expenses of implementing Prism and potential profit Nordstrom could experience. David will also speak to Kelsie about how Prism will directly impact visual merchandising. He will also speak with Kristin about how Prism could also potentially impact human resources and cut labor costs. He will then speak with Beth about how he will be directly working with the Seattle flagship store as they begin to use Prism in their retail space. 68
COMMUNICATION PLAN Follow-Ups With Nordstrom Store David Morin, the Retail Analytic Expert, will work directly with the flagship store in Seattle to make sure they fully understand how to use the software. He will fly to Seattle to work with them in person on the first of each month to train the employees at the flagship store and help the visual merchandising team read and analyze the data that Prism produces. He will also show them ways to implement that data into real world visual display scenarios. David previously is a perfect fit for Nordstrom because he previously worked at Nordstrom as a sales associate (2008-2009) and a designer wardrobe stylist (2009-2010). Therefore, he knows the company very well. He will also be available to contact through Skype and telephone (Morin).
69
70
FINANCIAL PLAN 71
2015
2016
2017
2018
Total
REVENUE AND SAVINGS Projected revenue
$
10,368,000,000 $
10,932,019,200 $
11,526,721,044 $
12,153,774,669
Pojected revenue for selected stores $
418,000,000 $
1,721,000,000 $
3,602,000,000 $
6,594,000,000
Increased revenue due to initiative
$
430,540,000 $
1,772,630,000 $
3,710,060,000 $
6,791,820,000
Total Increase
$
12,540,000 $
51,630,000 $
108,060,000 $
197,820,000
Installation Fee
$
25,000 $
75,000 $
100,000 $
150,000
Basic License
$
840,000 $
3,360,000 $
6,720,000
$
11,760,000
Advanced License
$
900,000 $
3,600,000 $
7,200,000
$
12,600,000
Total Expenses
$
1,765,000 $
7,035,000 $
14,020,000 $
24,510,000
$47,330,000
EARNINGS
$
10,775,000 $
44,595,000 $
94,040,000 $
173,310,000
$322,720,000
EXPENSES
Projected Revenue To project the estimated increase in sales due to Prism, the projected sales without implementing Prism first had to be made. Projected revenue was calculated by finding the average increase of Nordstrom’s revenue throughout the years and continuing the pattern throughout 2018. Projected revenue for selected stores was found by taking the percentage of stores implementing Prism and multiplying it by total revenue. In 2015, there will be 124 Nordstrom stores, and we are implementing Prism in five of those locations. In 2016, there will be 127 Nordstrom stores and we will be implementing Prism into twenty. There will be 128 Nordstrom locations in 2017 and we will be implementing it in forty stores. Finally, in 2018 there will be 129 Nordstrom stores and we will be implementing it into seventy of those locations. According to David Morin, Prism has been increased sales by an average of three percent. This was multiplied by the projected revenue for selected stores to then find how much Prism would increase sales.
72
FINANCIAL PLAN Expenses Installation Fee The installation fee to install Prism onto a company’s surveillance cameras is free. However, Nordstrom is installing Prism onto their local servers. The free to install Prism onto a retailer’s local server is $5,000 per store (Morin). In 2015, Nordstrom is downloading it onto five of their location’s servers. The installation fee is a one time fee and does not need to be renewed each year (Morin). In 2016, they are downloading it onto fifteen more location’s servers. Next in 2017, they are downloading it onto twenty more of their location’s servers. Finally in 2018, Nordstrom will be downloading it onto 30 more of their location’s servers. This will make for a total of $350,000 to install Prism onto 70 Nordstrom servers over four years. Basic License Fee In order for a retailer to use Prism, they must first acquire the necessary license. Prism has two types of licenses. The first license is called a Basic License includes basic imagery and heat maps. David Morin, the Retail Analytic Expert, suggests that a retailer implements a basic license on seventy percent of their surveillance cameras and an advanced license on the other thirty percent of their cameras. The format view for Prism on a camera is sixteen by nine feet, or 144 square feet. Nordstrom’s flagship store in Seattle is 383,000 sq ft. Therefore, would need to be about 2,660 cameras within the flagship store. Of that 2,660, about 25% would be in back-stock. This would leave roughly 2,000 cameras on the retail selling space. 70% of those would have to have the basic Prism software installed on them. This would be 1,400 cameras. The basic license costs $120 per camera. Therefore it would cost each Nordstrom flagship store $168,000 to implement basic Prism software onto their cameras. Basic licenses do not automatically renew each year, so each Nordstrom location needs to renew their licenses each year. Advanced License Fee The Advanced License is required if a retailer wishes to view the analytic data which Prism can provide. This includes foot traffic, consumer trends, ground life, and consumer paths throughout a retail environment. As David suggested, Nordstrom will be implementing this into thirty percent of their surveillance cameras. Of the 2,000 cameras on the selling floor of each flagship Nordstrom store, 600 cameras would need to have an advanced license. An advanced license costs $300 per camera (Morin). Therefore, it would cost each flagship store about $180,000 to install advance Prism software on their surveillance cameras. Advance licenses do not automatically renew each year, so each Nordstrom location needs to renew their licenses each year. Final Earnings When the total expenses for each year is subtracted from the total increase of sales for each year, it is found that Nordstrom’s total earnings is $322,720,000 over the four year time period.
73
74
CONCLUSION 75
76
CONCLUSION
In conclusion, it would be in Nordstrom’s best interest to adapt Prism Skylab technology into the Seattle, WA flagship store, and subsequent stores to follow. With a live feed of customer traffic and hotspots, Nordstrom’s visual team would be able to plan floor sets and displays based off of the customer journey, managers would be able to cut labor costs based off of when and where the customer needs assistance the most, and even the building team could plan out different store layouts when future stores are built based off of the negative space customers try to avoid. This venture would provide increased sales of over 300 million in a 4-year period, and an insight into the customer journey.
77
78
APPENDIX 79
Execution Plan
80
APPENDIX Execution Plan
81
Financial Plan
2015
2016
2017
2018
Total
Notes
REVENUE AND SAVINGS $
10,368,000,000 $
10,932,019,200 $
11,526,721,044 $
12,153,774,669
Pojected revenue for selected stores $
418,000,000 $
1,721,000,000 $
3,602,000,000 $
6,594,000,000
Increased revenue due to initiative
$
430,540,000 $
1,772,630,000 $
3,710,060,000 $
6,791,820,000
Total Increase
$
12,540,000 $
51,630,000 $
108,060,000 $
197,820,000
Projected revenue
82
Estimated 3% increase from Prism Analytics Expert
APPENDIX Promotional Plan
Activities
November
December
January
February
March
Cost
Convention Digital Summit
$1,925
Leave Behind
$216
Table Banner
$144
Signage
$128
Total
$2,413 Meeting
Flight Hotel Food Cab Total Overall Total
$
983
$
3,760
$
1,350
$
346
$883 $
6,439
$
8,852
$424
$191
$181
$187
$2,487
$333
$474
$466
$900
$150
$150
$150
$106
$80
$80
$80
$3,917
$755
$885
83
Promotional Plan
Quote for Banner from Creative Approach Savannah, GA
Quote for Leave Behind from Creative Approach Savannah, GA
84
APPENDIX Promotional Plan
Flight to go to Digital Summit
Hotel for Digital Summit
85
Promotional Plan
86
APPENDIX Promotional Plan
Hotel and Flight for Meeting on January 10th between David Morin, Kelsie Nance, Beth Fleming, Kristen Carden, Ben GrossmanKahn, and Bruce W. Nordstrom
87
Promotional Plan
Hotel and Flight for follow up between David Morin and Nordstrom flagship store on February 1st
88
APPENDIX Promotional Plan
Hotel and Flight for follow up between David Morin and Nordstrom flagship store on March 1st
89
Promotional Plan
Restaurants near the Westin Seattle
90
APPENDIX Promotional Plan
Restaurants near the Westin Seattle
91
Promotional Plan
How Much UBER costs
92
APPENDIX Promotional Plan
Distance Between the Airport and the Westin Seattle
93
Promotional Plan
Distance Between the Westin Seattle and the Digital Summit
94
APPENDIX Promotional Plan
Distance Between the Westin Seattle and Nordstrom Headquarters
95
Interview with Prism
Interview with Analytics Expert at Prism: David Morin 96
APPENDIX Interview with Prism
Interview with Analytics Expert at Prism: David Morin 97
Interview with Prism
Interview with Analytics Expert at Prism: David Morin 98
APPENDIX Interview with Prism
Interview with Analytics Expert at Prism: David Morin 99
Interview with Prism
Interview with Analytics Expert at Prism: David Morin 100
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WORKS CITED 103
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