Article title

Managing Service Quality Volume 7 Number 1 1997 0000

Author/s

Celebrate and record Practices of excellent companies in the retail industry

Sherrie La Vere and Brian H. Kleiner

The authors Sherrie La Vere and Brian H. Kleiner are from the School of Administration and Economics at California State University, Fullerton, California, USA. Abstract Attempts to reveal the successful practices of three unique retail operations. Shows that the companies reviewed have a history of success but are also known for nding new ways to evaluate and value innovation. All three organizations are different in their congurations of environment, historical evolution, and merit structure, yet in their uniqueness they have similarities of visionary leadership, management that interfaces with leaders and workers on the front lines, empowerment to these workers, and practices of continually institutionalizing new approaches. In these cases, the originators of the businesses impart a continuity and cohesiveness that cannot be underemphasized. These are not stagnant workplaces. These enterprises are in a constant state of renewal; rapid changes in the world are embraced and addressed rather than resisted.

The organizations used in this report are not only retail stores, but speciality retail stores. The distinction of a speciality retail operation is that it carries one category or a number of categories of items as opposed to a department retail store which carries a larger number of items and different items including bedding, housewares, furniture (for example, Bullocks and May Company) and even tyres and tools (Sears, for example). The three business operations examined in this report include Nordstrom (commonly thought of as a department store, but in fact, it is a speciality store on a grand scale), The Gap, and The Body Shop. John W. Nordstrom was a Swedish immigrant who arrived in the USA in 1887 at the age of 16. He managed through a series of mining, logging, and assorted odd jobs to make his way from New York to Seattle and eventually landed in Alaska during the gold rush of the late 1800s. Through persistence and luck he made his fortune, $13,000, and returned to Seattle. He then went into business with a shoe salesman/shop proprietor and thus Nordstrom-Wallin was born in 1901. He eventually bought Mr Wallin out, and handed his three sons the legacy of a business created and maintained by focusing on people and forging continued quality relationships with them. The operation has grown and developed to become one of the leading fashion speciality retailers in the United States, offering a wide variety of ne quality apparel, shoes, and accessories for women, men and children. John W. Nordstroms grandsons, Jim, John and Bruce are now co-chairmen of the company and their children are also active in the business as well[1]. In 1995, with 55 existing stores, the potential for growth over the next three to ve years is unprecedented in the 94-year history of Nordstrom. No other apparel store in the world can generate sales of $80-100 million in the rst year of operation and the Nordstroms expect that volume out of most of their new locations. Donald G. Fischer did not start out to create a retailing superstar when he introduced his rst store to San Francisco

Managing Service Quality Volume 7 Number 1 1997 pp. 3438 MCB University Press ISSN 0960-4529

The authors would like to thank Laurie Jackson, manager of The Body Shop; Cherie Decker, manager of The Gap; and Fran Broda, assistant store manager of Nordstrom.

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Practices of excellent companies in the retail industry

Managing Service Quality Volume 7 Number 1 1997 3438

Sherrie La Vere and Brian H. Kleiner

in August of 1969. Already established as a real estate developer, he simply wanted to exchange an ordinary pair of Levis blue jeans. But when he discovered that what should have been a simple transaction was impossibly frustrating at the local department stores, he decided that America needed a new kind of speciality shop a Levis-only store. It was a milestone decision for the UC Berkeley graduate. The early target market was primarily teenagers, the name The Gap originating from a conversation Fischers wife was having about the generation gap. But the convenience of a neatly organized jeans store with exclusively Levi Strauss products appealed to customers of all ages. The business took off in 1970 and has been ourishing ever since. After 26 years, Gap, as it is now called, has 728 stores worldwide, has acquired Banana Republic stores, and has spawned the highly lucrative GapKids and BabyGap. Levis, only 2 per cent of their business in 1990, were dropped from their stores in favour of jeans made by the companys own label. This company now creates, produces and sells an extensive assortment of their own mens, womens and childrens denim, activewear and accessories. From its modest beginnings, The Gap has grown and prospered to become one of the most successful speciality chains in retailing history. Anita Roddick was a young housewife with two children in London in 1976 when her husband decided to take an extensive hiking expedition. As she needed income, she decided to open a small shop selling body lotions made of natural ingredients. Her rst shop was such an old building that the walls were mouldy; to cover the holes in the wall she used green paint, and to this day her shops are green-coloured. For her products she used plastic bottles she got for free from a local hospital. She did not have enough bottles so she told her customers she would rell bottles from their original purchases. This was the beginning of one of her many slogans re-use, re-ll, re-cycle. What was economic necessity in 1976 has become a total commitment on the part of Anita Roddick to environmental as well as animal rights causes. Today there are 2,100 branches of The Body Shop in 44 countries. Anita travels worldwide to nd new sources for and to develop new uses for her products. She uses her shops not only to provide superior products and turn a prot, but as a forum for issues which are important 35

to her. Pamphlets in her stores have titles such as What on earth are we doing?, Against animal testing, Re-use, re-ll, re-cycle, and Trade, not aid. The Body Shop is reinventing our concept of what business can do to affect environmental and social issues.

Key success factors

Leadership Leadership is the process of persuasion or example by which an individual (or leadership team) induces a group to pursue objectives held by the leader or shared by the leader and his or her followers[2, p. 1]. Dispersed leadership is important to the vitality of a large, intricately organized system. The most forward looking business concerns are working in imaginative ways to devolve initiative downwards and outwards through their organizations and to develop their lower levels of leadership. High-level leaders are made more effective in every way if the systems over which they preside are made vital by tapping into the potential creativity and motivation of lower levels of management and workers[2, p. 9]. Leaders do not create motivation out of thin air. They unlock or channel existing motives. Any group has a great tangle of motives. Effective leaders tap those which serve the purpose of collective action in pursuit of shared goals. They accomplish the alignment of individual and group goals. They deal with the circumstances which often lead group members to withhold their best efforts. They call for the kind of effort and restraint, drive and discipline that make for great performance. They create a climate in which there is pride in making signicant contributions to shared goals[2, p. 13]. As large as the three organizations listed above may be, the originators and/or descendants of the originator are visible and active as corporate leaders. They are decision makers and they are symbols to middle management as well as to workers on the front line (salesforce, customer service) and those behind the scenes (human resources, operations, maintenance, etc.). Anita Roddick and Donald Fischer are the leaders of the companies they formed. John, Jim and Bruce Nordstrom are the leaders of the company their grandfather formed (note that, even as Nordstroms, these gentlemen had to begin working for the company as stock people, later moving up into

Practices of excellent companies in the retail industry

Managing Service Quality Volume 7 Number 1 1997 3438

Sherrie La Vere and Brian H. Kleiner

sales, then management, etc.). How, then, are these company heads imparting leadership to their workforce? Each in their own individual way. Nordstrom promotes only from within. The people on top the family and other corporate heads communicate to their employees through personal visits to stores; employees are encouraged to say hello personally to Mr Jim, or Mr Bruce when they walk through the stores. A quarterly newsletter to all employees called The Open Door is published, updating employees on new developments and re-instilling the original values that have fared so well. Employees are encouraged to give their input on policies and issues, even if it means doing so anonymously. Clearly, the leaders here would rather hear the unpleasant truths and use them constructively than to ignore them and seal themselves behind closed doors. Organizational values are reinforced by being handed down vertically and spread horizontally through management. The company remains committed to its founding principles of quality, selection, value and service. Donald Fischer and his company have established The Gap to be a worldwide creative and fashion force. Looking back and ahead to the companys strengths, the founder and CEO believes that above all, it is a team effort. As a company gurehead he is known to be very communicative to his staff and to the salesforce. He encourages management to implement their own ideas and to create an atmosphere where salespeople can give input and creative feedback from their experiences. This company also promotes only from within no one can move into management without being a salesperson rst. The Body Shop is a company with a bold commitment to what it stands for. As such, it attracts and retains employees who identify with the companys values as expressed by its founder and these employees become deeply committed to the organization which embodies them[3, p. 84]. Nowhere is the powerful alignment between company and employee beliefs more evident than in this UK-based beauty products retailer. Anita Roddick has articulated a strong, clear business philosophy which she acknowledges is quirky. The values she has created have attracted a group of employees (and a following of customers) who identify with the organizations commitment 36

to environmental causes and with its belief that companies can be agents of social change. Roddick nds that focusing on prots, prots, prots is deeply boring. Instead, she prefers to create an electricity and passion that bonds people to the company. She strives to nd a way to grab the imagination of young people and wants them to feel they are doing something important. She believes she would never get that kind of motivation if she thought she was just selling shampoo and body lotion[1, p. 85]. Quality and service Quality and service, trademarks of these three companies, go hand-in-hand, especially because the subject being considered here is retail and retail is not only the business of selling products but the business of forging relationships, of connecting with the buyers wants and needs. Inherent in the Nordstrom philosophy is always to look for ways to improve products and service. They never stay satised or complacent, even in times of great success. The company employs decentralized decision making in buying products. Buyers have the freedom to institute a programme of teaming up with vendors to produce a powerful presentation. Labels reect a vendor name with Exclusive with Nordstrom printed on them. The product development department, with much input from buyers and salespeople across the country, design and develop products which provide value and quality as well as delight the customer. These products are constantly being reassessed and improved. If customer feedback is negative on the quality of a button on an in-stock shirt, for example, a new button is sourced or made and goes into production as soon as possible. Nordstrom has had an exemplary service philosophy since day one; in fact, it has been handed down through generations. One could easily state that company members, from the co-chairman and president to the salesforce, are passionate about service. Tom Peters has coined a new phrase called Nordstrom it, in other words, do whatever needs to be done for the customer immediately with no holds barred[4, p. 2]. Stores abound concerning the matchless service offered by this company. The Gap is now investing in producing all of its own garments and accessories, reacting to fashion trends and also creating some of their own. The main focus concerning

Practices of excellent companies in the retail industry

Managing Service Quality Volume 7 Number 1 1997 3438

Sherrie La Vere and Brian H. Kleiner

product is on providing down-to-earth Gap basics. Quality control and continual updating of their own products, along with unique merchandising and advertising campaigns, has established The Gap as a leading quality speciality store for casual clothing. For example, a recent advertising campaign called Individuals of style showed high-prole personalities from show business, sports, etc., clothed in classic pocket T-shirts, chambray shirts and denims, bringing attention to the Gap name and adding an upscale clientele to the already popular stores. Service is of extreme importance to this company, although the selling style is somewhat more relaxed than at Nordstrom the customer is acknowledged and allowed to shop in a casual atmosphere, knowing that help is available when needed. It is impossible to separate the products sold in The Body Shop from the impact that production of these products has on the world community and the environment. Customers come into The Body Shop to buy a hair conditioner and nd a story about the Xingu reserve and the Kayapo Indians who collect Brazil nuts for the company. Roddicks company showed them a simple process for extracting oil from the nut, which consequently raises the value of the raw ingredient used. The result is that the Indians are paid more for it, and that gives them an alternative to their logging income, which in turn protects the rain forest. That is what Roddick means by Trade, not aid, a way of trading honourably with indigenous communities in disadvantaged areas not changing the environment or culture. Roddick states that what she brings back with her are stories how others do things, the connections, the essential wisdom of the indigenous groups. She believes that stories are the soul of The Body Shop. Her products are made of high quality, natural ingredients. Customer service is inherent in this corporate culture of premier service to humanity, the environment and the animal kingdom. Employees are educated about the products, gracious and ready and willing to connect with and educate the customer while selling away. Empowerment and reward structures While the idea of making others feel more powerful contradicts the stereotype of the allpowerful executive, research suggests that the traditional ways of explaining a leaders 37

inuence may not be entirely correct. For example, recent leadership studies argue that the practice of empowering or instilling a sense of power is at the root of organizational effectiveness, especially during times of transition and transformation. In addition, studies of power and control within organizations indicate that the more productive forms of organizational power increase a superiors sharing of power and responsibility with subordinates[5, p. 420]. Empowerment can be thought of as the act of strengthening an individuals beliefs in his or her sense of effectiveness. Empowerment is not simply a set of external actions; it is a process of changing the internal beliefs of people. Any management practice that increases an individuals sense of self-determination will tend to make that individual more powerful. The theory behind these ideas can be traced to the work of Antony Bandura, who conceptualized the notion of self-efcacy beliefs and their role in an individuals sense of personal power in the world[5, p. 421]. Nordstrom employees are praised in large corporate meetings. When employees sell a target amount, they become pacesetters, receiving cash and a managers discount for a year. Salespeople and support staff can receive an All-Star Award, probably the most honoured award in the company, for continued exemplary service on or off the salesoor. With this award they receive cash, a managers discount for a year, a weekend trip to a local resort, and their photograph displayed in the customer service department (only one person per store per month receives this honour). The Gap and The Body Shop do not appear to have such forms of recognition, although one still gets the sense of an upbeat staff while shopping their stores. These stores have salaried employees only, so in order to make more money, people must move up through the ranks of management. Managers spend a lot of time teaching and coaching their staff, asking for input and using it in creative ways. Recognition and praise are given, although not as formally as in the more vertically structured Nordstrom stores. A salespersons sense of self-determination can be affected by the fact that employees work on a commission basis the more they achieve, the more they earn. This works positively for some individuals and negatively for others. Nordstrom operates on a commission basis; the other two stores do not. On the

Practices of excellent companies in the retail industry

Managing Service Quality Volume 7 Number 1 1997 3438

Sherrie La Vere and Brian H. Kleiner

one hand, the ability to build and develop a personal clientele can inspire many employees; on the other hand, the lack of pressure to sell and the absence of competition on the salesoor can foster a more positive and relaxed experience. Both methods work, as all three companies are wildly successful. The employee must nd the corporate culture that is appropriate and satisfying for him/her. Other reward structures which are common to the three companies are prot sharing, benets and the autonomy to make decisions at the point of transaction with the customer. The culture of each organization is such that if an employee is not committed to doing quality work, they will not last. Empowerment, states Terry Neill of Anderson Consultings worldwide change practice, is not the things you do to or for people; it is the impediments you take away, leaving space for people to empower themselves[4, p. 6]. Individuals in these companies are encouraged to express their individual personalities, and the payoffs have proved to be enormous. Each organization has generations of customers walking through their doors; customers who know that, even if there is a problem with a product (inevitably there are problems), they will be taken care of with the utmost consideration.

boundaries, the other two have expanded horizontally into the international market. Leadership and vision have been imported downwards through all three companies, and one of the most common and important themes they share is the treatment of employees as valuable assets to be developed. Employees can share the core values of these organizations and have the freedom to engage in continuous dialogue with management and owners. Within the connes of each structure, unique as they may be, success is forged daily by creating quality relationships with consumers. These are companies which are so strong in their elds at this point that they are scarcely daunted by other contenders. Each has become so good at what they do that it appears they are fervent in continuing to reinvent themselves, with barely enough time to look back at the rival companies in their wake. Their formulas for success differ, but each company has carved out a broad space in the marketplace these superheroes will not easily be undone.

References
1 Nordstrom, J.W., The Immigrant, Dogwood Press, Marietta, GA, 1950. 2 Gardner, J.W., On Leadership, The Free Press, New York, NY, 1990.

Conclusion
All three of the companies considered above are extremely successful. Each one of them started with one individual in one storefront. Each one has far surpassed their original goals to become a leader in their industry. One has grown vertically and stayed within the nations

3 Bartlett, C. and Ghosal, S., Changing the role of top management: beyond strategy to purpose, Harvard Business Review, November-December 1994, pp. 82-5. 4 Peters, T., The Pursuit of Wow!, Vintage Press, New York, NY, 1994. 5 Gordon, J.R., Organizational Behavior, Allyn & Bacon, Boston, MA, 1993.

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