Nordstrom 2011 Annual Report Download - page 7

Nordstrom, Inc. and subsidiaries 7
ABILITY TO ANTICIPATE AND RESPOND TO CONSUMER PREFERENCES AND FASHION TRENDS
We strive to ensure the merchandise we offer and our shopping experience, both in store and online, remain current and compelling to our
customers. We make decisions regarding inventory purchases well in advance of the season in which it will be sold. Therefore, our ability to predict
or respond to constantly changing fashion trends, consumer preferences and spending patterns, and to match our merchandise levels, mix and
shopping experience to sales trends and consumer tastes, significantly impacts our sales and operating results. If we do not identify and respond to
emerging trends in consumer spending and preferences quickly enough, we may harm our ability to retain our existing customers or attract new
customers. If we purchase too much inventory, we may be forced to sell our merchandise at higher average markdown levels and lower average
margins, which could harm our business. Conversely, if we fail to purchase enough merchandise, we may lose opportunities for additional sales and
damage our relationships with our customers.
GROWTH STRATEGY
Our strategic growth plan focuses on both our stores and on e-commerce. There are risks associated with opening new stores. The availability and
cost of suitable locations for our stores depends on a number of factors, including competition from other retailers and businesses, local land use
and other regulations, new shopping center construction and developers’ financial condition. New store openings also involve certain risks,
including constructing, furnishing and supplying a store in a timely and cost effective manner and accurately assessing the demographic or retail
environment for a particular location. Our sales at new, relocated or remodeled stores may not meet our projections, which could adversely affect
our return on investment. As part of our growth strategy, we also intend to open stores in new and international markets. Expansion will require
management attention and resources and may ultimately be unsuccessful, which could harm our future business development. In addition,
competition from strong local competitors, compliance with foreign and local laws and regulatory requirements and potentially unfavorable tax
consequences may cause our business to be adversely impacted.
We are also pursuing a heightened focus on technology to enhance our website and mobile capabilities, broaden the selection of our online
merchandise offering and improve the speed and quality of our delivery of merchandise to customers. In addition, other growth opportunities may
include acquisitions of, or investments in, other businesses, as well as new technologies or other investments to improve the customer shopping
experience in our stores and online. If these technologies and investments do not perform as expected, our profitability and growth could be
adversely affected.
LEADERSHIP DEVELOPMENT AND SUCCESSION PLANNING
The training and development of our future leaders is important to our long-term success. If we do not effectively implement our strategic and
business planning processes to attract, retain, train and develop future leaders, our business may suffer. We rely on the experience of our senior
management, who have specific knowledge relating to us and our industry that is difficult to replace. If unexpected leadership turnover occurs
without adequate succession plans, the loss of the services of any of these individuals, or any negative perceptions of our business as a result of
those losses, could damage our brand image and our business.
MERCHANDISE PLANNING
We are making investments to improve our multi-channel merchandise planning, procurement and allocation capabilities. These efforts involve
changes in personnel, processes and technology over a period of several years. If we encounter challenges associated with change management,
the ability to hire and retain key personnel involved in these efforts, implementation of associated information technology or adoption of new
processes, our ability to continue to successfully execute our strategy could be adversely affected. As a result, we may not derive the expected
benefits to our sales and profitability, or we may incur increased costs relative to our current projections.
INFORMATION SECURITY AND PRIVACY
The protection of our customer, employee and company data is vitally important to us. As we operate in multiple retail channels and maintain our
own credit operations, we are subject to privacy, security and cybersecurity risks and incidents. Our business involves the storage and transmission
of customers’ personal information, consumer preferences and credit card information, in addition to employee information and company financial
and strategic data. In addition, we use mobile devices, social networking and other online activities to connect with our customers. Some of our
critical systems also depend upon third party providers.
As techniques used to obtain unauthorized access, sabotage systems or otherwise attack our services change frequently and often are unforeseen,
we may be unable to anticipate these techniques or to implement adequate preventive measures and they may remain undetected for some period.
Concurrently, measures that we may take to prevent risks of fraud and breaches of privacy, security and cybersecurity have the potential to harm
relations with our customers or decrease activity on our websites by making them more difficult to use or restricting the ability to meet customers’
expectations in terms of shopping experience. Any measures we implement to prevent a security or cybersecurity risk may not be totally effective.
In addition, the regulatory environment surrounding information security, cybersecurity and privacy is increasingly demanding, with new and
constantly changing requirements across our business units. Security breaches and cyber incidents and their remediation, whether at our company
or our third party providers, could expose us to a risk of loss or misappropriation of this information, litigation, potential liability, reputation
damage and loss of customers’ trust and business.
We have expended, and will continue to expend, significant resources to protect our customers and ourselves against these breaches and to ensure
an effective response to an internal or external security or cybersecurity breach, either actual or perceived.