I can definitely see Gaylene's point - that low prices or generous return policies have to be compensated for by a price hike elsewhere.
I will say, though, that for me Nordstrom's strategy definitely worked. I have switched to doing probably 80% of my clothes shopping though Nordstrom, even though I do not have a bricks-and-mortar store. I used to mostly buy clothes at local mall stores (Macys, JCPenney, AnnTaylor, Loft, Talbots etc.) but I very rarely buy things there anymore. And Nordstrom's return policy, free shipping, and generous price adjustments have played a big role in this switch. I did not enjoy stopping by a Loft store only to see that an item I bought a week ago and haven't worn yet is now 20-30% cheaper. And most of the time these stores would not do a sale-to-sale adjustment. I suppose if you like something, it should not matter that it is now cheaper than when you bought it, but somehow it did make me feel cheated as a customer.
One of the reasons I buy more things from Nordstrom than I would otherwise is that I know I can buy an item in my size and have it price-adjusted if it later goes on sale. I have never been refused a price adjustment on online purchases, and the sales associates are super-nice about it. I certainly feel that Nordstrom has the right to change their policy at any time (or, rather, request a more strict adherence to the current policy), whereas I have the right to change my shopping behavior in response.
I will say that at the time I ask for a price adjustment, whether it is within the two week window or slightly over, the tags are usually still on because I am still debating whether to keep something. So if I decide the item is not worth it to me at the current price, I will simply return it (and the store will have paid return shipping costs, only to have to resell the item at the lower sale price).
As to Una's example with REI - DH and I used to buy lots of camping gear from LLBean because of their generous return policies. I think that over the years we have purchased lots of things from them at higher prices than other retail outlets precisely because we wanted to know that we could return things without hassle if needed. I don't think we returned all that many purchases. So to me, this again was an example of generous policies and good customer service attracting customer loyalty (and we were certainly well aware of the higher prices we ended up paying).
Anyway, the reason a wrote this long response is because to me this kind of CS is the deciding factor in picking a retailer to buy from. So I hope that stores like Nordstrom continue to take this into consideration, along with their bottom line, of course.
