Nordstrom Opens Outlet Next to Flagship

Discussion
Mar 19, 2012

Typically, department store retailers place their flagship locations in a major mall or prime downtown location. Discount outlets are often miles away in a complex housing other chains’ or manufacturers’ overstocks and irregular items.

Well, not that it’s new news, but Nordstrom is not your typical retailer. The company has proved that once again by opening one of its Rack stores a “crosswalk” away from its flagship in downtown Seattle.

Blake Nordstrom, president of the chain, told The Seattle Times, “What we’ve learned is that our Racks do well when they’re closest to our flagships.”

Geevy Thomas, president of Nordstrom Rack, said that around 60 percent of his division’s customers also shop at Nordstrom’s flagship stores.

“Many of our customers who’d like to try a new brand have the opportunity to do so at 40 to 60 percent off at the Rack,” Mr. Thomas told the Times.

“And when they get accustomed to certain brands, they want the newest, latest, greatest thing. That’s when they go across to our full-line store and get it the day it comes out,” he added.

Reports from a number of sources indicate the decision to relocate the Rack store has gotten off to a good start. Around 550 shoppers were on hand when the store opened for business last Thursday.

Discussion Questions: How do you think Nordstrom’s decision to open a Rack store a “crosswalk” away from its flagship store will affect sales in the dual locations? Do you see other department stores or specialty chains doing something similar?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

19 Comments on "Nordstrom Opens Outlet Next to Flagship"


Sort by:   newest | oldest | most voted
Anne Howe
Guest
10 years 2 months ago

I think it’s a great idea. I’m a shopper of both stores, and the locations I visit are on the same road, just a few miles apart. If I have time, I’ll start at the Rack, then stop by the main store on the way home. But if I’m pressed for time, it’s the main store and their wonderful customer service and no lines! The value equation works for me both ways.

Gene Hoffman
Guest
Gene Hoffman
10 years 2 months ago

Good move by Nordstrom. Imagination is in the eye of the Nordstrom shopper’s soul and the soul hopes that designer shoes can be found at The Rack at a discount.

>Nordstrom has opened the door to a dual approach to selling and others will try to imitate Nordstrom with lesser credentials. So a note of caution arises for copying retailers: Hope is the universal liar. Think about it.

Warren Thayer
Guest
10 years 2 months ago

My initial instinct was very negative, since this seems likely to cannibalize full-ticket sales. But the Nordstrom execs have apparently given this much thought and research, so now I’m merely “not sure.”

Dick Seesel
Guest
10 years 2 months ago

I don’t see the new Rack location hurting sales in the flagship Nordstrom store. The brand is so widely accepted in its hometown that this move should represent a net gain. As Mr. Nordstrom suggests, this pattern has been repeated elsewhere, such as in downtown Chicago, with evident benefit to both locations. It may not be a move worth duplicating everywhere, but some markets can support the strategy with the right amount of traffic and population density.

Mark Price
Guest
Mark Price
10 years 2 months ago

In Minneapolis, we have had a Nordstrom Rack next door to the base Nordstrom store for a number of years. As a customer of both, I can tell you that they both fill specific needs, and have less cannibalization than you think. The Rack targets a discount-oriented customer, who is willing to scramble in the racks in order to save money on high quality items. The core Nordstrom customer seeks a combination of consulting, service and support, as well as the guarantee that the products are all the highest possible quality.

Not only will Nordstrom increase its brand awareness to a new group of customers with the opening of the Rack store, but will also drive incremental revenue, based on the experience in the Twin Cities.

Ryan Mathews
Guest
10 years 2 months ago

This may — and probably will — work for Nordstrom’s, but I don’t think it would be a good idea for other retailers. A Nordstrom’s primary customer may not want to wear last year’s colors, but I don’t think that’s going to stop most other retailers’ customers from seeing the outlet as a better price alternative to the main store.

As with so many things in retail, it all depends on who the retailer is, what the market is like and who their target customer is. Sadly, there are still no “silver bullets” available, no matter how many times you check the gun.

Ronald Stack
Guest
Ronald Stack
10 years 2 months ago

Typically brilliant move by Nordstrom. They can do this because of their brand, but they *know* they can do this because they know their customer. Not only is the Rack a less expensive way to try a new brand, it’s a gateway for aspirational shoppers who want the Nordstrom experience. I don’t think this strategy is by any means limited to Nordstrom, however. Any upscale brand with a good outlet could do the same.

Bill Emerson
Guest
Bill Emerson
10 years 2 months ago

In the old days, department stores had what they called “the budget store” in their basements. Indeed, Filene’s Basement was literally that, a store in the basement of their flagship store in downtown Boston. The belief then, and apparently now at Nordstrom’s was that these were two separate customers. Of course, in those days there were only two big season-end promotions. Nordstrom’s has been pretty disciplined in avoiding the promotional narcotic. It will be interesting to see how this plays out.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
10 years 2 months ago

Ahhh yes, a retail strategy that is in fact customer centric! Bravo Nordstrom. Customers can differentiate the “value” offered by each channel and making it convenient for them is table stakes in today’s multichannel world.

Raymond D. Jones
Guest
Raymond D. Jones
10 years 2 months ago

This is consistent with a customer-centric approach. Why make it difficult for the customer by requiring a separate trip to the outlet? Assuming the outlet is carrying a different set of merchandise, they can optimize sales for the total chain this way.

Ed Rosenbaum
Guest
10 years 2 months ago

It’s Nordstrom. They create the music that other retailers march to. Watch the others follow this.

Tony Orlando
Guest
10 years 2 months ago

I like the idea, as they get money out of the customer who prefers one or the other store, or both. Great idea. Reyer’s shoe store in Sharon, PA has the same idea, with their outlet store down the block from their flagship store.

David Slavick
Guest
David Slavick
10 years 2 months ago

From a store environment and positioning standpoint, it is a smart move. Nordstrom doesn’t discount and is loathe to have sales. So, maintain the integrity of the core store and create a “bargain” environment via outlet stores. I don’t like the idea of being on the same or nearby pad. For some shoppers, they may delay a purchase at higher margin to find the alternative at the outlet. The quality of goods is maintained, so a selective/smart value-priced Nordstrom shopper may fill their basket with lower priced goods at corresponding lower profit margin on goods sold.

Make the outlet location a “destination.” It is likely a real estate play to their advantage based on what is available vs. a conscious move of convenience/proximity or logistics.

Martin Mehalchin
Guest
Martin Mehalchin
10 years 2 months ago

Richard and Mark’s earlier comments are spot on; the two concepts fill different needs and Seattle (like Chicago and the TC) is a market that can support both easily. I’d also not read too much into this: as a Seattle resident, I have a suspicion that this may have had as much to do with a landlord who was looking to revive a flagging center as it did with deliberate strategy on Nordstrom’s part.

Craig Sundstrom
Guest
10 years 2 months ago

“… company’s decision in the 1970s to launch the Rack business INSIDE ITS DOWNTOWN STORE” (emphasis added). As the quote from the related Times article shows, this is really more a “back to the past” move than it’s anything innovative (and indeed reminiscent of the “bargain basements” of yore, that either disappeared with their stores, or were upscaled out of existence).

The real loss — to me anyway — is the move from what sounds like a quirky, albeit inefficient, 4 floor layout (which was only a few blocks away, anyway) to a boring mall location.

Anne Bieler
Guest
Anne Bieler
10 years 1 month ago

Nordstrom knows its shoppers and how they shop. They manage assortments very well, and don’t confuse either the brand or the value while maintaining very high service levels. This will work for Nordstrom — others should be very careful!

John Detwiler
Guest
John Detwiler
10 years 1 month ago

A few years ago, a Rack existed in a center across from a Nordstrom-anchored mall in northeast suburban Fort Worth. That Rack has since closed. More recently, a new Rack opened in a center across a freeway from a different Nordstrom-anchored mall in Dallas. The two stores don’t really face each other; the Nordstrom is at a far corner of its mall, the Rack, meanwhile, is hidden by a parking garage. The reason for the Fort Worth-area Rack closure? I’ve not heard one, but the combo should have worked there. The Dallas pair should do great, as the stores are near some of the pricier/upscale residences of the market, as well as much of their local customer base. Great topic, RW!

Robert DiPietro
Guest
10 years 1 month ago

Great idea! I get a sense that the numbers show that customers that shop both locations spend more than just one. It is a no brainer to capture more share of wallet.

William Passodelis
Guest
10 years 1 month ago

Nordstrom is phenomenal and Rack is phenomenal, each in their own unique way. I do not see the two in competition and in my opinion, Nordstrom Rack is to outlet stores what Target is to discounters.

wpDiscuz

Take Our Instant Poll

Do you see Nordstrom opening a Rack right next to a flagship location as a good or bad move?

View Results

Loading ... Loading ...