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April 24, 2025
Why Is Nordstrom Removing Rack From Its Loyalty Points Program?
Beginning June 3, Nordstrom’s The Nordy Club members will no longer be able to earn loyalty points for purchases made at Nordstrom Rack’s stores or on nordstromrack.com.
Instead, members will be eligible for a 5% discount for purchases at Nordstrom Rack as well as its website when they use their Nordstrom credit card on eligible purchases, according to an update. Other payment methods will not feature the discount.
A similar change was made for purchases at Nordstrom’s Last Chance clearance stores. At the close of 2024, the retailer operated 277 Rack, two Last Chance, and 92 full-line Nordstrom locations. It also operated six Nordstrom Local service hubs.
Nordstrom said the credit card discount will enable Rack customers to more quickly benefit from their purchases, with the move also providing differentiation for Nordstrom Rack.
“We are excited to evolve The Nordy Club and introduce exclusive benefits to Nordstrom Rack customers, delivering great brands at great prices with even more perks each time they shop with us,” said Deniz Anders, Nordstrom’s EVP and chief marketing officer, in a statement sent to Retail Dive and TheStreet. “The new benefits offer our Nordstrom Rack customers more value, providing instant discounts, special promotions, and early access to new arrivals.”
Under the current Nordy Club program, members earn one base point per $1 net spend across banners. The earned points are converted to Nordstrom Notes, which are like gift cards and can be used for purchases at Nordstrom or Rack. Accumulating 1,000 points, for instance, equals $10 in Nordstrom Notes.
Members earn points faster during bonus points events, when they make a purchase with their Nordstrom credit or debit card, and as they reach higher member status levels.
Nordy Club members also enjoy experiential awards such as early access to sales and invitations to special events.
Retailers are increasingly emphasizing experiential rewards, although points, cash back, discounts, and other transactional perks remain core drivers of enrollment and retention.
Correction: Customer spend at Nordstrom Rack under the updated program will still count toward their loyalty status (Influencer, Icon, Ambassador, etc.) if they’re a Nordy Club member or cardmember, and Nordstrom Notes are still redeemable at Nordstrom Rack. An earlier version of the article indicated that Nordy Club member purchases at Rack would no longer count toward their loyalty status.
Discussion Questions
Why do you think Nordstrom plans to no longer allow Nordy Club members to earn points on Nordstrom Rack purchases?
Does the move make sense from a profitability standpoint as well as a loyalty perspective for both the Nordstrom and Rack banners?
Poll
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Nordstrom has made changes because rewards members were chalking up a lot of points which are reflected in the group’s financials. As Nordstrom Rack is now growing rapidly, they want to cut back on this point inflation and restrict rewards to customers of the department stores. However, Rack shoppers are not being entirely short-changed, the discount on purchases made with a Nordstrom credit card is attractive – especially as off-price shoppers are looking for ways to save money.
From a theoretical standpoint, this makes complete and utter sense: upscale brands – including, but not specifically Nordstrom – have allowed the differentiation between their full- and off-price banners to become blurred; this helps draw a line in the sand between the two (shouldn’t the freebies be reserved for those who spend the most?)
So why only one upraised thumb? Theoreticians don’t shop at Nordstrom, people do; many shop at both, and a non-trivial number will whine and winge about it.
(And a side note – upscale but not Nordstrom – for those who questioned the viability of Saks’ appoinment only model, your verdict is available at the BOPIS desk https://www.sfgate.com/local/article/saks-fifth-avenue-closure-san-francisco-20291027.php)
Exactly. Nordstrom is about loyalty. Rack is about price.
Good move. Separate the aspirational brand from the main brand
Since the merchandise sold at Nordstrom Rack barely resembles the quality of the merchandise at a Nordstrom store, I think it makes sense to separate them. Apples and oranges.
Get the credit card if you shop at Rack. You’ll save each time you use the card and you won’t have to wait to accumulate points.
The 1-Brand dream (of starting customers at the lower end and raise them to the full line) has rarely if ever worked. In this case not only the product but the service/CX is also different.
Re: Nord credit card… it’s 1st party data & revenue for retailer. Although, I suspect, not the best financial environment for avg consumers to be opening credit card account if they don’t already have. The rest of this year will be interesting to see where low consumer sentiment affects behavior.
This change could potentially decrease Nordstrom Rack’s sales, as customers may be less incentivized to shop there without the added benefit of earning points.
Loyal Nordy Club members might choose to make their purchases at other retailers that offer rewards, leading to a decline in customer retention. Additionally, this decision may impact customer perception of the brand, possibly resulting in reduced overall brand loyalty.
As a matter of profitability, Nordstrom may be seeking to streamline its operations and reduce costs associated with managing complex loyalty programs.
A simplified rewards structure may also allow the company to improve margins and invest in other areas of customer service.
In a strategic sense, this decision could also serve as a way to differentiate Nordstrom from Rack, positioning Nordstrom as a more premium option while encouraging Rack customers to explore other exclusive discounts offered by Rack.
The separation of incentives creates a stronger incentive for customers/members to use the co-branded card to get 5% discounts at Nordstrom Rack – which is meaningful to customers, but also generates incremental revenue for Nordstrom – while emphasizing the importance of the relationship with their departments stores.
Some loyalty program members are never happy with any change, but this is introduced with sufficient notice and in very clear terms, so I anticipate the majority of Nordy Club members will be accepting.
Nordstrom can then more clearly focus on customer engagement via the department stores program and enhance emotional benefits, while continuing to create loyalty based on their great selection, outstanding service, and the desire among customers to be recognized above earning points (or in their current case – vouchers for future purchases).
This is an interesting spin on the loyalty program, but for the Rack customers, it’s actually a very good deal. 5% off on the current purchase is actually better than the typical $10 gift card for $1000 purchase. Of course, with bonus days that could become a $20 or $30 gift card, but still that’s less than a 5% instant discount. Rack customers are interested in price, and that is a good reason to offer them the additional discount rather than making them accumulate points over time. This is a smart move.
This is a great move to separate the two brands, and the 5% discount fits Rack’s value-focused shopper. Requiring the credit card to access the discount perks is a smart way to get people to sign up. I’m curious to see how many new card users they’ll gain.