the department store into the 21st century
The National Retail Federation's Big Show helps the industry take stock of a new year, fresh off the typically grueling holiday quarter. This year, the event also provided an opportunity to check in with one store in particular: Nordstrom's first New York City flagship, which opened in October to great fanfare, and with great expectations.
(Author : Daphne Howland)
The store, at seven floors and and 320,000 sqare feet, certainly looks the part of a 21st century department store, with hi-touch services like styling and tailoring, brand expertise plus brand-agnostic guidance in beauty and fashion, opportunities for digital connections (including dressing rooms), and food and beverage. The store has plenty of high-end labels, including items developed in partnership with Burberry exclusive to this location, but also offers price points in all categories for more budget-minded customers, according to Shelley Kohan, professor of fashion business management at the Fashion Institute of Technology, speaking during a recent excursion there.
In addition to multiple restaurants and bars — there's some sort of food concession on every floor, more than any other Nordstrom — customers can order drinks in dressing rooms and footwear areas. That helps sell things, Co-president Erik Nordstrom said during an NRF keynote talk on Tuesday. "I grew up selling shoes. … We think a lot about shoes," he said. "I don’t know why it took us so long to put drinking and shoes together, but it’s a great combination."
For the retailer, New York is more than the flagship, however. As Nordstrom told his NRF audience, the company has constructed a retail ecosystem in the city, which some observers tell Retail Dive is especially suited to the Big Apple. Jane Hali & Associates analyst Jessica Ramirez, speaking to Retail Dive at the NRF event, described the flagship as "well curated," with emerging as well as classic brands, plenty of buy online, pickup in-store opportunities, and strong merchandising in competitive segments like lingerie.
"It's like a version of the online store, which is appropriate for New York," she said. Nordstrom has high hopes for that. The wider Tri-State area represents a $700 million-plus market, and the company has enlisted its off-price Rack stores (two in Manhattan), its two new Local stores (both in Manhattan), along with the men's store across the street, also on West 57th Street and Broadway, to tap that market. Nordstrom also says that New York is already its largest e-commerce market.
Not all analysts believe that shoppers frequent both Nordstrom's full-line stores and its off-price Rack stores as Erik Nordstrom claimed again during his NRF talk. But at least some apparently do. On a visit to the company's bustling Upper East Side Local location on 3rd Avenue, a somewhat harried young mother pushed a pram into the store to drop off a return and asked, seemingly without hope, "You don't also take Rack returns do you?"
Indeed, they do; in fact, Nordstrom's Local stores also take other retailers' returns, in a spirit of sharing that extends to its collection of used apparel for Housing Works and gift wrapping services supported by Paper Source, which also runs a store of its own down the street. The stationary company supplies the paper and trains Local staff in optimal wrapping techniques. Local regulars have requested the ability to come in to wrap their own packages, too, and the Nordstrom associates said they're working on that.
The location already seems like a neighborhood fixture. A man and his large, gregarious Goldendoodle, who bounded in to pick up a package, were greeted with cheery familiarity by the staff. Since opening in September, the 3rd Avenue Local has had to expand its shelving to accommodate the large number of order pickups. The store has also improved its signage based on customer feedback, and added a second register.
"The majority of our customers here live in the neighborhood," Shaye Anderson, Nordstrom senior director of customer experience, told Retail Dive during the visit. "We've got a really clear and favorable connectivity with our customers. They're very honest!"
With three major enterprises in the city still fairly new and therefore untested, it's too early to tell how much the city will contribute to Nordstrom's top or bottom lines. (A second Local location, in the West Village, was not so busy on a previous day the same week.) The company at press time hadn't reported its holiday numbers; no doubt it's looking for something like its third quarter, when it at least partially salvaged department stores' reputation with the only favorable performance in the sector.
If Nordstrom can make it here, it can probably make it anywhere. But that's a big "if."
Nordstrom's New York flagship, plus its wider ecosystem of merchandising and services, at various price points, in different store configurations, may represent one of last bets on the department model itself. As such, it may be wise to rein in expectations, according to a recent note from William Blair analyst Dylan Carden. He does "see a tangible path to $700 million in total omnichannel full-line Manhattan revenue," but warned that the ecosystem won't likely contribute much profit, in light of (what any Manhattanite can tell you) is considerable costs of just being there.
"We are further cautious around the decision to invest the majority of capital in building such a large flagship and separate men’s store in a period of retail downsizing (which Nordstrom itself has been undertaking in other markets)," Carden also wrote in emailed comments, noting rivals' flagship closures, including Barney’s bankruptcy, and the 60% reduction in the appraised value of Saks Fifth Avenue’s flagship in the last five years.