With the official opening of Nordstrom’s N.Y.C.’s flagship on Thursday, the retailer is also gearing up for the expansion of its Nordstrom local strategy to three more markets in time for holiday 2019.
Nostrom Local will land in San Francisco, Chicago and Dallas, chief operating officer Ken Worzel said in an investor presentation Tuesday detailing the opening of Nordstrom’s 320,000-square-foot women’s flagship store at 225 West 57th Street, near Columbus Circle. The company will roll out the local strategy to its remaining top 10 markets by the end of 2020, he added, calling the strategy a “material differentiator for us,” with customers “responding in a big way.” After launching in Los Angeles, Nordstrom expanded the concept to New York City.
Nordstrom is hoping an enthusiastic response to the opening of its New York flagship, across the street from its existing men’s store that opened in April 2018. The retailer’s local market strategy in New York includes the Nordstrom Rack at Union Square and at 31st Street and 6th Ave., the Trunk Club clubhouse at 457 Madison Ave. and two local service hubs that opened last month: one in the Upper East Side at 1273 Third Ave. and the other in Downtown Manhattan in the West Village at 13 7th Ave.
New York flagship
During the company presentation, co-president Erik Nordstrom said the new store “brings the best of what our brand is all about,” which he described as making customers feel good and look their best. The flagship and the local strategy are designed to giving customers control over their shopping experience, and for Nordstrom to be convenient for consumers, he explained. That means complete integration between physical and digital, and the breadth of service options on which Nordstrom made its name.
“We know that more than half of store sales start with an online visit, and more than one-third of online sales start with a store visit,” Nordstrom said. He also emphasized that the company is not a promotional retailer, and that what it really aims to have is the kind of newness that gives customers a reason to visit, so that even if they don’t know exactly what they’re looking for, they can find something new.
Nordstrom described its local strategy model as unique, noting that the off-price Rack stores serve as a customer acquisition vehicle for its core Nordstrom nameplate as about one-third of customers move on to buy at full-price.
Services like alterations, buy online and pick-up in store, and booking a stylist appointment also attract stickier customers. “When customers engage in our services, everything gets better. Their spend goes up and retention goes up,” he said.
Pete Nordstrom, also co-president, said having a New York location was always in on the company’s priority list, but wasn’t immediately feasible as finding the right location took time and patience. The company wanted to make sure it had three key points to ensure success: a connection to the community and neighborhood, the ability to take advantage of what New York’s commuter backdrop, and strong tourist traffic.
The demographics were “fantastic” for building a new shopping hub on the Upper West Side, he said, and the amount of commuters in the area for work provided “sheer traffic.” Proximity to Central Park and nearby Columbus Circle provided a great opportunity, he said. Nordstrom said the company considered the Hudson Yards location, where Neiman Marcus opened in March, but said the location probably would be “great in 20 years,” whereas the company thought the current location at 57th Street would “be great on day one.”
“We wanted to make this a really relevant and modern place that connects to how shoppers want to shop today,” Peter Nordstrom said, adding that 48 percent of the men’s business is driven by women buying for men, and that women contribute 25 percent of the current New York men’s store business for the 18 months it has been open. The productivity of the men’s store will go up once the women’s store opens, he said.
The layout of the seven-floor store featuring six restaurant options includes a range of categories from home to apparel, footwear, accessories, children’s and beauty on the main floor, which attracts the younger consumer, as well as special curations and limited-time displays, like the Burberry set-up promoted at launch.
There’s also an area on the main floor in the center stage that doesn’t play home to any permanent display. That section is allocated to a rotating display that changes every five weeks, where Christian Louboutin currently has a shop-in-shop for the next few weeks.
Shopping as entertainment
Dave Cesaro, executive director of retail at Valassis, a marketing technology firm, said that according to proprietary data that his firm collects, retailers such as Nordstrom need to make entertainment a part of their physical shopping experience if they want to survive. In addition to having the right services, giving shoppers a place where they can eat or attend a cooking class is how they can differentiate themselves from their competitors.
Cesaro also said that exclusive collaborations, such as Nordstrom’s inclusion of direct-to-consumer brand Everlane, are a smart move. “We know from our proprietary research that almost 50 percent of shoppers begin their shopping online,” he explained. “They look for a particular brand, such as Everlane [and it can be a] good way to drive people to the store…. Consumers like the in-store experience as they still want to touch and feel [the product] and have that customer experience.
“It’s a good move to partner with a DTC company and given them an outlet to have their product displayed where the consumer can actually engage with it,” Cesaro said.
Dana Telsey, founder and analyst at Telsey Advisory Group, said the New York market offers a $700-million-plus revenue opportunity, versus the L.A. market, which is at $1 billion. She noted Nordstrom’s breadth of product assortment, but more important, the retailer’s “careful curating of its offering that is meant to provide constant newness and inspiration, resulting in a reason for shoppers to visit often. We believe this will help Nordstrom drive frequency and conversion at the New York City flagship store.”
As for the local strategy, Telsey said Nordstrom’s top 10 markets drive 40 percent of total company revenue. She pointed to increased customer engagement when the strategy is in place, as well as faster product returns–shaving off eight days on average–that, in turn, helps with “more efficient inventory management.”