Nordstrom Local: a new concept for a century old brand
Nordstrom has been in business for over 100 years, and they have a total of 370 stores in the country including their full-line stores, Nordstrom Rack, Trunk Club and others. Among those others, Nordstrom Local is included.
Nordstrom Local is a new service concept store located among many luxury brands in Melrose Place, Los Angeles. The store first opened its doors less than a year ago, in October 2017. It carries every product that Nordstrom has to offer but with a twist. Nordstrom local has no dedicated in store inventory. Who would have thought that a fashion retail store with not with no store room could ever be a thing?
Nordstrom Local is a 3,000 sq. ft. store, a true downsize from their usual 140,000 sq. ft. It does not have any clothes in storage but it does have one styling suite and eight dressing rooms, a beer, wine and press juice bar and a nail bar. From the way it is described it, if we take out the dressing rooms, it could easily be a cool new bar in L.A. The idea is that when customers shop at the store, the clothing they buy is transferred from another store or Nordstrom’s main warehouse. The store is carefully located with a big full-line store very close by. Also, the store has other services: it is a pick-up location for online purchases, it provides personal stylists to help you shop and it does in store alterations and tailoring. All of these services are possible in such a small store thanks to this lack of dedicated store.
This is not the first time Nordstrom has played around with its inventory and has made a move that could possibly be a game changer in the industry. In 2010, when online shopping was starting to boom, the company decided to change its inventory strategy. They introduced in store pick up, a service where the customer could check online if the product they were looking for was available in any nearby store, make a reservation and then go and pick it up in store the same day. They also made another move that allowed them to increase customer purchases on their website without having to increase their already existing inventory. Nordstrom decided to combine all of their inventories when shopping online. So, their website showed all items available at their warehouse as well as their brick and mortar stores. This augmented revenue because, if a particular item you were looking for was out of stock at their warehouse maybe a store had it. The customer is still able to buy the item since one of the 122 full-line stores is likely to have it and it’s going to send it out to him or her.
As new trends within fashion retail brands arise, do you know of any other brand that might be doing something similar? What other inventory strategies are companies using? Is Nordstrom trying to imitate luxury brands?
http://press.nordstrom.com/phoenix.zhtml?c=211996&p=irol-newsArticle&ID=2299729
Maria,
With the rise of e-commerce, it may seem that retail stores will see their end soon. It is much easier to look for items online and order them with a click of a button. What can a retailer do while online shopping becomes more and more prevalent? It seems that there are no plausible solutions. But times like these call for drastic measures, and that is what Nordstrom did by creating Nordstrom Local. Carrying no merchandise and being entirely serviced based is an idea that seems too farfetched for a store that sells clothing. A personal stylist to help you look your best. Nordstrom is making it more personalized and more experiential. This could be the answer for retail stores to be able to compete with the likes of Amazon and other online websites. Provide services to customers that others can’t. At their parks, Disney makes waiting in lines more bearable by making it more experiential. Nordstrom is making shopping at their stores more experiential and personalized. Nordstrom Local also includes the option to have clothes altered and tailored. Almost everything a customer needs regarding clothing can be located in a Nordstrom. Convenience and ease is the name of the game here. Nordstrom Local also offers the ability to pick up in store. One of the frustrations many people have is having to wait on line at the store when they already bought the item. Now they can head to a Nordstrom Local and pick it up in store without waiting on line with other customers. All this personalization and customization could be costly and too expensive for the costumer. The article mentions that the store is located in a high traffic area and is also in Los Angeles. A store like this may not work in different cities.
Maria,
This was quite a thought-provoking concept. As soon as I read your sources, I wanted to know even more. It is interesting that at the end of the post, you ask if any other companies are doing something similar. When I looked into Nordstrom’s ingenious idea, I found an article from USA Today linking Nordstrom with other companies. The article (which the link is posted here at the bottom) describes companies with other futuristic retail options, like the one you have described with Nordstrom. One of them is describes the partnering of Master Card and Marie Claire Magazine, a popular magazine about women around the world. They came together to make a very innovative and intriguing consumer experience by having mirrors with the ability to “recognize and display the clothing that shoppers tried on”. Then, instead of having shoppers checkout at a register, they simply tap the image of the dress or coat to put it into a virtual cart. Companies are continuing to enhance the shopping experience as a whole, and I think both the companies discussed here are leading the way.
https://www.usatoday.com/story/money/retail/2017/12/20/walmart-and-nordstrom-show-future-shopping-here/965246001/
Maria,
Thank you for sharing your thoughts on Nordstrom’s new local stores without traditional inventory. Your thoughts made me think of the idea of pop-up stores which have become popular over the past few years because they lack the cost of long term retail leases. Pop-up stores allow companies to offer inventory and create brand name recognition for less than the cost of a traditional retail store. In the mall in my hometown in Providence, RI, Lululemon opened up a pop-up during the holiday season where they sold activewear. The success of this pop-up led to them opening up a full-time store. Pop-ups can not hold and maintain the same level of inventory as a traditional retail store. However, because they can sell inventory they are often more profitable because of the lower real estate cost.
It is interesting to then think about Nordstrom Local which is basically the opposite of a pop-up. Nordstrom is paying for permanent real-estate space without any inventory. They are relying on customers wanting the experience instead of immediate purchase gratification. I will be interested to see how their strategy plays out for them.
https://www.forbes.com/sites/nikkibaird/2018/03/26/retails-uberization-is-already-here-its-called-pop-up-stores/2/#33548da57cc1
Maria,
Thank you for sharing your thoughts on Nordstrom’s new local stores without traditional inventory. Your thoughts made me think of the idea of pop-up stores which have become popular over the past few years because they lack the cost of long term retail leases. Pop-up stores allow companies to offer inventory and create brand name recognition for less than the cost of a traditional retail store. In the mall in my hometown in Providence, RI, Lululemon opened up a pop-up during the holiday season where they sold activewear. The success of this pop-up led to them opening up a full-time store. Pop-ups can not hold and maintain the same level of inventory as a traditional retail store. However, because they can sell inventory they are often more profitable because of the lower real estate cost.
It is interesting to then think about Nordstrom Local which is basically the opposite of a pop-up. Nordstrom is paying for permanent real-estate space without any inventory. They are relying on customers wanting the experience instead of immediate purchase gratification. I will be interested to see how their strategy plays out for them.
https://www.forbes.com/sites/nikkibaird/2018/03/26/retails-uberization-is-already-here-its-called-pop-up-stores/2/#33548da57cc1
Maria,
Thanks for this awesome post about Nordstrom. I love the idea of pivoting from traditional brick and mortar retail to a more enjoyable, full service stop for shopping and relaxing. Keeping only a small portion of product on site is a potentially profitable idea as long as customers are willing to wait the time for the products to ship. Nordstrom is a one of the few department stores that offers a higher quality, more expensive product than those typically found in shopping malls across the country. This is good and bad, of course, because of the rise of e-commerce. On one hand, e-commerce can be hurtful for physical retail locations’ sales. However, the luxury space is one dominated by in-store shopping, as customers are more concerned with quality and fit of each product than would be the norm for lower priced competitors, so the managing inventory process is typically more stable and focuses on forecasting.
This idea is evidenced by the attached article from Bloomberg. One of the most luxury-focused malls in the country, Bal Harbour Shops, has seen steady sales and profitability even during this rapid increase in online shopping.
https://www.bloomberg.com/news/features/2018-02-08/this-mall-is-only-for-the-rich-and-it-s-doing-fine
Maria,
Your discussion of Nordstrom’s unique business model is really interesting. Before reading this blog post, I have not yet heard of Nordstrom Local. My first impression of Nordstrom Local is that it is a risky move and also an unnecessary addition to their large retail stores, as the key features of Nordstrom Local can be found in their tradition retail stores. However, after reading more about this decision, I think Nordstrom is reacting well to the changing industry and changing consumption habits.
In a Los Angeles Times article reporting on the opening of Nordstrom Local, it discusses how Nordstrom is adding a personal touch to its usual shopping experiences. By opening these stores that appear to be more of an exclusive boutique rather than a department store, Nordstrom is altering the shopping experience as a whole. Without having any inventory or clothing racks, Nordstrom is challenging the original idea of a Brick and Mortar store. Because shopping has dramatically shifted towards online shopping, Nordstrom is encouraging online shopping while also giving shoppers the opportunity to use Nordstrom Local as the middle ground. They can use this as a place to return items or to try on items before purchasing them online.
Additionally, the Los Angeles Times states that Nordstrom’s VP for customer experience said, “With Nordstrom Local we are trying to create more accessibility and opportunities.” Nordstrom is adapting to changing times and continually making shopping experiences easier, ultimately responding to customer needs and desires.
http://www.latimes.com/business/la-fi-nordstrom-local-20171006-story.html
Fran,
I had the same mindset as you as I was reading this article. I moved from complete uncertainty to an actual appreciation of Nordstrom Local. I think Nordstrom’s ability to accept changing consumer culture from bricks-and-mortar industries to e-commerce makes them a flexible business. By cutting down their large bricks-and-mortar companies and turning towards a smaller, more personal experience they are (1) eliminating the waste of large storehouses that are not profitable and (2) better tailoring their customer service in areas that personal service is important to customers.
With Nordstrom’s past year of downward spiraling performance in the market, it was time for them to either get themselves back on track, or accept large business losses. Some would say this is a risky endeavor, but I say it is less risky than doing nothing. It is impressive that Nordstrom was able to act under pressure and make competent management decisions.
Maria,
I enjoyed reading your post! The retail environment in the US is rapidly changing, for the good or bad depending on how you look at it. Over the past two summers, I have been the retail services Intern at two separate commercial real estate firms, so I have been able to experience this first hand. The decline of American shopping malls is at the forefront of the suffering retail sector. Some estimates say that there will only be able 600 shopping malls operating by 2023 (there are currently about 1100 to 1200). This includes a writer for the Guardian, who writes, “It has been three years since a major new shopping mall opened in the US, leading even some mall operators to speculate that the last one has already been built.” The rest of the article can be found here: https://www.theguardian.com/us-news/2017/jul/22/mall-of-america-minnesota-retail-anniversary.
However, I think this estimate might even be a little high. From the people I’ve interacted with and the pulse they have on the retail market, it seems that traditional malls are seemingly doomed. Only the high market, popular malls will survive, but that does not mean retail as a whole is in trouble.
In my opinion, what Nordstrom is doing with new, concept stores are the key to success in the changing retail market. Instead of traditional malls, lifestyle centers will become more and more popular. A lifestyle center is a combination of apartments, and/or condos, with typically a gym, restaurants and other service-based retailers. Nordstrom, traditionally located in a mall, would be able to extend their reach into developing sections of the market. Other brands should follow, but it will be tough because a brand like Macy’s does not carry the same implication of “high fashion” that Nordstrom brings. However, a brand like Bloomingdales could find success in an upscale concept similar to Nordstrom. It will be very interesting moving forward to see how the market reacts and if other brands follow.
Maria,
Thank you for your reflections! I didn’t know that Nordstrom was so on the forefront in the brick and mortar retail industry. I think their new local store idea is a fun new experiment and I can’t wait to see how it works out. Combining the resources and trustworthiness of the Nordstrom brand with the small boutique feel with all of the services that accompany that is a great idea that could really shake up the way brick and mortar retail is done. This trend of downsizing from the massive department store to more boutique, customer first experiences is interesting and we have seen this out of multiple industries, the eye glass industry is being disrupted by Warby Parker doing something similar to Nordstrom. They keep their inventory in a central warehouse and have small boutique stores to allow consumers personalized help and then enable them to have any pair of eyeglasses to be shipped to their house.
Maria,
I had heard that Nordstrom had introduced this business model and I was excited to learn more about it. I think that this is a really smart move for a traditional retail store to keep up with the current trend towards experiences. In an article in Forbes, it is stated that Millennials “are uninterested in following the norms just for the sake of fitting in, and instead desire less stuff and more meaningful and tailored experiences.” In Nordstrom’s case this means taking out inventory and putting in experiences like a juice bar. Another way they are adapting towards the current retail landscape is their in-store pick up. This allows consumers to online shop in the comfort of their home, but they quickly get their purchases by going to the store. Nordstrom then builds on this by then adding on-site tailoring, which adds in connivence and makes the experience more valuable.
One thing that I found interesting was from another article that gave a tour of Nordstrom Local. In the pictures it shows that a large amount of the space is taken by dressing rooms. It is surprising that given they have no inventory, they would decide to use a large part of their 3,000 square footage on dressing rooms. However, it is consistent with their experiential business plan, by giving them a more luxurious dressing room. Because this is what the consumer wants, I think that Nordstrom will be successful. As the Forbes article says, “brands that listen to consumers and find opportunity among their evolving wants and needs rather than in spite of them are the ones to watch… [and] are best-positioned to earn consumer loyalty.”
Sources:
https://www.forbes.com/sites/jefffromm/2017/07/27/why-experience-innovation-matters-when-marketing-to-millennials/#49e75a7c7682
https://www.cnbc.com/2017/10/05/take-a-peek-inside-nordstroms-first-tiny-store-without-inventory.html