June 18, 2013
How High is Nordstrom Rack’s Ceiling?
Last year, Nordstrom announced its intentions to double the number of its Rack concept stores by 2016. The chain, according to a new report on WWD.com, is well on its way, planning to add 130 more Rack locations across the country including 24 this year and 30 in 2014.
The department store chain is comfortable with the expansion as it has found the discount Rack concept and its flagship stores can coexist peacefully. In March of last year, as reported on RetailWire, Nordstrom opened one of its Rack stores "one crosswalk over" from its flagship in downtown Seattle. While Rack customers skew younger than those who shop in the department store’s flagships, 60 percent of the concept’s shoppers also shop at Nordstrom.
While Rack is an off-price concept, Nordstrom service is still in evidence with features such as on-site tailoring. One of the goals Nordstrom has had for Rack since the beginning is to improve the off-price shopping experience for its customers.
Colin Johnson, a spokesperson for Nordstrom, told WWD that iPod Touch point-of-sale devices are installed in all Rack stores. "Service is defined by wait time. It’s helped us get rid of wait time in the line," said Mr. Johnson who added that removing registers freed up more space for merchandise.
Nordstrom Rack is also looking to grow through e-commerce, said Mr. Johnson. "We see a lot of potential to create a more robust experience. We’re very focused on that right now. We realize we have a way to go to make our online shopping capability a lot better," he told WWD.
- Nordstrom Rack Eliminates Lines With iTouch Registers – Racked National
- Nordstrom Rack is Expanding With More Stores and E-Commerce – Glam
- Nordstrom’s Big Plans for Expansion of Rack – WWD.com (sub required)
- Nordstrom Doubling Down on Rack Concept – RetailWire
- Nordstrom is Finally Ready to Take Manhattan – RetailWire
- Nordstrom Opens Outlet Next to Flagship – RetailWire
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Recent Discussions
Discussion Questions
How far can Nordstrom go with its Rack off-price concept? Are there lessons here for other department stores looking to marry their flagships with off-price concepts?
Poll
What I wonder is, how much has their acquisition of Hautelook shaped their Rack strategy? Especially online. The question for any up-market chain looking to take on discount selling is, how much can you feed the beast?
Outlet stores start as a way to get rid of the merchandise that didn’t sell, but then demand from outlet stores becomes high enough that some retailers start designing and assorting specifically for outlet. As long as it doesn’t impact the main brand (and for Nordstrom’s the risk of discounting the brand more likely falls on the luxury brands it sells vs. its own retail brand), then have at it. But if you find yourself building a whole other business to support what was once just an outlet strategy, then a retailer can find itself in murky waters fast.
Rack stores have some of the hallmarks of Nordstrom stores—plenty of “better” apparel and especially dominant shoe departments compared to the competition—but nobody would mistake the presentation in these stores for a full-line Nordstrom store. I would rank the “store experience” somewhere between a TJMaxx and an Off 5th store, where Saks has taken a more distinctive position on presentation and product development.
Rack outlet stores are an important growth vehicle as Nordstrom continues to be very deliberate in the expansion of its anchor department stores. And the credibility of the Nordstrom brand allows the outlet concept to expand into virtually any city, even those who will never see a full-line store being built.
Nordstrom is known for fashion, quality and value. The Rack focuses on discounts on quality for timely and passe Nordstrom Chic. The Rack’s concept can expand until it might change the general perception of the parent’s high reputation.
Possibly lesson to be learned is 1) Always keep your objectives straight.
The Nordstom customer knows what the Rack concept is about. It’s a way to move items that are last season, returned, haven’t sold as well as predicted, etc. It’s not the “latest and greatest,” but it’s not ten years old either. What’s interesting about Rack is that they want to deliver a Nordstrom type of experience. For what the store is (discount retailer) that’s refreshing. The Rack concept can hit a different demographic; age, economic, etc. It also serves as a feeder to the Nordstrom store.
Other retailers have similar discount stores. In some cases the names are changed. In some cases they are outlet stores at outlet malls. They serve their purpose. Nordstrom has done a good job of using their name to help the Rack brand.
Bottom line: The Nordstrom folks are pretty darn smart. Watch and learn. Then implement.
“60 percent of [Rack] shoppers also shop at Nordstrom.”
This is why Nordstrom can take Rack as far as they want. It’s a gateway to the flagship brand, not an alternative. And with Nordstrom committed to a high quality experience in both formats, the risk of brand dilution is reduced. It’s a great strategy, well executed.
My experience when Rack originally came to our area was very positive. As you know, Nordstrom originally grew out of shoes to where they are today. They carried my size and the price savings were spectacular.
Since then, the price differentiation has become less and less. On my last visit, the shoes I purchased were flagged by their register system as having too much of a discount from regular price. I was held up significantly as the cashier waited for a manager to come up and approve the sale at the price marked. I waited through three customers to get the sale approved. There was not even an “I’m sorry for your delay.” Can you guess how many times I’ve returned since?
My experience with Nordstrom stores has been off the scale. Not so much so with the “Rack”.
Their ability to compete in the world of e-commerce is “iffy”. My most recent purchase was a great price on a pair of Sperry Topsiders. While it was a great price their “free” shipping was for five day delivery. Okay, so the price was right – I waited. They are a good secondary source but Zappos delivers nearly the same day – “free”. If you are going to compete, you have to compete.
If they are going to be successful, they actually have to be “off-price”. Claiming it is one thing but being it is another. My experience shows tells me that they may be using the claim as an attraction and alternate merchandise. Consumers know the difference.
There is definitely room to expand the Rack. Our Rack is down the street from Nordstrom, and we definitely shop both on the same day.
I think the lessons are the same for any brand operating in both full price and outlet markets.
- Be consistent and different at the same time.
- Remember that it’s often same customer shopping in both.
- While your approach and experience/service can be different based upon the customer’s expectations, they must always meet the customer’s expectations of your brand. That’s what Nordstrom does extremely well with the Rack.
Members of my family have been Nordstrom shoppers for decades. I happily started shopping at two different local Racks close to 20 years ago, mostly for shoes. But I’d look at other sections on my way to the back of the store and usually find something wonderful in apparel, too. It was obvious from the tags that the goods were predominantly left over sizes, last season, returns, and overbuys of the regular Nordstrom stock, and that you were getting some great deals along with the Nordstrom quality. One time I went to the regular Nordstrom to get a second pair of sandals that I loved in a different color, and the salesman said, “Oh, they just picked all those up to make room in our stockroom, but check at the Rack in a week or so.” And I did and found them there.
Unfortunately, as Nikki noted above, as off-price malls and discounters have grown, more and more of the brand name goods available in them are specially manufactured and assorted for discount retail only. They are still of decent quality, but of noticeably lesser quality. Nordstrom Rack clearly uses this sourcing method to partially stock its stores and I think it is hurting them. Obviously, there is no way they can double their Racks’ presence without relying even more heavily on this outside sourcing. I hope they know what they’re doing.
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What I wonder is, how much has their acquisition of Hautelook shaped their Rack strategy? Especially online. The question for any up-market chain looking to take on discount selling is, how much can you feed the beast?
Outlet stores start as a way to get rid of the merchandise that didn’t sell, but then demand from outlet stores becomes high enough that some retailers start designing and assorting specifically for outlet. As long as it doesn’t impact the main brand (and for Nordstrom’s the risk of discounting the brand more likely falls on the luxury brands it sells vs. its own retail brand), then have at it. But if you find yourself building a whole other business to support what was once just an outlet strategy, then a retailer can find itself in murky waters fast.
Rack stores have some of the hallmarks of Nordstrom stores—plenty of “better” apparel and especially dominant shoe departments compared to the competition—but nobody would mistake the presentation in these stores for a full-line Nordstrom store. I would rank the “store experience” somewhere between a TJMaxx and an Off 5th store, where Saks has taken a more distinctive position on presentation and product development.
Rack outlet stores are an important growth vehicle as Nordstrom continues to be very deliberate in the expansion of its anchor department stores. And the credibility of the Nordstrom brand allows the outlet concept to expand into virtually any city, even those who will never see a full-line store being built.
Nordstrom is known for fashion, quality and value. The Rack focuses on discounts on quality for timely and passe Nordstrom Chic. The Rack’s concept can expand until it might change the general perception of the parent’s high reputation.
Possibly lesson to be learned is 1) Always keep your objectives straight.
The Nordstom customer knows what the Rack concept is about. It’s a way to move items that are last season, returned, haven’t sold as well as predicted, etc. It’s not the “latest and greatest,” but it’s not ten years old either. What’s interesting about Rack is that they want to deliver a Nordstrom type of experience. For what the store is (discount retailer) that’s refreshing. The Rack concept can hit a different demographic; age, economic, etc. It also serves as a feeder to the Nordstrom store.
Other retailers have similar discount stores. In some cases the names are changed. In some cases they are outlet stores at outlet malls. They serve their purpose. Nordstrom has done a good job of using their name to help the Rack brand.
Bottom line: The Nordstrom folks are pretty darn smart. Watch and learn. Then implement.
“60 percent of [Rack] shoppers also shop at Nordstrom.”
This is why Nordstrom can take Rack as far as they want. It’s a gateway to the flagship brand, not an alternative. And with Nordstrom committed to a high quality experience in both formats, the risk of brand dilution is reduced. It’s a great strategy, well executed.
My experience when Rack originally came to our area was very positive. As you know, Nordstrom originally grew out of shoes to where they are today. They carried my size and the price savings were spectacular.
Since then, the price differentiation has become less and less. On my last visit, the shoes I purchased were flagged by their register system as having too much of a discount from regular price. I was held up significantly as the cashier waited for a manager to come up and approve the sale at the price marked. I waited through three customers to get the sale approved. There was not even an “I’m sorry for your delay.” Can you guess how many times I’ve returned since?
My experience with Nordstrom stores has been off the scale. Not so much so with the “Rack”.
Their ability to compete in the world of e-commerce is “iffy”. My most recent purchase was a great price on a pair of Sperry Topsiders. While it was a great price their “free” shipping was for five day delivery. Okay, so the price was right – I waited. They are a good secondary source but Zappos delivers nearly the same day – “free”. If you are going to compete, you have to compete.
If they are going to be successful, they actually have to be “off-price”. Claiming it is one thing but being it is another. My experience shows tells me that they may be using the claim as an attraction and alternate merchandise. Consumers know the difference.
There is definitely room to expand the Rack. Our Rack is down the street from Nordstrom, and we definitely shop both on the same day.
I think the lessons are the same for any brand operating in both full price and outlet markets.
Members of my family have been Nordstrom shoppers for decades. I happily started shopping at two different local Racks close to 20 years ago, mostly for shoes. But I’d look at other sections on my way to the back of the store and usually find something wonderful in apparel, too. It was obvious from the tags that the goods were predominantly left over sizes, last season, returns, and overbuys of the regular Nordstrom stock, and that you were getting some great deals along with the Nordstrom quality. One time I went to the regular Nordstrom to get a second pair of sandals that I loved in a different color, and the salesman said, “Oh, they just picked all those up to make room in our stockroom, but check at the Rack in a week or so.” And I did and found them there.
Unfortunately, as Nikki noted above, as off-price malls and discounters have grown, more and more of the brand name goods available in them are specially manufactured and assorted for discount retail only. They are still of decent quality, but of noticeably lesser quality. Nordstrom Rack clearly uses this sourcing method to partially stock its stores and I think it is hurting them. Obviously, there is no way they can double their Racks’ presence without relying even more heavily on this outside sourcing. I hope they know what they’re doing.