The Case for Flagship Stores in the Age of the Internet

(Bloomberg Businessweek) -- After decades of planning, Nordstrom Inc. opened a 320,000-square-foot store—set to be its highest-grossing—in Manhattan on Oct. 24. It’s betting a focus on customer experience will help it stand out in New York’s crowded market.

It’s a tough retail environment. Lord & Taylor closed its New York flagship, Henri Bendel shut down, and Barneys is in bankruptcy. How do you avoid some of the problems they haven’t?

I grew up selling shoes. You are literally on your hands and knees in front of the customer trying to take care of them. That’s a good metaphor for how we try to continue to run the business: We focus on the customer, and certainly today’s customer wants things done differently.

Just how differently?

Customers are more empowered than ever, less willing to compromise any of their experiences, and shopping is included in that.

How do you address that?

Building a new physical store gives us advantages. We have technology built into the store—Wi-Fi, cell service, connectivity—so customers can be on their phone. A lot of product discovery for what we sell, fashion, begins online. And we know that over half of our store sales involve a visit to our website, usually on someone’s phone.

How is the New York flagship organized around those changes?

The architecture of the place is very different, very open. Historically, retail—especially mall-based retail—has been very inwardly focused. Almost like a fortress, a different environment shielded off from the rest of the world. We want to do just the opposite.

At the New York store, you’re letting customers order food while shopping, and it’s delivered to them on a nice plate. Is that going to become a significant, separate revenue line?

It’s not so much about our revenue line. As we continue to get better information, we’ve learned about the importance of engagement and experiences. The more we can engage customers—and food and drink is part of that—people come back more often.

I’ve heard that “omnichannel” marketing [actively integrating shopping via brick-and-mortar, web, and mobile] is a term you don’t like.

I talk to customers every day, and I’ve never had one use the word “channel” with me. It’s not how they think. They just want great experiences. People are on their phones and they’re in physical locations, and they want it when they want it, on their own terms.

Is it right to call you a high-end retailer?

We have pretty broad range. We talk about carrying [everything] from Vans to Valentino. A key part of what we do is having a breadth of merchandise. And I really think that’s how a modern customer shops today: A customer doesn’t buy one brand and stick to it, or even one price point. There’s a mix-and-matching by people that’s part of fashion, that’s part of the interest of expressing who you are. We’re not in an industry where there’s this massive market share. There are plenty of places to buy shoes and clothes. So our success is much more on what we do.

Given all the fallout that we’ve seen in retail lately, are we over-stored?

Oh, sure, we’re over-stored. It’s not a big news flash that America has too many malls, too many stores. And people are online more. Now, are there going to be no stores? Well, of course not. There’s times where, especially what we sell, people like to touch, feel the sizes. I think it’s interesting that our online returns, the vast majority of customers choose to come in a store to do it. We have free shipping on our online returns. But they’d rather come to a store; it’s just easier than putting it in a box. So customers are going to do what they want to do. Our job is not to try to coerce them into a channel or a certain experience that we prefer. Our challenge is to give them options and let them do what they want to do.
 
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