Nordstrom's New York City Store Strategy Makes Sense

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(Bloomberg Gadfly) -- You know what they say about New York: If you can make it there, you'll make it anywhere. Nordstrom Inc. is about to find out if that old maxim holds true in the brutally tough department-store business.  

The retailing giant on Thursday opened its first full-line store in the city, a 47,000-square-foot emporium that aims to beckon customers with high-touch services (the store is targeted to men -- a women's store will follow next year). It's got everything from a Levi's tailor shop where you can have jeans custom-embroidered to a "24/7 Express Service" that promises to cater to "fashion emergencies like lost luggage." 

If you're a regular Gadfly reader, you know I am frequently baffled when retailers add more stores, and am bewildered when they're not closing them fast enough. In the e-commerce era, it's hard for me to fathom how major retailers think such strategies are sustainable.

But Nordstrom's foray into New York is a rare case where adding brick-and-mortar selling capacity makes good sense.

Nordstrom has one of the smaller store fleets in the sector, with far fewer locations than the likes of Macy's Inc. or J.C. Penney Co. Inc. Of its portfolio of 366 stores, the majority are its off-price Nordstrom Rack concept. So Nordstrom can open a full-line department store or two without it striking me as a sign that the company is naive about the e-commerce transformation.

That's especially true when the store opening is in a market like midtown Manhattan, which has loads of the affluent shoppers that Nordstrom courts.

And it's clear when you look at Nordstrom's broader physical retailing strategy that it is well aware it can't play by 1990's or early 2000's rules when it comes to opening stores. Its experiment with the Nordstrom Local concept -- a tiny outpost where shoppers can meet with a stylist or get a manicure -- is proof.

It's also worth noting that the kind of store Nordstrom just opened in Manhattan is the variety that has a relatively strong prospect of withstanding the so-called retail apocalypse. As I noted in a previous column, the trouble in the sector is largely being felt by middling retailers, the ones who don't offer either rock-bottom prices or premium, distinctive experiences.

Nordstrom's New York location -- with its promise of craft cocktails in its Clubhouse Bar and express returns at a dedicated kiosk -- fits squarely into the latter category.

Lastly, there's a decent chance that adding this store could help Nordstrom in an indirect way, by stoking e-commerce sales in the lucrative New York market. Macy's, which is in downsizing  mode, has said that when it has shuttered a store in a market with a single location, online sales in that region suffered. It's hard to know exactly why that is, but if Macy's has found online sales are challenged when it vanishes from a market, perhaps Nordstrom will find its online sales are boosted when it enters one.

Given all the shifts in retail, any major chain should be seriously cautious about increasing its U.S. store lineup in 2018. But I suspect Nordstrom won't come to regret its logical bid to conquer the Big Apple.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

©2018 Bloomberg L.P.

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