Last year, 1 million Nordstrom Rack customers started shopping at the company’s full-line store or Nordstrom.com for the first time.
Nordstrom Rack, the fast-growing discount version of the department store, is proving that if you get customers hooked on one store they will go to the other one, too.
Last year, 1 million Rack customers started shopping at the company’s full-line store or Nordstrom.com for the first time, said Co-President Blake Nordstrom in a recent second-quarter earnings call with investors.
Headquartered in Seattle, Nordstrom has 118 higher-producing department stores and 178 Rack locations, which are expected to grow to 200 by the end of the year. By contrast, 10 years ago Nordstrom department stores outnumbered Nordstrom Rack stores 94 to 49.
Rack, along with the online HauteLook, are successfully wooing young, discount-seeking customers in the hopes they will become shoppers at the pricier department stores as they become older and more successful financially.
Last year, Nordstrom’s full-line stores and website generated $9.7 billion in sales, compared with $3.6 billion for the discount division, which includes the Rack, its website and HauteLook.
During the last quarter, sales at the Nordstorm’s department stores rose 1.1% compared to 13% for Rack stores.
Similar to T.J. Maxx, Marshalls and Ross stores, Rack targets “aspirational’’ consumers seeking more sophisticated fashion at a value. About 20% of the inventory comes from the full-line Nordstrom stores, but most comes from outside sources.
Company officials have said the best-performing Rack stores are close to the department stores, further suggesting that having the two available options breeds success for both. Rack stores are typically located in strip centers, rather than large malls that have faced limited growth.
Other department stores are trying to duplicate Nordstrom’s success. Macy’s is opening a chain of off-priced stores this year call Macy’s Backstage. Saks has its Off 5th stores and Neiman Marcus has its Last Call stores. All are attempts to compete with the more valued-driven retailers that saw huge growth after the recession.
Nordstrom Rack has seen 26 straight quarters of double-digit gains, astounding success in today’s difficult retail environment. Attracting younger, hipper shoppers has been a struggle for retailers seeking to expand their base without alienating its core customers.
Nordstrom learned this the hard way in 2000 with its $40 million Reinvent Yourself campaign that turned away longtime shoppers with its sexy ads and too-edgy fashions at its department stores.
