Nordstrom Moves East in a Big Way
Mollie Ottina had barely heard of Nordstrom when she agreed last June to head up a fund-raising event on the eve of next Friday’s opening of the chain’s first East Coast store in this Washington suburb.
She soon got a taste of the specialty store’s legendary customer service. The merchant flew Ottina and her husband, John, to San Francisco, put them up at the Fairmont Hotel, invited them to a big fashion show and suggested that they shop at some Nordstrom stores in the Bay Area.
The Ottinas were impressed. “I’d never before gotten a thank you note for buying a $14 pair of espadrilles,” Ottina said of the stylish canvas shoes she bought.
As Nordstrom ventures next month into new territory far from its origins, it will be counting on people like the Ottinas to spread the gospel.
Expensive Program
Having become a favorite destination of West Coast shoppers, the retailer now faces the daunting task of somehow exporting its name and service-oriented culture to an unfamiliar part of the country where shoppers have been known to ask, “Nordstrom. Isn’t that a refrigerator maker?”
The move east--part of an ambitious nationwide expansion plan--will put Nordstrom in a head-on battle with some of the biggest, most prestigious names in retailing. Bloomingdale’s is in the same mall, and Macy’s, Saks Fifth Avenue and Neiman-Marcus will soon be moving into a new center across the street.
By retailing standards, Nordstrom’s expensive program could spell trouble if the economy falls flat, and customers rein in spending on apparel, shoes and accessories, Nordstrom’s stock in trade. But the company is optimistic.
“We think there’s a demand for what we’re doing, and as long as there’s a demand we’re going to continue to build stores,” said President James F. Nordstrom. “We don’t pay a lot of attention to the state of the economy and are not very good at forecasting. If we’re doing well, we’ll expand. If not, we’ll slow down.”
Retail industry observers agree that the potentially most troublesome step of all will be the move to the Washington area, where competition is heating up despite signs of a slowing in spending.
Other Retailers Interested
“The entry of Nordstrom into Washington will be a challenge because they are not known,” said Walter F. Loeb, an analyst with Morgan Stanley & Co., a New York investment house. “But very quickly, the quality of service and distinctive level of assortments will attract many people to the store.”
Jim Nordstrom, a grandson of the founder, said the company did not bother with marketing research when it considered going into Washington. Nordstrom and his brother John and cousin Bruce, co-chairmen, simply relied on instincts, in keeping with the chain’s style since its start as a Seattle shoe store in 1901.
On a 1985 trip to Tysons Corner Center, site of the new store, “John . . . told us how the center was packed on a rainy Tuesday morning,” Jim Nordstrom said. “That got our attention.”
It also got the attention of R. H. Macy & Co., a powerhouse New York retailer that plans to open its first Washington store four months from now at a new development across the road.
“When Nordstrom and Macy’s enter the market, every major retailer will be represented in the Washington area,” said Neal J. Fox, chairman of Garfinckel’s and Raleighs, two longtime Washington retailers. “They must think it’s a good market. But everyone has to be realistic. If the market and economy are not expanding at the same rate, each of the participants gets a smaller piece of the pie.”
Fox recalled that Nordstrom “ate everybody’s lunch” by entering South Coast Plaza in Costa Mesa at an opportune time in 1978, but he expects the merchant to gain minimal market share in Washington. “If it takes 2%, that will be a lot,” he said. Besides, he noted, Nordstrom will have the added logistical problem of starting up a store 2,700 miles from home base.
Retailers such as Fox might sound sanguine, but industry observers and shoppers say merchants are plenty nervous.
“Nordstrom will make competition a new word back in Washington,” said Katie Lowery, wife of Rep. Bill Lowery, a fourth-term Republican congressman from San Diego who eagerly anticipates Nordstrom’s arrival near her McLean home.
She has already noticed a change at other stores in Tysons Corner. “Salespeople are more courteous and friendly and have taken a much better attitude about returning things,” she said. “Even Bloomingdale’s, which would put you through an IRS check and scrutinize your mother’s pedigree, now takes checks” without fussing.
Competitors ‘Worried’
“The retail community is really worried about Nordstrom coming,” she said.
There are other signs of change. Woodward & Lothrop, a well-known Washington department store, has reinstated a commission pay system at some stores in an effort to improve service. The idea is to offer incentives for workers to sell more by being more attentive and courteous.
Edwin K. Hoffman, chairman and chief executive of Woodies, as the store is known, denies that the change was made because of Nordstrom. He does acknowledge that Woodies “certainly accelerated the customer-service plan” it had begun about 20 months earlier.
“Where Nordstrom got the jump on us (in customer service),” he said, “we’re still feeling our way. They’ve been doing it a long time.”
Even Hoffman has an anecdote about Nordstrom customer service. On a trip west, he was shopping with two friends at the Westside Pavilion store in West Los Angeles when a saleswoman offered to place a long-distance call for him--on Nordstrom’s tab. “A tear came to my eye,” he said.
Nonetheless, he professes to be “maybe a bit more concerned about Macy’s,” which he says has a better understanding of the market than Nordstrom. As for Nordstrom being an unknown commodity, he added: “Nordstrom may not be a recognized name, but they’re so smart that long before the 4th of March it will be a recognized name.”
Retail analyst Bernard Sosnick with Deutsche Bank Capital, a New York investment bank, goes further: “Very quickly, Nordstrom is going to become one of the destination stores in the Washington area.”
Problems could crop up, however, as Nordstrom waits to build a loyal following at its new $26-million store in McLean, the first of three announced openings for the Washington area. Nordstrom’s “limitless depth of inventory leverages them,” noted Kurt Barnard, publisher of Retail Marketing Report newsletter in New York. “If there is a downturn or for some reason the merchandise doesn’t click, that ties up a lot of money.”
Nordstrom, which signed the deal with Tysons Corner management in January, 1986, has been working for months to insinuate itself into the Washington consciousness.
Starting in mid-August, store manager John Whitacre and a small staff began coordinating construction, ordering merchandise and planning events from a cramped trailer a short walk from where the new 200,000-square-foot, red-brick-fronted store was being built. In line with the company’s policy of promoting from within, Whitacre was transferred from the Walnut Creek store near San Francisco.
In December, Nordstrom made its first pitch directly to customers, offering its store credit card by mail to 300,000 people. Its research showed that 3,000 people in the area already had an account, Whitacre said.
Splashy Market Entry
Early in January, the store went in search of job applicants with its first newspaper advertisement in the Washington Post. A few days later, amid much hoopla, Nordstrom dedicated a $6.8-million, 170,000-square-foot distribution center in an industrial park in Prince George’s County, Md. Local dignitaries, noting that the facility could be tripled in size as the chain grows in the East, praised the operation’s potential for revenues and jobs.
That same day, Jan. 12, in downtown Washington, Nordstrom held a luncheon and fashion show at the Park Hyatt for representatives of the Wolf Trap Foundation, the organization that funds and contracts programs at Wolf Trap Farms Park for the Performing Arts in Fairfax County, Va. On Jan. 14, the Wolf Trap and Nordstrom contingents converged again, for an elegant soiree designed to introduce members of Washington’s philanthropic and arts communities to Nordstrom staff and fashions.
On Monday, Nordstrom will begin an image ad campaign on Washington television stations with the theme “For the All of You.” (Nordstrom has used such an introductory TV campaign only once before, for last September’s opening of the store in Main Place/Santa Ana.) Nordstrom will also launch extensive newspaper advertising this week.
All of the events are building up to the main shindig, the March 3 pre-opening benefit for Wolf Trap, which quickly became a hot ticket. Mollie Ottina said the $75-a-person, black-tie event is expected to raise about $200,000. The original expected guest list of 2,000 has grown to about 3,000, all of whom will jam the new store for a fashion show the evening before the 10 a.m. opening. “It was hard to draw the line,” Whitacre said.
From among thousands of applicants, 400 or so new employees are being hired to join about 225 managers and salespeople--known to one another as Nordies--that the company is transferring from stores in Washington, California and Oregon.
They will be key to the store’s success and to helping build a service orientation among new employees, observers say. “We’ve just got to take care of the customers,” Nordstrom said last week. He noted that, as the East Coast worker population builds, the company will not continue to transfer hundreds of workers.
Given that Nordstrom’s current easternmost location is Salt Lake City, the move to Washington is the biggest challenge the 87-year-old Seattle-based merchant has faced in many years--arguably since 1978, when it first ventured with some trepidation out of the Pacific Northwest with a modest store in South Coast Plaza.
Plans on Track
In addition to the Tysons Corner store, the chain’s 47th location, Nordstrom has announced openings for Pentagon City, Va., next year and Towson, Md., in 1990. Plans are to open new sites at the rate of one annually for several years in the East and Southeast, with locations being studied in New Jersey, Atlanta and Boston. A store for downtown Denver has been announced, and sites are also under consideration in Minneapolis and Chicago.
At the same time, Nordstrom will be opening two important stores in San Francisco later this year, with others scheduled for Sacramento, Pleasanton and Santa Barbara in 1989 and 1990. It also has announced plans for growth in Orange and Riverside counties to bolster its 13 Southern California stores.
These plans continue to be on track despite signs that even Nordstrom’s enviable record of sales increases was showing signs of losing momentum, according to analyst Loeb. The chain had sales last year of $1.9 billion, a 17.8% increase from the year before that was below some analysts’ projections.
After weathering six months of slower-than-anticipated sales, Loeb said, Nordstrom started controlling costs better, changed its merchandise and regained customers who had turned apathetic. These moves were indicative of Nordstrom’s ability to act quickly when there are problems, the analyst said.
With Nordstrom’s coming expansion, he added, “The wind is at its back.”
