Nordstrom has officially become a discount outlet chain
Nordstrom is on the verge of losing its luxurious luster.
The department store's off-price store, Nordstrom Rack, has been growing rapidly, to the point that there are more Rack stores than there are regular department stores. The company plans to have 300 stores by 2020.
And now, Sapna Maheshwari of Buzzfeed reports that the lines between the original brand and its outlet off-shoot have been further blurred, as consumers can return items purchased at Nordstrom Rack to Nordstrom, and they can also return items purchased at the company's namesake store to its off-price store. Unsurprisingly, Buzzfeed notes that Nordstrom does not promote this return policy.
Having the ability to return full-price apparel to an off-price store sends the message: "why shop full price at all?" It also convolutes the brand's level of luxury, as the two begin to ideologically merge together.
Buzzfeed points out that many other department stores with off-price versions of their namesake brands — like Saks Fifth Avenue and its Saks Off Fifrth and Neiman Marcus and its Last Call — do not have such a policy. These other retailers have been keeping the line between full-price and discount distinct, in a clear attempt to maintain the namesake stores' respective reputations, something that Nordstrom is now at risk of losing.
"As more customers view Nordstrom Rack as their Nordstrom experience versus the full-price store, how do you not have the brand get less special or more associated with off-price over time?" Liz Dunn, CEO of Talmage Advisors, said to Buzzfeed.
Retail expert Robin Lewis believes that the discount-outlet strategy is flawed and will hurt companies in the long term.
"Over time as their discount stores outnumber their full-price stores (which is already the case for some retailers); consumers will perceive the flagship brand and the discount store brand to be one and the same," Lewis writes on his blog, The Robin Report. "Sadly, they will happily continue to shop in the brand's discount store where they can get it cheaper."
Nordstrom wouldn't be the first brand unable to buck an unfortunate industry trend. It would be falling to the same plague that cursed Michael Kors — that of a devalued brand.
Maheshwari reports that even though Nordstrom might not want this blurring to happen, it's nearly impossible to avoid it, given the sheer number of Rack stores (194 Rack stores versus 121 Nordstrom stores as of November, according to Buzzfeed).
Rack's swift growth is unsurprising. As ailing retailers like Banana Republic continue to resort to incessant discounts, consumers have become conditioned to purchasing items on sale.
Olivia Palermo launches her collection for Nordstrom:
Additionally, stylish fast fashion empires like Zara and H&M have sent a loud message to shoppers that they can get stylish apparel without having to shell out tons of money.
Other retailers are zeroing in on their discount stores, too.
Macy's also announced that it would be opening off-price offshoots called Backstage, amid news that it would be closing 40 stores, solidifying that consumers don't want to pay more for clothes if they have to option to pay less.
That said, Nordstrom has claimed that they aren't doomed. This past summer, Buzzfeed reported that the company said on an earnings call that Nordstrom viewed Rack as an "entry point" to the namesake brand. Still, shares have declined substantially over the past year.
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