Nordstrom goes off-price & off rack; new format to compete in discount apparel area

Discount Store News, March 15, 1993 by Jill Lettich

SEATTLE - Nordstrom, the upscale department store based here, has ventured further into the off-price arena with a new retail concept called Nordstrom Factory Direct (NFD). It is scheduled to open in May at Franklin Mills mall outlet center in Philadelphia.

This move will add another off-price feather to the cap of Nordstrom, which already operates 15 Nordstrom Rack stores.

The principal difference between the two formats revolves around where the retailer will be buying its merchandise. While Rack stores sell Nordstrom's own off-season and clearance goods from its mall stores, the new NFD concept will include off-season, end-of-season and overrun merchandise from a variety of designer and brand name vendors, all at a 30% to 70% discount. In addition, while Rack stores are generally located in markets with Nordstrom department stores, the retailer considers NFD an opportunity to expand its off-price concept outside of its current operating areas.

Nordstrom originally announced the idea for the new 40,000-sq.-ft. NFD store last year and described the concept by comparing it to retailers such as Loehmann's and Filene's Basement. Like those off-pricers, NFD will carry designer and branded men's, women's and children's apparel and accessories. One difference, however, will be the emphasis on shoes. According to Paul Hunter, vp, gm, Nordstrom, "more than 30% of the store will be devoted to shoes."

Nordstrom did not confirm an analyst report that it plans a second test site for NFD this year. "This setting will provide us with an outstanding opportunity to perfect the concept before we determine the future of NFD at Nordstrom," said Hunter.

The retailer has also been fine-tuning its Rack format. Last September, it opened a Nordstrom Rack on the first floor of a brand new Nordstrom department store at Townson Town Center Mall in Townson, Md. About 35,000 sq. ft. was devoted to the Rack operation. According to Nordstrom, that combination format is still in test mode and no decision has been made on future Rack units in its department stores.

The setting at Franklin Mills of the NFD test pits the new store against several competitors. Filene's Basement has operated a store there since 1989. In addition, Nordstrom's first foray into this off-price format comes on the heels of further expansion announcements for Filene's Basement. The Wellesley, Mass.-based retailer is planning 12 store openings this year, with up to four in the Washington area - a new market. In 1992, Filene's entered Chicago and Minneapolis.

Other possible competition for NFD at Franklin Mills includes Saks Fifth Avenue Clearinghouse. On April 1, one month before NFD, Last Call from Neiman Marcus will also open at the outlet center.