With Nordstrom’s annual Anniversary Sale kicking off this week, the Seattle-based retailer is aiming to lure more local customers into its flagship stores in the absence of tourists, according to its New York general manager, Chris Wanlass.
Locals have been a lifeline for the retailer over the last year. Nordstrom stores in urban areas like New York and San Francisco rely heavily on tourism, Wanlass said, though Nordstrom wasn’t able to disclose what percentage of revenue, pre-pandemic, came from tourists specifically.
“The biggest thing is local versus tourism,” Wanlass said. “That’s been seismic. Tourism has been nonexistent for a while, and our flagship stores typically get a lot of tourists coming in. We’re seeing a lot of traffic from local customers coming back, and there’s some domestic travel. The nice thing is that it’s been an opportunity for us to connect more deeply with our local customers on what they need.”
In the absence of tourism, Wanlass said Nordstrom has been relying on its Nordstrom Local stores, a small-format store concept that launched in 2017 and is focused on supporting online shoppers. It now has seven Local stores — two in New York and five in Los Angeles. Nordstrom does not disclose revenue specific to Local, which it lumps in with all non-Nordstrom Rack locations. But Wanlass said Local stores performed above average compared to flagships during the pandemic. In 2019, the launch of two New York Local stores led to a 400% increase in local shoppers taking advantage of its buy-online, pick-up in-store service, according to the company.
“The Local stores have been embraced by New Yorkers basically since day one,” Wanlass said. “And they’ve been great during the pandemic, when staying closer to home and doing things quickly was a benefit.”
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To appeal more to the local customers, Nordstrom has been bringing some of the functionality of Local stores into its main stores. Over the last 12 months, Nordstrom has been adding Local-like features such as online fulfillment, alterations and personal styling services to its more than 250 Nordstrom Rack locations. As a result, almost a third of all Nordstrom online orders are now being picked up at Rack stores. Online pick-up has more than doubled in 2021, compared to 2019.
This, coupled with off-price’s appeal during the pandemic, has helped Nordstrom Rack be more resilient than the flagship stores. It lost only $1.8 billion in sales in 2020 compared to 2019, while Nordstrom stores lost $2.9 billion over the same time period.
Now, Nordstrom is working more of those services into its flagship stores. For example, a new section of its 57th street flagship is dedicated to “express services,” or quick, in-and-out offerings like 30-minute alterations and online order pickups.
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Daniel Saponaro, creative director of women’s contemporary brand Hutch said refocusing on a local customer is a smart move and that it requires a unique mindset.
“In essence, it’s thinking back to the 1970s-’90s era of clienteling as a way to grow in-store loyalty through customer service. Large-scale department stores have let that go by the wayside or just haven’t needed to focus on that, because a tourist shopper needs a different level of customer service,” he said.
International travel to the U.S. remains extremely low. New data from Tourism Economics shows that, in May, international arrivals in the U.S. were down 81% from their 2019 levels, although slightly better than 87% in April. The few international travelers coming to the U.S. this summer are mainly from Latin America, while visits from other regions like Europe and China remain stagnant.
As of May, e-commerce grew to 54% of Nordstrom’s total sales from 35% at the same time last year. Wanlass said this too is related to tourism, as e-commerce tends to be mostly local sales, while in-store is buoyed by tourists. Nordstrom’s total sales for the quarter ending on May 1 decreased nearly 13% from the same period in 2019. On July 13, Nordstrom entered a joint venture with British fast-fashion company Asos to sell Topshop and Topman products in the U.S., to attract Gen-Z customers.
“Without tourists, some regions will continue to be challenged to maintain 2019 levels at retail,” said Marshal Cohen, NPD’s chief retail industry advisor. “For some tourist cities, retail [purchases] by tourists represent over 25% of revenue. We won’t see that loss recovered until tourists return with some level of frequency and volume.”
