Affairs

Nordstrom’s off-price strategy is becoming a problem.

SEATTLE — The Business of Fashion wonders aloud whether Nordstrom’s off-price strategy sees the Seattle-based department store prioritizing short term gains over long term stability and brand equity.

It’s a valid question, considering Nordstrom’s announcement last week, in which they cleverly attempted to reframe what should’ve been worrying news as good news.

From BoF (bolded for emphasis by us):

“The department store chain said strong demand in its off-price business helped offset a decline in footfall at its mainline locations in its 2016 fiscal year.

While the chain’s discount offering, Nordstrom Rack, reported a strong rise in sales to $4.5 billion, up 11 percent from the previous year, full-price sales declined by 2.7 percent to $9.7 billion, with sales at physical stores down 6.4 percent.”

We’re big fans of Nordstrom here at Lean Luxe. The retailer has been an early supporter of emerging upstarts, and despite the fact that one of their big purchases, Trunk Club, has lost about 90% of its value, Nordstrom, at the very least, has shown to be one example of an existing department store that understands the value of native e-commerce operations.

But this news should have Seattle HQ breaking out in a cold sweat. As a luxury retailer, a destination department store of an elevated nature, the fact that their flagship brand is being undercut by their discount one, does not bode well for the firm over the long term.

Nordstrom’s board would be wise to remember this Lean Luxe maxim: Once a brand has crossed over into “masstige” and lowered its standing among consumers through practices of ubiquity, it becomes an immensely difficult battle, when they decide to swim upmarket, to shed nasty that image.

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