Major retailers turning to off-price
As consumers retreat from shopping malls, department stores are turning more to outlets. Case in point: Nordstrom Inc. is rolling out a sixth Nordstrom Rack in the Philadelphia region.
As consumers retreat from shopping malls, department stores are turning more to outlets.
Case in point: Nordstrom Inc. is rolling out a sixth Nordstrom Rack in the Philadelphia region.
This time in Langhorne, Bucks County.
Nordstrom Rack at Lincoln Plaza shopping center, 350 Lincoln Highway, near Oxford Valley Mall, will debut on Oct. 21 at 9 a.m., according to the Seattle-based company.
"Lincoln Plaza is a great fit for Nordstrom, given the compelling retail and restaurant offerings and the space available," Nordstrom Rack spokeswoman Jessica Canfield said on Thursday. "The store will offer a more convenient location for customers in the Langhorne area who previously had to drive to our Willow Grove or Mercer Mall locations."
The new store reflects the continued demand for deals at high-end stores as consumers monitor their spending.
Other upscale chains have spawned their own off-price divisions: Saks Fifth Avenue has "Off 5th," Neiman Marcus offers "Last Call," and Bloomingdale's has been rolling out outlet stores, including one at Liberty Place in December.
A Saks "Off 5th" opens at the Metroplex shopping center in Plymouth Meeting on Thursday.
Macy's Backstage, described as a combination department store and outlet, debuts at Montgomery Mall on Friday inside the existing Macy's.
"In our opinion, there has been a secular shift toward price sensitivity in apparel purchases following the Great Recession," said Bridget Weishaar, senior equity analyst at Morningstar, who covers department store and off-price retail stocks.
"People now value price more than other retail attributes like customer experience. Compounding this is the fact that the quality of customer service and store environment seems to have fallen in some department stores, making the experience not that much different from shopping at an off-price retailer," she said.
There are four existing Nordstrom Rack stores in the region: at 1700 Chestnut St. in Center City, Towne Place at Garden State Park in Cherry Hill, Willow Grove Park Mall, and the Overlook at King of Prussia.
The Mercer Mall Nordstrom Rack near Princeton opened in March of 2015.
"We're always on the lookout for the best locations for Nordstrom Rack," Canfield said. "Rack stores can be opened on a relatively short timeline, which allows us to be nimble and dial up, or slow our Rack growth, depending on how customers respond.
"We're continuing to accelerate our Rack growth because of the encouraging customer response," she said.
Experts say the growth of high-end, off-price stand-alone stores like Nordstrom Rack underscores the trend of consumers retreating from malls. Driving this is the growth of online buying and consumers' obsession with saving money.
"By locating in those off-the-mall places, Nordstrom is ensuring it can still reach those shoppers that have shopped its mall stores in the past," said Frank Badillo, research director at MacroSavvy, which tracks trends.
The move to add outlets - which offer merchandise at 20 percent to 60 percent off department-store prices - was also strategic - as value chains, such as Ross Dress for Less, TJMaxx, and hhgregg - have gained market share. Many of these stores are not in malls.
"The move by Nordstrom and other upscale retailers to beef up their outlet divisions is about being where the brick and mortar shoppers are -- which is increasingly off the mall," Badillo said. "Basically, those shoppers are rationalizing, or reducing, the places they shop. These shifts partly reflect a heightened focus on value and saving money in recent years."
Ida Leyferman, 69, of Langhorne, is thrilled Nordstrom Rack will be moving into her shopping center.
She returned earlier this month from a vacation in Miami where she bought shorts at Nordstrom Rack. She visits the regular Nordstrom on Staten Island, where she grew up. Her 47-year-old daughter in Princeton shops at the Nordstrom Rack at Mercer Mall that opened last year.
"I like the regular [Nordstrom] better obviously," said the retired special-ed teacher while she shopped for art supplies at A.C. Moore, Michaels, and HomeGoods, all at Lincoln Plaza. "But having a Nordstrom Rack so close will be really convenient. It's like two minutes away."
In Center City, many credit the 40,000-square-foot Nordstrom Rack, which opened in October 2014 on the corner of 17th and Chestnut Streets for helping attract more people downtown and spurring a wave of new retailers to follow.
"The Nordstrom name and reputation gave new legitimacy to Center City retail," said Larry Steinberg, senior vice president at commercial real estate firm CBRE Inc., who negotiated the Nordstrom deal. "Larger format retailers recognized this and started to commit to the big spaces that are available on Chestnut Street. Forever 21, Uniqlo, Bloomingdale's, and Old Navy followed suit."
Of the throng of new shoppers visiting Center City, Andi Pesacov, senior director of the retail division at Cushman & Wakefield, who signed Bloomingdale's to join Liberty Place, called it "cluster retail."
"You just don't do one outlet, you do a bunch of them," she said.
Analyst Badillo said the number of Nordstrom shoppers preferring freestanding stores vs. those at malls had gone up to 27 percent this year, vs. 20 percent in both 2014 and 2015, based on his research at MacroSavvy.
"This suggests that Nordstrom is holding on to a core shopper that prefers mall stores over off-mall stores," he said.
Pesacov said names such as Nordstrom and Bloomingdale's have caché.
"They feed off each other's energy and customers," she said of the outlets' proximity in Center City. "There is a synergy."