WWD.com/business-news/department-stores/weighing-nordstroms-nyc-effect-6009518/
government-trade
government-trade

Weighing Nordstrom’s NYC Effect

Executives are expected to reveal plans today to build the company's first full-line store in New York City, a flagship at 225 West 57th Street.

Can Nordstrom make it in the Big Apple?

This story first appeared in the June 28, 2012 issue of WWD.  Subscribe Today.

Probably, considering shoppers are fickle, show little loyalty to any store in particular, and have been long awaiting the arrival of a full-fledged Nordstrom.

The Seattle-based retailer already operates a Nordstrom Rack outlet on 14th Street and a Treasure & Bond charity store on West Broadway in SoHo. But today, Peter Nordstrom, Nordstrom Inc.’s president of merchandising; Mayor Michael Bloomberg, and Gary Barnett, president and founder of Extell Development Co., are expected to reveal plans to build Nordstrom’s first full-line store in New York City, a flagship at the base of a future skyscraper on the north side of 57th Street between Broadway and Seventh Avenue. The skyscraper, at 225 West 57th Street, is being constructed by Barnett.

According to retail experts contacted Wednesday, it will take at least two years for Nordstrom to get its flagship up and running. They characterized the footprint as in the vicinity of 300,000 square feet, and bigger than the 230,000-square-foot Barneys New York on Madison Avenue, or the 250,000-square-foot Bergdorf Goodman main women’s store on Fifth Avenue. Yet it’s far smaller than Saks Fifth Avenue, at 646,000 square feet; Lord & Taylor, at 650,000 square feet; Bloomingdale’s, at 859,000 square feet, and Macy’s Herald Square, at more than 1 million square feet.

RELATED STORY: Citi Downgrades Sakes, Nordstrom and Macy’s >>

Still, Nordstrom is making a bit of history. There hasn’t been a department store opening in Manhattan in quite some time.

For its debut, here’s what’s expected, according to the experts.

• Nordstrom will double up on its legendary service. It’s a tactic that’s been seen at other openings, to make a strong impression and handle the expected rush of curious consumers.

• Nordstrom will also play up its superior selection of shoes, currently among the hottest-selling categories at most department stores.

• Nordstrom will have a major impact on other retailers and midtown. The family-run, publicly held chain is likely to grab market share from competitors and force them to up their game. For years, Manhattan retailers have feared the arrival of Nordstrom and pondered where it would end up planting a flagship.

There are challenges. For one, the store will be located in a pocket virtually devoid of fashion retailing. Said one Fifth Avenue landlord, “When wealthy women from Europe or the Middle East come out of Bergdorf’s, they never go west. They go east to Madison Avenue, or maybe Bloomingdale’s.”

Secondly, there could be issues with certain brands that Nordstrom would like to sell at its Manhattan flagship but have distribution agreements with other major retailers in town. “This puts Nordstrom right in the heart of Bloomingdale’s, Saks and Bergdorf Goodman country,” said Marvin Traub, the consultant and former chairman of Bloomingdale’s. “The challenge will be to get the brands, many of which also have their own freestanding stores not far away.” Traub also said that the success of Nordstrom in Midtown “depends on how the brands react,” and added, “I suspect Nordstrom is paying a pretty fancy rent.”

Bernard Aiden, chief executive officer of Catherine Malandrino, which sells Nordstrom, said of the distribution issue, “On the West Side, honestly, there is nothing. Saks Fifth Avenue and Barneys New York are on the East Side. We could use a great store on the West Side. It’s a different neighborhood. On the West Side, I don’t see who it’s going to bother. Still, as far as us selling to them, I have to make a little research.”

“Initially, [Nordstrom’s] going to be an island. They have to hope that some more retail follows down the road. Right now, there’s nothing coming down the road,” said Joe Sitt, ceo of Thor High Street Advisors. “That part of 57th Street is a little bit grungy. This will bring it up to snuff. It will help the office and residential in the area more than it’s going to help retail in the area.”

Another source said of Nordstrom’s management, “They felt very badly about not being able to be on Fifth Avenue. In their budget, they found an affordable alternative on West 57th Street.”

“It’s a big deal for New York to get a 300,000-square-foot department store,” said Jeffrey Paisner, a retail broker at Ripco. “Department stores have gone out of New York,” he said, referring to such closings at Gimbel’s, Korvettes, Alexander’s and Ohrbach’s decades ago. “It’s obviously going to bring a critical mass of shoppers over to the West Side. It will be a destination for people on the West Side. A lot of people with a lot of spending power won’t have to always go to Bloomingdale’s or cross town. It’s going to further energize the area along with the Time Warner Center. It will have a lot of allure as a shopping destination. There’s going to be a lot of retail square footage where there’s none existing presently.

“That area has had difficulty. [Nordstrom] will create a lot of synergy to bring in brands that were reluctant to open stores there. Hearst Tower and other buildings with big retail spaces have been begging for tenants for years. There will start to be some more significant infill between the two projects, Nordstrom and Time Warner.”

Nordstrom’s assortment tends to be more traditional and less designer-oriented than Bergdorf Goodman, Bloomingdale’s or Saks, and the company for seasons has cited difficulties in some women’s categories. Nordstrom plugged a big hole in its women’s team earlier this month by promoting Tricia Smith, corporate merchandise manager for the BP. teen girls’ department, which has been one of the better-performing areas, to executive vice president and general merchandise manager of women’s apparel two weeks ago, succeeding Loretta Soffe, who left in January.

Concerns were also raised Wednesday when Nordstrom, along with Saks and Macy’s, was downgraded by Citibank (see related story this page), which cited a slowing of high-end spending and weakness in women’s designer apparel. Citibank called it “a systemic issue.”

Some retail experts believe the addition of Nordstrom to the 57th Street corridor could create a continuum of shopper traffic from the East Side all the way to The Shops at Columbus Circle on the West Side, altering the area’s pedestrian patterns. The streets along 57th Street, west of Fifth Avenue, have always been fashion challenged.

For Nordstrom to select 57th Street, the economics had to be appealing. The Nordstroms have been very cautious in their search for a Manhattan site. The family has looked high and low for over a decade, including examining the former Drake Hotel at 57th Street and Park Avenue; 3 Columbus Circle, as well as properties on West 34th Street, in the Financial District and the former Alexander’s building next to Bloomingdale’s, which became the Bloomberg Building. The most recent consideration was Hudson Yards under development on the far West Side.

Overall, there were few viable sites for Nordstrom, considering the amount of space required and the preference for situating in an upscale area where there is a lot of foot traffic.

“What were the alternatives? Hudson Yards? That seems like a long way off,” said one Manhattan real estate executive who requested anonymity. “It’s really hard to find a big box in Midtown. It’s an incredible opportunity. Nordstrom will ignite that part of the West Side.”

“When they built Time Warner, there were a lot of skeptics,” said Robert K. Futterman, chairman and ceo of Robert K. Futterman & Associates. “But The Shops at Columbus Circle is working. It’s captured an audience. It turns out, the Upper West Side customer is really underserved in terms of retail. Nordstrom will really change the neighborhood.”