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Nordstrom’s Midwest Harvest

OAK BROOK, Ill. -- Nordstrom is out to conquer the Midwest.<BR><BR>In just a few years, sources say, sales in the region are growing at 18 to 22 percent annually, which has propelled Nordstrom stores here and in Bloomington, Minn., into the top five...

OAK BROOK, Ill. — Nordstrom is out to conquer the Midwest.

In just a few years, sources say, sales in the region are growing at 18 to 22 percent annually, which has propelled Nordstrom stores here and in Bloomington, Minn., into the top five out of 77 units. That’s fueling an aggressive expansion plan over the next two years.

At Nordstrom’s annual meeting, held here in May, co-chairman James Nordstrom said the Midwest is the specialty-store chain’s fastest-growing market. The Oakbrook store opened in 1991, and the Bloomington unit, in the Mall of America, opened in 1992.

Underlining its commitment to the region, the Seattle-based company will open its second major Chicago-area store at Old Orchard mall in Skokie, Ill., on Oct. 7. Industry sources estimate the 200,000 square-foot store will generate first-year revenues of $100 million.

The company is kicking off the opening with a gala fashion show and party for 2,500 at the store the night of Oct. 6.

“Nordstrom is experiencing a lot of success in Oakbrook and I expect them to generate strong sales in Old Orchard,” said Rick Nelson, analyst with Duff and Phelps.

Nordstrom’s 1993 earnings were up 2.8 percent to $140.4 million on sales of $3.59 billion, which was a gain of 4.9 percent. Its average sales per square foot are pushing $400, the highest in the industry.

Other recent and future Midwest expansion includes:

A Nordstrom Rack clearance store, which opened in Schaumburg, Ill., in March.

A regular-price unit in Schaumburg, slated for spring 1995.

A store in Indianapolis slated for fall 1995.

A store in Troy, Mich., slated for summer 1996.

While the Midwest is the fastest growing market, the chain is also continuing to sprout elsewhere in the country. An expanded unit in Portland, Ore., opened in August, and new stores are planned in California, Washington, New York State, New Jersey, Texas, Pennsylvania and Colorado over the next two years.

According to Bob Middlemas, vice president and general manager of Nordstrom’s Midwest operations, there’s no single reason for the store’s success in the region. Rather, he attributes it to Nordstrom’s philosophy — an emphasis on customer service, deep inventories and a broad range of sizes — which has been imported successfully to new markets.

The chain brought 100 seasoned employees from other stores to Oakbrook when that store opened to help instill Nordstrom’s culture in local employees, Middlemas said.

According to Jennifer Black, analyst with Black and Co. Inc., this is one of the chain’s greatest achievements.

“They have been very successful at translating their culture throughout the country,” she said.

The chain’s regionalized buying structure is another ingredient in the specialty store’s success, Middlemas noted.

“We quickly identified differences in the market and addressed them through our merchandise,” he said. For example, Chicago’s harsh winters call for a strong assortment of outerwear. Buyers work closely with customers on the sales floor.

“They can see how the coats are fitting,” and adjust buys accordingly, he said. “Technology doesn’t tell you what you’re not selling or missing.”

Nelson of Duff & Phelps concurred.

“[Nordstrom’s buying] is very decentralized and it can therefore tailor [its assortments] to local needs better than most retailers,” he said.

Middlemas also acknowledged that stores in new regions typically perform better.

However, it took a while for its Mall of America store to become established because at first it attracted mainly tourist traffic. Now, it gets more local customers, Middlemas said, and “has become embraced as part of the community.”

Nordstrom chooses its locations according to where the competition is, Middlemas said. Maps of the Chicago and Detroit areas on the wall of Nordstrom’s conference room in the Oakbrook store look like old-fashioned war charts, with dots identifying major malls, anchors listed beside them.

“Our competition does a lot of research for us. We want to be with the best,” Middlemas said. Other anchors at Oakbrook are Saks Fifth Avenue, Marshall Field’s, Neiman Marcus, Lord & Taylor and Sears.

Old Orchard has Field’s, L&T and Saks, with a Bloomingdale’s under construction.

Middlemas noted that demographics of Old Orchard, near Chicago’s upscale North Shore suburbs, and Oakbrook, surrounded by the affluent western suburbs, are very similar. Old Orchard, being closer to downtown Chicago, should attract more customers from there, he said.

He also expects there to be some transfer of sales between the two stores, which are 22 miles apart — perhaps about $10 million — but he said the Oakbrook unit should make up the difference with new customers. He noted that the Chicago metropolitan area has a population of 7.5 million, with two stores and a third to open next year.