Macy’s, Nordstrom see the benefit of discount stores

Discount retailing should thank Filene’s for opening a basement store to dispose of extra inventory at discount prices.

During the first ten years of the last century, very few customers had vehicles to drive to an outlet mall located out of town.  They also wanted to shop in the main department store, so the basement space below the fancy Filene’s store suited everyone.

This concept is being used by Nordstrom when they open their off-price store next year.  It will be located up the road from the store at Ross Park Mall.

This strategy is being considered by many retailers as they search for ways of increasing their sales.  Instead of worrying that discounted clothing will taint their classy image, many stores are now grabbing at this opportunity.
Macy’s revealed plans earlier this year to place its Bloomingdale’s Outlet chain in Manhattan, an area that is served by its flagship department store.  A similar off-price concept is due to pilot for Macy’s.

In the face of the slump in the economy, most shoppers are out to find bargains.  During 2000, around 38% of shoppers went to a traditional mall at least once per month.  After 9/11, that figure started to decline and is now at 20%.  This has forced retailers to move to areas that suit shoppers.  Part of this effort on behalf of retailers includes omnichannel plans and off-price outlets.  

 Full-line Nordstrom stores have seen a decline of 0.5% during its last fiscal year, but same-store sales at its Rack stores have increased by 3.8% for the same period.  This has prompted the retailer to set a target of opening 300 Rack stores by 2020 – it currently has 173.

 Nordstrom Rack initially opened as an outlet to sell last season’s goods at discounted prices, however this method has changed over the years.  Currently, about 20% of the stock is mainline clearance items.  The balance of the items is purchased specially for the off-price store.  According to Nordstrom, clients at Rack are able to obtain goods at a saving of 30% to 70% off its regular price.

Shoppes at Northway, located on the corner of McKnight Road and Babcock Boulevard, already contains a host of off-price stores.  

Traditional outlet malls have not disappeared, but are moving closer to the urban areas.  One of the main reasons for the expansion in outlet malls is the high level of interest from retailers to place stores at these outlet sites.