Fashion is fickle. In recent years, it has become a market of retail niches: high-end stores that cater to the smaller but richer upper class, discounters and big-box stores attracting many more middle-class buyers with competitive prices, and an ever-shifting roster of youth-oriented stores that cater to the fast-changing tastes of the young. And each of these niches has multiple online competitors with greater selection than any bricks-and-mortar store can offer.
The old-line department stores where most of the people used to buy most of their clothes are in danger of losing their customers and their relevance.
Nordstrom is in this latter group. Its sales have been increasing -- 2.2 percent in 2013 -- but not because of traditional full-line Nordstrom stores.
In fact, Nordstrom stores are becoming less and less of Nordstrom, Inc. In 2013, same-store Nordstrom sales dropped by 3.3 percent.
The company's two newer divisions, Nordstrom Rack and its online sales, generated all of the profit in 2013.
The off-price Rack stores, pitched to value shoppers, reported 3.3 percent higher same-store sales in 2013, following 7.1 percent growth in 2012.
Online sales grew much faster, up 30 percent for the third year running, accounting for 14 percent of revenue in 2013, a trend that will surely continue.
Nordstrom Rack stores now outnumber traditional Nordstrom stores, 141 to 117, and the company has set a goal of 81 new Racks by the end of 2016. By contrast, it plans on only three new full-line Nordstrom stores, including its first in Canada. Nordstrom also will devote $1 billion over several years to expanding its online efforts.
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