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Saturday, March 2, 2024
March 2, 2024

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Nordstrom’s Seattle flagship store stands the test of time, city issues

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SEATTLE — Danielle Kuhlmann grew up with cherished memories of shopping at the Nordstrom flagship store in downtown Seattle.

When she was in high school, Kuhlmann and her friends would visit the store, leave their backpacks with the concierge, then head to the makeup counters for consultations and to get their makeup done before school dances.

“It felt like such a luxury,” said 38-year-old Kuhlmann, who is now a musician at Seattle Symphony Orchestra. “We barely bought anything, but they always made us look and feel special for those nights.”

Kuhlmann is one of many Seattleites who have been fond of the Seattle flagship store since its early days when it opened at 500 Pine St. in 1998. The grand opening reportedly drew about 5,000 people.

The flagship store, in a building that also houses Nordstrom’s headquarters, remains a destination for Seattle-area residents and visitors alike, offering services that go well beyond its large shopping portfolio. The makeup services that attracted young Kuhlmann are still available in addition to full-fledged in-store beauty services, styling advice, luxury spa, restaurants, alteration services and much more.

“I could spend a lot of time there because it’s just fun to look at the different sections and just browse, and I like to try stuff on,” Kuhlmann said. “It still feels like a familiar place to me because I’ve always gone there.”

Kuhlmann is not alone. Even on a rainy November afternoon, the store appeared to be buzzing with shoppers and holiday-gift seekers, especially in the women’s shoe section on the first floor. People carrying Nordstrom bags around downtown could be a good sign for the retailer that posted Tuesday a 6.8% drop in its latest quarterly sales compared to a year earlier.

Nordstrom said in an email this month the Seattle flagship store is one of its top-performing stores. But the Seattle-based company declined to provide specific performance details.

For this flagship store as well as the retailer as whole, the remainder of the year may tell if a rebound boosted by holiday sales is on the horizon. Nordstrom, similar to other high-end retailers, has grappled with the impact of COVID on shopping habits and downtown foot traffic nationwide.

Last August, it closed three San Francisco stores, including its flagship store there after 35 years, citing dramatic changes in the San Francisco market over the past few years that impacted foot traffic to the stores. The closures came just months after it announced it was exiting the Canadian market altogether.

Despite these closures, there are no plans to close the downtown Seattle flagship store, a Nordstrom spokesperson said this month.

Keeping the Seattle flagship store open is a good sign of Nordstrom’s health, and it is also good news for loyal shoppers like Kuhlmann as well as nearby businesses.

“Their presence lifts all boats,” said Jon Scholes, president and CEO of Downtown Seattle Association, adding it is “a point of pride” and an important retailer in the city core.

Nordstrom said Seattle influences its character and values as a company. “We are deeply invested in the continued success of this city,” the company said in a statement. “We look forward to welcoming customers into our Seattle-area stores this holiday season.”

Different times, similar problems

Hopes pinned on Nordstrom among other retailers to help pull Seattle out of the post-pandemic retail slump are similar to how it all started.

In the 1990s, the Nordstrom opening was part of a broader revitalization project of downtown Seattle, which had empty storefronts and increased crime as people moved to the suburbs, according to a HistoryLink article. Other developments included a “five-story mall, a 16-screen theater, underground parking garage and a boutique hotel,” according to Seattle Times archives.

For the project to work and attract more retailers, it was key that Nordstrom stayed downtown, according to Times archives.

More than 25 years later, low foot traffic and safety concerns continue to impact downtown retail, making it harder to lease space, Matt Griffin, former managing partner who led the project for what’s now Pine Street Group, said in an interview last month.

Downtown Seattle suffered from the COVID-19 pandemic, which sent office workers home and cut off tourism. Since then, downtown Seattle, also inflicted with crime, saw major retailers such as Nike leave, while others like Uniqlo began to trickle in as tourists and workers slowly returned.

“It’s getting better, we just have to get out of the hole,” Griffin said, adding that downtown has “long ways to go still.”

According to data from the Downtown Seattle Association, the number of visitors in October was 93% compared to 2019. Office workers are still lagging behind. October marked the sixth straight month that saw half of worker foot traffic compared to 2019, according to the DSA.

And despite this partial recovery, crime is another reason that deters would-be downtown shoppers.

Former Capitol Hill resident Apollo Moonfire, 62, says he remembers the opening of the Nordstrom flagship store, but he doesn’t shop there as much as he did when he lived nearby. Moonfire moved from Capitol Hill after it became more dense, louder and more dangerous compared to Wedgwood in 2016, he said, and he doesn’t go downtown as much as he used to.

But Kuhlmann, who works downtown, said she feels mostly safe in the neighborhood, and she often shops at the flagship for formalwear and shoes. “I might think more about which way I’m walking or something, but I’m pretty comfortable downtown,” she said.

In 2022, the total number of offenses reported by the Seattle Police Department was 2,593 downtown. In 2019, that number was 3,428.

Crime is a double whammy for retailers like Nordstrom. In addition to discouraging shoppers like Moonfire, it also means loss of merchandise and risking staff.

Nordstrom CEO Erik Nordstrom said in August during an earnings call with investors that “losses from theft are at historical highs.” The drag of these losses on the retailer’s earnings needs to come down, he added. As a result, Erik Nordstrom said, the company is partnering with local jurisdictions and law enforcement to make stores safer.

Nordstrom performance

Over the years, Nordstrom has weathered economic highs and lows, and now it finds itself in another challenging environment. As the company reported Tuesday a drop in sales in the third quarter over soft customer traffic, Chief Financial Officer Cathy Smith told investors that customers are still cautious about their spending.

“It remains to be seen how changes in inflation, higher interest rates and the resumption of student loan repayments will affect discretionary consumer spending during the holiday season,” Smith said on Tuesday.

Still, Nordstrom said its improvements on inventory made it well-positioned for holiday sales.

These economic headwinds are adding another challenge for the retailer that has also been in a moment of turnaround “for some time,” according to Morningstar analyst David Swartz ahead of the most recent earnings.

Nordstrom has struggled with a changing retail landscape for the past 10 years. Malls have been on the decline, he said, and other high-end department stores have struggled with business models that don’t work anymore.

It also has struggled with growing competition. Instead of the beauty counter Kuhlmann used to go as a high schooler, for example, customers can shop at Sephora and Ulta, he said. “People don’t have to make trips to the department stores anymore because they can find these products in other places, and a lot of times it’s places where they actually prefer to shop.”

But Nordstrom has not been standing still. It has tried new tactics to broaden its shopper base and attract online shoppers.

Among these tactics is expanding the footprint of its off-price department store Nordstrom Rack. As of Oct. 28, Nordstrom Rack stores tallied 258 nationwide, compared to 93 non-Rack stores. Erik Nordstrom said on Tuesday the Rack is the company’s “largest source of new customer acquisition.”

Nordstrom is opening more Rack locations to meet customers in more suburban areas, where they might shop more than in downtown centers, Swartz said.

But expansion has not been without growing pains; the Rack has struggled with a glut of inventory and faltering sales in recent years. In the third-quarter results, Nordstrom signaled an improvement, saying the Rack’s net sales dropped just 1.8% compared to 4.1% in the second quarter and 11.9% in the first quarter over the same periods a year earlier.

Part of the reason for the Rack’s sluggish performance, according to Swartz, is trailing behind other off-price retailers such as T.J. Maxx and Ross. Compared to off-price competitors, Nordstrom has very few Rack locations. Nordstrom sees a larger market for Rack stores than for its namesake banner stores based on the thousands of stores T.J. Maxx and Ross have, Swartz said.

And Nordstrom seems to be on track for doing just that. The company will have opened 19 stores this year, Erik Nordstrom said Tuesday. In 2024 and 2025, the company plans to open 11 Rack locations and zero Nordstrom banner stores, according to its website.

Nordstrom has not opened any more non-Rack stores since its New York flagship in 2019. The company might be at its peak for Nordstrom banner stores, Swartz said.

To further broaden its client base, Nordstrom has been trying to cater to shoppers who don’t shop at brick-and-mortar stores. It boosted its digital presence by offering its anniversary sale online and in stores, two-day shipping, and an order online, pick up in-store service.

Despite these tactics, Nordstrom’s digital sales make about a third of its total sales. In the most recent earnings, digital sales fell 11.3% compared to a year ago, but remained at 34% of the total sales.

“There’s been a bit of a return to stores this year,” Erik Nordstrom told investors Tuesday. “Digital business has been a little more pressured in that.”

Family business

Nordstrom, founded by John W. Nordstrom and Carl Wallin in 1901, has come a long way. Its leadership, currently held by fourth-generation family members, has been consistent in building a business that draws loyal shoppers in Seattle and beyond.

In August, Nordstrom celebrated the Seattle flagship’s 25th anniversary by opening a time capsule that was placed inside a wall on the opening date. The event, which drew shoppers, Nordstrom family members and store staff, among others, brought back memories not just of the late 1990s, but of the excitement that once surrounded the store opening.

When the Seattle flagship store opened in August 1998, taking up the space of the previous department store Frederick & Nelson, thousands of people waited outside to be the first ones inside. According to Times archives, “Pine Street between Fifth and Sixth avenues and part of Sixth Avenue were temporarily closed to traffic” because of the crowd.

Patrick Burns, who worked on the construction of the flagship store as senior project manager for Bayley Construction, remembers the hectic opening. Burns said he worked on several Nordstrom store constructions, and the family executives were always involved and meticulous with each store opening. His last project was the Seattle flagship.

The Nordstrom family “just always wanted [their stores] to be the best of the best,” Burns said. “They never cut any corners.”

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