“Racking” Up for Millennials
The luxury off-price boom may not have been just a way for retailers to appeal to suddenly cash-strapped customers, says a recent article. It may be a way to train younger consumers to appreciate (and buy) the finer things in life later on.
A recent BuzzFeed article notes that with 141 units, Nordstrom Rack now outnumbers its full-price stores (117). The same is true of Saks Fifth Avenue, which has 41 full-line stores and 70 Off-Fifth locations. (Neiman Marcus, on the other hand, has 41 Neiman’s stores, 2 Bergdorf Goodmans, and 36 Last Call clearance centers – for now.)
Even more critically for Nordstrom, Rack will be expanded at a far quicker pace, with the luxury chain eventually comprising about one-third of the total store count. The idea is to build brand loyalty among young adults who may just be starting out now, but eventually will “graduate up” to full price. (Of course, some 20-somethings I know were more than familiar with Nordstrom when their parents were paying their pre-recession bills, so it would be more like a homecoming than a move up.)
Theoretically, it makes sense, as aspirational shoppers far outnumber the affluent consumers: They’ve been supporting other off-pricers including TJX for years. And a long-term view for a retailer is so refreshing it’s downright revolutionary.
That isn’t to say that Nordstrom isn’t expanding – just look to Canada, which will follow the same model of opening eight full-line stores (five already announced) and some 20 Racks. Hudson’s Bay also plans to expand Saks and Off Fifth to Canada, while opening seven Off-Fifth units in the United States this year. In its initial public offering last summer, Neiman said it plans to double its Last Call store count, and also grow its younger-skewing CUSP chain.
Ultimately, though, will Nordstrom, Saks and Neiman become more for their value stores than the luxury that made them legends? We’ll see.