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Nordstrom Is Growing Its Online and Lower-Priced Businesses in 2014

Expect to see a lot more Nordstrom Rack locations in the next few years.
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Despite emphasizing its multi-channel approach to sales, Nordstrom is focusing on growing its e-commerce and Nordstrom Rack businesses this year, executives at the company said during its fourth quarter earnings call Thursday. In the next few years, Nordstrom expects roughly half of its sales to come from online and the Rack business, compared to 38 percent today.

Online is and will likely remain the retailer's fastest-growing sales segment, says CFO and EVP Mike Koppel. Nordstrom is putting the emphasis on its off-price offerings when it comes to store openings in 2014: The plan is to open 27 Nordstrom Rack stores and just three full-line stores. By 2016, Nordstrom Rack is expected to grow to 230 storefronts from 140 stores today.

The Seattle-based retailer has good news for Topshop fans, too: Nordstrom will be expanding its in-store Topshop stands from 14 to 41 locations by year's end since it's an "enhanced merchandising offering." Translation: People love Topshop, and Topshop brings people to Nordstrom.

Nordstrom breaks its business down into four channels along the lines of price and online/offline: the full-priced Nordstrom stores, the Nordstrom e-commerce site, its lower-priced Hautelook site and Nordstrom Rack, which is both offline and off-price. The retailer approaches those not as independent businesses, though, but rather as interlocking units that can leverage each other.

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That multi-channel approach can manifest in ways as simple as allowing customers to return Hautelook items purchased online to any Nordstrom Rack storefront.

"This drives thousands of customers to the Rack each week," says president Blake Nordstrom. "For those making a return, many leave with a Rack purchase."

Nordstrom is also promising big improvements to its mobile site later in the spring. Nordstrom has a $3.9 billion capital plan for 2014 through 2018, about a third of which accounts for technology investments. That's compared to less than a quarter of investments allocated to tech in the years from 2009 to 2014.