Nordstrom Rack Closes Canadian Stores: A Discussion [Podcast]

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Craig and Lee chat about Nordstrom Rack as it exits its Canadian operations. Some stores were doing better than others — and the retailer’s strategy to carry fewer high-end and exciting brands is partly to blame for Canadian apathy.

The Weekly podcast by Retail Insider Canada is available on Apple Podcasts, Stitcher, TuneIn, Google Play, or through our dedicated RSS feed for Overcast and other podcast players. Also check out our The Interview Series podcast where Craig interviews guests from across the Canadian retail landscape as part of the The Retail Insider Podcast Network.

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Transcript

Announcer 0:00
This is a Retail Insider podcast. You’re listening to “The Weekly”.

Lee Rivett 0:08
Welcome to this week’s episode of “The Weekly” by Retail Insider. I’m Lee Rivett and I’m joined with the owner and publisher of Retail Insider Media, Craig Patterson, to discuss this week’s most read articles on retail-insider.com. So thanks for joining me, Craig!

Craig Patterson 0:22
Hello, everyone.

Lee Rivett 0:23
For this week, we published an article about the Canadian Nordstrom Rack locations closing country wide. Now ever since Nordstrom made their announcement to exit Canada, there’s been a lot of focus on their “full line” stores – and what’s going to happen with their locations and the impact on their malls and so on – but their “off price” or discounted “Rack” locations have always been an afterthought in a lot of media coverage ever since the announcement. So we wanted to focus on the “Rack” aspect of the Nordstrom business during this podcast. So Craig, where do you want to start?

Craig Patterson 0:54
Yeah, geez. Nordstrom announced on March 2 that it would be pulling out of Canada, which was quite well, it was a shock to everyone else. In terms of news. We knew about it for a little while. We talked about this in a previous podcast, but we saw Nordstrom Rack actually shut its stores down over the weekend.

Lee Rivett 1:11
And I’m in the downtown of Vancouver and there isn’t any Nordstrom Rack locations around me. So did you visit the Nordstrom Rack location in your neck of the woods in downtown Toronto?

Craig Patterson 1:21
I popped in and they had the final clearance sales. I was actually in the downtown store on Sunday, and they were just selling ‘fixtures only’. At that point, really, I mean, the store was barely open. That may have been the case with some of the other ones. Norm Katz was up at the Vaughan Mills location a couple of days before and they had a little tiny bit of stuff left. But really the stores had figured out quite quickly.

Lee Rivett 1:43
When I found that in the downtown Vancouver at the full line store after the announcement. And when they started the actual liquidation sales that the discounts were quite laughable. It was only like 5% to start. So it was the same strategy unfolding for the rack locations in downtown Toronto where you were kind of located as well?

Craig Patterson 2:02
The sales at the Nordstrom Rack were basically the same in terms of the percentage being offered, but that sale price started at 5%, which drew criticism, mocking, whatever you want to call it. The discounts definitely did increase with time. And you know, I actually didn’t see what the final discounts were I think they were maybe closer to 50%.

Lee Rivett 2:25
I’m just looking back and I think it was on April 27 was last time that I was in Nordstrom (the full line store in downtown Vancouver) and they were offering 50% off of things like sleepwear, dresses, sweaters and outerwear and then 30% off of everything else practically. So, I’m assuming if the “full line” was doing that at the end of April, then probably the rack was too but is it Nordstrom making these decisions on the discounts or is it another liquidator that’s handling it?

Craig Patterson 2:52
It’s a liquidation so it’s not Nordstrom handling the liquidation. It’s Hilco merchant retail solutions and Gordon Brothers Canada. They’re the liquidators so they were responsible

Lee Rivett 3:03
For the discount schedule and promotions.

Craig Patterson 3:05
And what’s interesting too with this liquidation is – at least in the big Nordstrom stores I saw in downtown Toronto (CF Toronto Eaton center) – is the liquidators had brought in a lots of non-Nordstrom merchandise to clear out as well, including some home goods and some sporting goods. So they were clearing it out from someone else or something – I’m not actually sure. They had brought those into the Nordstrom stores. So already the stores have been changing and I think still are they probably still have that clearance stuff. And the big one I just haven’t been to the big Nordstrom store in a bit. I just got back from Las Vegas. So I knew we’re aways. So we I haven’t gotten into a big Nordstrom store yet. I gotta go this week and just check it out.

Lee Rivett 3:43
Once speaking of changes, yes we just spoke about the changes that happened during the liquidation cycle. By backing up before the actual decision to close in Canada was there some changes that were happening when it came to designer offerings from Nordstrom Rack that we wanted to talk about? That might have been an interesting kind of segue that led into this whole decision to like pull the plug in Canada…

Craig Patterson 4:05
I had something that I witnessed, and quite a few people had commented on it. So when the Nordstrom Rack store opened in downtown Toronto here I went in and I was really impressed with the designer shoe selection. The shoes were you know, discounted at a good price. But that did change into the pandemic. There wasn’t nearly as much exciting designer product. So we did have someone reach out to us and explain a little bit what was going on with that. Nordstrom Rack had shifted its strategy during the pandemic to go after a bit more of a price conscious consumer called the “Bargainista”. And this was mentioned in an earnings release. But I think that Canadians got it and probably Americans too, became a bit disappointed saying oh my goodness, you know, the excitement that we saw there with these brands isn’t there anymore.

Lee Rivett 4:52
That would make sense, especially for those that might be familiar with the earnings reports and that the ‘writing might have been on the wall’ that they were starting to pull things out and make changes. For the consumer that might be just listening to our podcast and isn’t aware of these earnings discussions, what was the performance like for Nordstrom Racks in Canada?

Craig Patterson 5:12
I gotten some conflicting information on Nordstrom racks performance, someone in the know was saying that they didn’t think Nordstrom Rack was doing as well as people were expecting it to be. And in fact, earlier on, I think it was in February, early February, they actually thought I said that Nordstrom could be looking at leaving Canada, this is what we were told before we got a full confirmation. And this person says, Well, maybe just Nordstrom Rack. So I thought that was quite interesting, because I thought the big stores were not doing as well. But we had another source as well, that was saying that the softest stores or the stores that were selling the least were still a bit over $400 a square foot and that some of the top stores were somewhere in the 800 to $1,000 range. So I can’t confirm that for sure. This is what another source has told us. But nevertheless, it sounds like the stores weren’t doing maybe as badly as some had thought. Nevertheless, Nordstrom did lose money across its business in Canada that includes both the Nordstrom Rack ‘off price’ division, and the full price larger Nordstrom stores.

Lee Rivett 6:18
To put those numbers into context, would you be able to remind our listeners, how many Nordstrom racks had opened across Canada because for myself, I’m guilty of only knowing the ‘full line’ figures because I only have a ‘full line’ store in downtown Vancouver. So if you could go through that, again, that might provide a little bit of context on the quantity of Nordstrom Rack locations in Canada.

Craig Patterson 6:38
Yeah, Nordstrom Rack ended up opening seven stores in Canada. The plan we were told earlier on when Nordstrom was coming into Canada was that they were looking at doing I think between 12 and 15. Nordstrom Rack stores so they didn’t quite get there. They got maybe about halfway. The first store opened in 2018. So this was four years after the first big store opened in Calgary. And that was two years after the big stores started expanding into the Toronto market, which was 2016. So Nordstrom Rack I think just oh, it was actually about two years. I think that it ended up opening at seven stores. The first one opened at Vaughan Mills outside of Toronto in 2018. And the seventh Nordstrom Rack store opened in suburban Vancouver in Langley at the Willowbrook center in 2020. So it was a fairly short expansion. In 2020, we had a pandemic. So even though the store opened during the pandemic, the pandemic was definitely having an impact on retail sales. We saw lock downs in other parts of the country, it was hard to get around and find space. And so Nordstrom Rack never ended up opening any more stores in Canada after 2020. I suppose in hindsight, that’s a good thing given that the company is now pulling out of Canada completely.

Lee Rivett 7:59
When looking at the ‘off price’, discounted retail clothing competition landscape in Canada, how is this going to impact all those other retailers that are left behind?

Craig Patterson 8:13
There were only seven Nordstrom Rack stores versus say, TJX group, which has winners and Marshalls and HomeSense – HomeSense being more of a home store which isn’t quite as much of a competitor to Nordstrom Rack just because Nordstrom Rack focused more on fashion and a bit of home goods and whatnot. TJX has well over 100 stores in Canada, I think it is now so it’s a much bigger player. Nevertheless, TJX definitely stands to gain some market share from the exit of Nordstrom Rack from Canada.

Lee Rivett 8:47
Well now that the discounted ‘Rack’ locations have exited Canada for Nordstrom, do you have any expectations on what we can expect for the remaining liquidation process for those ‘full line’ locations that still are in the process of liquidating?

Craig Patterson 9:00
Well, the clearances are going to continue at the big stores by the liquidators. There’s six of those big stores left in Canada. Those are located in what is it Vancouver, Calgary, Ottawa, and then all in stores in Toronto. And so yeah, there’s gonna be a clearance there are those stores will close I think mid June or by the end of June.

Lee Rivett 9:21
Well, and again, a very sad chapter to be closing for Nordstrom for the Canadian marketplace, but is there anything else you’d like to kind of touch upon before we wrap up the podcast here?

Craig Patterson 9:31
I got some interesting information. I was down in Las Vegas at the Salesforce Tableau conference in very recently, and I walked into the Nordstrom store at Fashion Show mall, and the staff are really nice because I struck up some conversations. One of the things I noticed immediately was a lack of pricier designer merchandise in the store. So I asked a few questions at the staff and I said you know, what do you have for designer offerings for menswear (because I start within the men’s department) and they said, “Well, we don’t really have a lot left here now. Nordstrom has taken most of that out. So we’ve got a bit of, you know, John Varvados and a few other things”. And then I asked about “Collectors” for women (which is the pricier designer department that Nordstrom has and quite a few of its stores) and they said again, that Nordstrom had taken those brands out. That there had been a Gucci boutique in the store, but that that had exited. And then I asked about the handbag department, because again, when I’d been there last time was 2012. There was bags for Valentino, and a few other brands and almost all the designer brands were pulled out other than I saw MCM was in there in the Las Vegas store. And I kind of just made an off the cuff comment saying, “Well, this is kind of like Macy’s in terms of its brand selection” and one of the sales stuff burst out laughing. And he says, “Yeah, we were just talking about that”.

Craig Patterson 10:57
But I don’t know I was in the San Francisco center store in late September. And I was actually shocked at the San Francisco for the Westfield San Francisco center. Nordstrom store had very little to no designer product in it as well. The “Collectors” department had basically been decommissioned. There was some I think BCBG dresses or something in there, which was not part of the original “Collectors”, which would have you know, the Valentino and, you know, Fendi and other brands, which would be quite high end. Same thing went for menswear and bags. So, long story short, it was just recently announced that the downtown San Francisco Nordstrom store will be closing, which I mean, my jaw hit the floor. I couldn’t believe it because that used to be such a productive location for Nordstrom being also declared a flagship, it’s about two 380,000 square feet.

Lee Rivett 11:46
What do you think the ‘writing is on the wall’ for the end of Nordstrom? Or do you think it’s just another struggle of COVID that impacted them – or something else?

Craig Patterson 11:54
I really, really hope this is not a downfall of Nordstrom as a chain even though it is leaving Canada but it is a bit concerning to see this because I studied Nordstrom I guess since the 90s, I wrote a paper about it and university when I was at the University of Alberta as a student and about 1996 I think it might have been and it was at the time, it seemed like Nordstrom could do no wrong. The store was was very successful. It had an incredible brand awareness. It had an incredible brand affinity. The stores had piano players in them, which made them extra experiential. And Nordstrom just doesn’t seem to have that anymore. And I would caution Nordstrom from getting out of designer goods as well as anything that’s experiential at this point, because anything that a large format store can do to bring people in and keep them interested is going to be paramount. Because people can get brands online. They can get brands in mono brand stores, they can get brands and competitors. So really losing that interest as being a retailer to consumers I think is quite dangerous for a retailer like Nordstrom or any retailer out there for that matter of course so I wish Nordstrom well as it as it exits the Canadian market here and it was unfortunate to see Nordstrom Rack shutting down because it creates quite a gap in the in the markets as well.

Lee Rivett 13:13
What’s really sad to see Nordstrom go of course and wish them well. But it’s also great to be able to focus on the Nordstrom Rack portion of the story as they exit Canada. So thank you again for going through this with me and chat with you next week.

Craig Patterson 13:26
Thank you so much Lee and thank you so much everyone for listening. Take care and bye for now.

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