July 13 (Bloomberg) -- Nordstrom Inc., the upscale department-store chain, navigated the recession and its aftermath better than its peers. Yet even a company that has posted average sales growth of 14 percent for the past 10 quarters isn’t immune to today’s fast-changing retail environment.
At a time when wary U.S. consumers obsessively comparison-shop online and open their wallets only for must-have products, retailers are falling over themselves to lock up merchandise shoppers can’t find anyplace else.
“For a time, you had the same four department stores as mall anchors, and they had the same four brands,” said Deborah Weinswig, a Citigroup analyst based in New York. “They needed to spice things up.”
In Nordstrom’s case, it’s a matter of wooing more fashion-conscious women. Since the recession, many female shoppers have been buying fewer clothes -- a challenge for a chain that generates about a third of its more than $10 billion in annual sales from ladies’ apparel.
To get women excited about shaking up their wardrobes again, Peter E. “Pete” Nordstrom, 50, the president of merchandising, has cut a deal to sell clothes from Topshop, a London-based retailer known for mid-priced trendy styles -- punk-inspired pinafores and ladylike tweed -- that defy easy characterization. It’s the sort of fashion people don’t expect to find at Nordstrom. And it could draw in new customers -- or turn off existing ones.
The Topshop-Nordstrom deal is the latest and splashiest instance of a U.S. retailer locking up exclusive merchandise. The goal is threefold: drive sales, deprive rivals of the goods, and make it harder for discount-addicted consumers to compare prices. Target Corp. and Neiman Marcus Group announced on July 10 that they will collaborate on a “limited-edition” collection for the holidays, featuring products from such designers as Tory Burch and Diane von Furstenberg. More than 40 percent of Macy Inc.’s merchandise is now from exclusive or limited-distribution brands.
J.C. Penney Co. is by far the most radical proponent of the strategy. Reversing the usual department-store setup, Penney is embarking on a four-year plan to devote space to as many as 100 branded boutiques within its stores.
Nordstrom is taking a less risky approach. While the chain is giving Topshop goods a high profile in its stores, including installing the brand’s signature neon signs and matte white mannequins, it’s not letting the British chain run its own enclosed boutiques.
Also, because Topshop is still a relatively untried brand in the U.S., Nordstrom initially will test its appeal in 14 cities of varying sizes -- King of Prussia, Pennsylvania, and Chandler, Arizona, are among the debut markets -- before taking it national. The clothes will start appearing online and at stores in September, and Nordstrom may roll them out to most if not all of its 117 locations within a year.
Topshop, known for showcasing talented young designers, including the late Alexander McQueen, has a quirky British sensibility. For the winter season, the retailer is previewing punk-esque checked looks such as a £30 ($46.56) pinafore that it recommends pairing with chunky black lace-ups. (“British fashion loves nothing more than a bit of anarchy!” it says on its website.) It also is pushing retro 1960s styles: tweed and boucle pieces it suggests wearing with beehive hairdos and slick black eyeliner.
A nimble operator capable of continually turning out fresh fashions -- as many as 200 new styles appear at the Oxford Circus flagship in London each week -- Topshop appeals “to youthful, fashion-obsessed customers,” Pete Nordstrom said.
The look will play outside fashion centers such as New York, home to one of Topshop’s three U.S. stores, according to Walter Loeb, founder of the consulting firm Loeb Associates.
“Because of its appeal to young people, it could be in several new places, including college towns,” he said.
At the same time, a profusion of fashion blogs and shows like Heidi Klum’s “Project Runway” have helped spread awareness of fashion and apparel trends even to habitués of middle-American malls.
For Topshop, the partnership with Nordstrom is a low-risk, inexpensive way to expand its presence in the U.S., where it’s perhaps best known for a five-year-old line of Kate Moss-designed clothes once sold at Barneys New York.
Sir Philip Green, whose Arcadia Group Ltd. owns Topshop, talked to a number of potential U.S. partners over the past two years and was attracted to Nordstrom’s premium position in the U.S. market. Topshop also plans to have as many as 20 U.S. stores of its own in the next three years, part of a global expansion designed to reduce Arcadia’s reliance on slowing growth back home in Britain.
The Nordstrom-Topshop alliance came together quickly. Four months ago, Pete Nordstrom flew to Las Vegas, where Green was opening a Topshop flagship. They had tea at a Nordstrom café in the Fashion Show mall and agreed to a deal that very day.
Nordstrom and Green, 60, declined to provide sales projections for their partnership.
“We think it can be pretty big,” Nordstrom said. “The intent is, ‘Let’s do something special, let’s do something that works on a sizable scale.’”
For Green, the deal was a model of speedy decision-making.
“It hasn’t been some long, drawn-out agony,” he said.
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