Shoppers walk in front of the Neiman Marcus flagship store inside the Shops at Hudson Yards, Manhattan's new $2 billion mall. Photographer: John Taggart/Bloomberg

Nordstrom Joins Manhattan Shopping Scene Amid Retail Upheaval

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Manhattan is undergoing an unprecedented shift in its shopping scene.

Gone are the gargantuan Lord & Taylor, the Henri Bendel flagship and the Saks Fifth Avenue women’s store downtown. Rising rents are pressuring iconic retailers like Barneys, which filed for bankruptcy earlier this summer. At the same time, the city is welcoming newcomers like Neiman Marcus, which opened its first New York outpost in March.

Shakeups of this magnitude are a rarity in a market where stores can stay open for more than 100 years, through every downturn and depression.

New York’s Shopping Shakeup

Square footage added and lost at all of Manhattan’s department stores
  • Net change

Now, Nordstrom becomes the latest luxury department store to try its hand at winning over New York City shoppers. This week, when it inaugurates its much-hyped mega-store in a skyscraper overlooking Central Park, it will be the biggest new retail space the city has seen in over half a century.

“Manhattan does not need another department store,” said Jamie Nordstrom, president of Nordstrom stores. “But we think they need a Nordstrom.”

The shifts in the department store landscape in Manhattan highlight both the allure and duress the island presents retailers in the age of Amazon. On a net basis, the city will lose about 322,000 square feet of department stores this year – almost the equivalent of two Walmart Supercenters – and that net loss could be higher still if Barneys gets a new owner with a slimmer footprint in mind.

Despite that, Manhattan remains the nation’s most prestigious place to sell fashion and luxury goods. For U.S. retailers, New York has long been a place to situate the crown jewel of their store networks, like Paris or London for their European counterparts. There are around 30 department stores on the island, ranging from discounter TJ Maxx to luxury emporium Bergdorf Goodman, each vying for New York’s 8.6 million residents and the 65 million tourists who visit each year. Their selling floors take up a lot of space, nearly 6 million square feet in all, about the size of 100 football fields.

The flagship stores are usually much larger than their suburban brethren found in shopping malls across the country, since they count on both locals and out-of-town visitors to provide enough foot traffic to justify their size. Some are so big that a single store can have an enormous impact on its company’s performance. The 815,000-square-foot Bloomingdale’s on 59th Street occupies a whole city block and accounts for 18% to 20% of the retailer’s annual global sales, according to a 2018 report in Women’s Wear Daily.

The granddaddy of all the flagships is Macy’s Herald Square. Though it’s less luxurious than its glitzy Fifth Avenue competitors, Macy’s dwarfs its rivals. At 2.5 million square feet, with much of that devoted to retail space, the building is 17 times larger than the J.C. Penney store in a mall across the street. Macy’s has been there since 1902, and was among the first buildings to be outfitted with a modern escalator. It was also the first in the city to hold a liquor license after Prohibition ended in 1933, and the iconic building continues to be critical to the company.

0 other Macy’s stores could fit in the 2.5 million-square-foot Macy’s Herald Square building

“Herald Square is our most productive and our most important brick-and-mortar asset in the entire chain,” Jeff Gennette, chief executive officer of Macy’s, said in an interview. “Every inch of it is highly productive. From the main floor all the way up to the top ninth floor.”

Retail is helping redraw the city’s skyline as well. Macy’s is considering adding a skyscraper atop its shopping space and executives have met with local officials to get their input. The new Neiman Marcus is inside the 750,000-square-foot Hudson Yards mall on Manhattan’s sleepy west side. Nordstrom’s store will be on the bottom levels of a 95-floor tower, billed as the tallest residential building in the world.

Manhattan Department Stores

Marshalls

Marshalls

TJ Maxx

Marshalls

MANHATTAN

TJ Maxx

Barney’s

New York

Bloomingdale’s

Marshalls

TJ Maxx

Century 21

Hammach

Schlemmer

Nordstrom

TJ Maxx

Bergdorf

Goodman

Saks Fifth

Avenue

Macy’s

Kmart

JC Penney

Neiman Marcus

Kmart

Barney’s

New York

TJ Maxx

Marshalls

TJ Maxx

Marshalls

Pearl River Mart

Bloomingdale’s

Marshalls

TJ Maxx

Saks Fifth Avenue

Leez

Century 21

Manhattan Department Stores

Marshalls

TJ Maxx

Marshalls

Marshalls

MANHATTAN

TJ Maxx

Barneys New York

Marshalls

Bloomingdale’s

Century 21

TJ Maxx

Hammacher

Schlemmer

Nordstrom

TJ Maxx

Bergdorf Goodman

Macy’s

Saks Fifth Avenue

Kmart

JC Penney

Neiman

Marcus

Kmart

Barneys

New York

TJ Maxx/Marshalls

TJ Maxx

Marshalls

Pearl River

Mart

Bloomingdale’s

Marshalls

Saks Fifth Avenue

TJ Maxx

Leez

Century 21

Meanwhile, existing stores have invested more than $500 million to revamp their Manhattan locations. Bergdorf Goodman has unveiled parts of its five-year revival plan, such as a new first floor and jewelry salon in its historic building. Bloomingdale’s is redesigning three fashion floors, the cosmetics department and the shoe area in its own multi-year renovation project. Saks Fifth Avenue is nearing the completion of a $250 million renewal, opening a redone main floor that’s meant to be a handbag shopper’s paradise and a jewelry space called “The Vault.”

This shows the newcomers are entering a cutthroat—and expensive—arena. They’ve collectively bet billions that they can win.

For Nordstrom, Manhattan represents a “long-term quest” that’s been in the works for more than 25 years, said Jamie Nordstrom. He said he scoped out space on the island with his father as far back as the mid-90s. The 118-year-old company landed on a plot near Columbus Circle and owns the building, a sign that it expects to stay for some time.

“We’re not looking to do business in New York over the next four quarters,’’ he said. “We’re looking to do business there for the next 50 to 100 years.’’

When shoppers walk into the store, they’ll see items they haven’t seen before, he added. The store will have high ceilings and lots of natural light, and will focus on apparel for women and kids. Men can walk across the street to their own store that opened last April. Nordstrom said his company’s big bet on Manhattan is backed up by the fact that the borough has been the retailer’s largest online market in the past couple of years.

Convenience will be key to Nordstrom’s strategy, with plenty of services for commuters, such as tailoring and delivery options. Restaurants and specialty coffee shops are staples throughout other Nordstrom stores from Seattle to Arlington, Va., but the Manhattan location will take those offerings to the next level. The chain has also opened two “Nordstrom Local” concept stores in Manhattan this fall that carry scant merchandise and instead offer services like styling consultations and online returns, even from rivals.

Neiman Marcus says even before it had a store in New York, it raked in about $100 million of sales per year from the city’s inhabitants and $200 million from the metropolitan area. In April, executives said the store was seeing more traffic than expected.

At Hudson Yards, Neiman Marcus is surrounded by stores such as Sephora, Cartier and Dior. The 188,000 square foot shop is filled with shoes, personal shoppers, a beauty salon, a restaurant, bar and arcade games. Geoffroy van Raemdonck, CEO of Neiman Marcus Group, calls it “retail theater.” His strategy shows how companies are calculating that they have to provide a large store packed with merchandise and amenities to lure Manhattan shoppers.

Even as excitement builds for the new entrants, there are plenty of nearby reminders of what could go wrong. On Fifth Avenue, Lord & Taylor sold its 11-floor building to WeWork and shuttered its flagship store for good in January. Signs reading “We’ll miss you Fifth Avenue” could be seen behind the glass doors. Just down the street, Henri Bendel closed its flagship (and all of its remaining shops) that same month when parent company L Brands shut down its operations. The newbies know running a department store in this environment isn’t easy.

“We’re not coming to plant the flag in New York and say we’re going to have a big store,’’ van Raemdonck said. “We’re going to New York to mature the customer relationship we have with the New Yorkers.”