It will have a casual cocktail lounge, a men’s clubhouse, a playhouse for children, an espresso bar, a full-service licensed restaurant and, oh yes, Nordstrom will also sell clothes and shoes and accessories when it opens inside its Toronto Eaton Centre location on Friday.
Launching this store at a time of turmoil in the apparel industry, the Seattle-based retailer is betting that a suite of lavish services including the restaurant and bars; a 24-hour emergency shopping service; personal stylists; and a small army of cosmetics experts will be a hit with shoppers who are proving increasingly distracted and harder to persuade when it comes to spending money on the things they wear and carry.
The new store the first Nordstrom in the GTA has been carefully laid out across 220,000 square feet on three floors at the north end of Eaton Centre, in part of a space once moored by the failed Eaton department store chain and vacated by a struggling and grateful Sears Canada in exchange for cash from mall operator Cadillac Fairview.
The space has been transformed into a fresh, bright, slate, with natural light from windows overlooking Yonge Street. It has been carefully curated with goods ranging from Nordstrom’s own private-label clothing and accessories to frothy designer creations with equally frothy price tags.
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But while Nordstrom is often cited as a luxury retailer, prices are in fact accessible to a wider range of consumers including people just joining the workforce and moms who don’t mind paying $50 for a private-label tote bag that can run into the hundreds or even thousands of dollars under a designer label.
It will be the fourth Nordstrom store to open in Canada and the second largest, after the Vancouver location. A fifth is set to open at Yorkdale on Oct. 21, and a sixth is set for Sherway Gardens in the fall of 2017. Five Nordstrom Rack locations have also been announced.
“We’re happy with the way they’re going. They’re doing well, but by no means do we think we have it all figured out,” said Todd Buntin, Nordstrom CF Eaton Centre store manager, during a media tour of the TEC store on Wednesday.
Whether Nordstrom will ultimately succeed with its model in Canada requires a longer time frame than the two years since the first store opened in Calgary, and will depend on a number of economic factors, but adding restaurants and bars to the mix is being met positively by some analysts.
“There is a tight correlation between the number of minutes or hours a consumer spends in a store and how much they buy and how loyal they are to a store,” said Merril Mascarenhas, managing partner at Arcus Consulting Group.
“People who hang around a long time actually buy stuff because they feel guilty.”
He cites Ikea as an example of a retailer that has successfully used the restaurant concept to build traffic, sales and loyalty many shoppers breakfast at Ikea and then shop, or shop and pause for a lunch of Swedish meatballs.
Perhaps ironically, offering shoppers a place where they can meet and eat and shop is a return to old “Main Street” culture, said Mascarenhas.
“Most interactions have become too transactional, whether they are in the workplace or online. Emotion has been stripped out of a lot of those transactions.” Creating a place where people can meet and interact with others brings the emotive reasons for shopping back into play.
The concept has been put to use by Restoration Hardware in the U.S., which opened a restaurant inside a Chicago store just before Christmas in 2015. Three months later, CEO Gary Friedman was able to say it was on track to becoming a $5 million a year business for the company, and more restaurant locations were being considered.
“They have this beautiful café on the ground floor with a big, open atrium. We were going to eat there at lunch and they had a three-hour wait,” said Maureen Atkinson, of J.C. Williams Group, a global retail consultancy, who visited the location.
“I was laughing because I saw these people wandering around the store with a glass of wine and the stuff is really expensive. Can you imaging getting home from your foray in the afternoon thinking: ‘Oh my god, what did I just do? I just spent a fortune on furniture.’
“For a store like Nordstrom, which is a very pleasant store to be in, it makes a lot of sense It is a trend I think we’ll see more of.”
Getting more people in the door isn’t a magic bullet. The Runnymede Chapters store was closed in 2014 even though it had become a neighbourhood meeting place, because the visits weren’t translating into enough sales to support an upcoming rent increase.
Then again, that store didn’t sell alcohol.
The latest statistics underpinning the sector aren’t all that encouraging for upscale apparel retailers.
Overall sales of women’s clothing and accessories grew by a threadbare 0.5 per cent between June 2015 and June 2016, according to Statistics Canada, while men’s clothing fell by 0.1 per cent during the same period. Footwear sales rose two percent.
Meanwhile, sales of home electronics, including cameras and computers, were up 6.5 per cent.
A recent report by Randy Harris, president of the apparel industry newsletter Trendex, concluded that department stores in Canada are continuing to lose market share and currently account for only six per cent of Canadian retail apparel sales.
Walmart was Canada’s largest retailer of apparel in 2015, according to Harris. H&M is the country’s fastest growing major apparel specialty store.
And at the higher end, while the market for personal luxury goods in Canada is in good shape, the sector found itself challenged globally in 2015 by heavy discounting at department stores, the Paris terrorist attacks, which affected tourism, and setbacks in Asian markets, according to a report by Bain & Company, issued in May.
“The luxury market is stuck in a holding pattern for the foreseeable future,” said Claudia D’Arpizio, lead author of the study, predicting continued, measured growth of 2 to 3 per cent through 2020.
Nordstrom was not unaffected by the trend, posting poor earnings after the holiday season, but an unexpected improvement in the second quarter sent its stock price soaring. Critics, however, pointed to an increase in discount sales, including sales at Nordstrom Rack stores, as an important underlying factor not a good sign for a retailer that trades in luxury.
Mascarenhas said the value of Toronto real estate will shape the future of Nordstrom and retailers like it in the GTA.
He believes that the steeply rising price of real estate has driven the economy over the past three to five years, because people feel wealthy and spend more when their home values rise, even though they may not be earning more.
“Usually there is a co-relation between the wealth effect and how well retail will do,” he said.
But the blistering pace of home price increases in the GTA is unsustainable, he believes, and Canadian consumers are carrying record loads of debt. If there’s a market correction, retail will suffer.
“I think there is going to be a big shakeout in the market. Those that have a strong reason for being and a distinct identity, which have loyal customers with good incomes who keep their jobs, will do well.”
Date: September 10, 2016