Nordstrom to Fill Mall Anchor Vacuum

Discussion
Aug 15, 2005
George Anderson

By George Anderson

He probably didn’t realize it more than 2,300 years ago when he said, “Nature abhors a vacuum,” but Aristotle could just has well have been speaking about the retailing business.

Federated Department Stores’ announcement earlier in the month that it would close 68 mall locations is prompting speculation on which stores will move in to fill the vacated
locations and which businesses stand to benefit from Federated’s integration of the May Department Store chain into its business.

A report in the Cincinnati Business Courier says Nordstrom is a likely beneficiary for two reasons: 1) It will probably see increased traffic in stores that it presently operates that are near the closing locations and 2) it will have the opportunity to open new stores in prime real estate vacated by Federated.

Nordstrom currently has 12 stores in malls where Federated has announced its intention to leave. That means Nordstrom has 56 potential anchor locations to bid on.

Neely Tamminga, senior research analyst for Piper Jaffrey, said that moving into an existing anchor and remodeling could cut the amount of time Norstrom requires to open a new store in half.

Nordstrom’s chief financial officer Mike Koppel indicated the chain was looking at opportunities to expand made possible by the Federated/May merger.

Two markets that are thought to be likely targets for Nordstrom are Boston and Pittsburgh. According to the Cincinnati Business Courier piece, Nordstrom has its first store opening planned for Massachusetts in the Boston suburb of West Natick. The location is due to open in 2007.

Moderator’s Comment: What opportunity does the Federated/May merger provide to Nordstrom? Aside from Federated itself, which retail chain stands to benefit
the most from the Federated/May merger?

George Anderson – Moderator

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6 Comments on "Nordstrom to Fill Mall Anchor Vacuum"


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Robert Craycraft
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Robert Craycraft
15 years 6 months ago

With the exception of Marshall Field’s or Lord & Taylor, no former Macy’s or May Company regional chain customer is going to move to Nordstrom. They are the only two brands with any equity left in them in the May stable, Field’s in its current state and Lord & Taylor at least possible to revive. In our market (Washington, D.C.), I would expect a lost L&T/Macy’s/Hecht’s customer to move to Penney’s or Kohl’s, if she stayed with any department store at all.

Al McClain
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Al McClain
15 years 6 months ago

The fact that no chain is likely to pick up even a very large fraction of these locations indicates the lack of viability of the channel as a whole. Nordstrom would be unlikely to pick up more than a handful of these, as their customers are more upscale, and upscale shoppers are more likely than the average shopper to prefer stand alone locations, rather than having to wade through the chotchsky stores at the mall.

George Whalin
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George Whalin
15 years 6 months ago

I agree with Dan. Nordstrom’s approach to growth has generally been slow and steady. They will likely take this same approach as the closed May/Macy’s stores become available. Other likely candidates for some of these locations will include Target and Wal-Mart as well as other retailers like Kohl’s and Mervyn’s.

Those who will benefit most from all of this will be mall management companies and consumers. Many of the department store anchors, including May Co. and Macy’s stores, have done little in recent years to bring more customers into malls or provide a compelling shopping experience. It’s time for meaningful change in the mall and this could prove to be the catalyst.

Joseph Peter
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Joseph Peter
15 years 6 months ago

NBC 5, the local NBC TV station, did a survey recently and asked customers if they would shop at Marshall Field’s if Federated changed the name or would jump ship to Nordstrom. At least 80% of the Chicagoans polled said they would go to Nordstrom.

Goodbye Marshall Field’s…..Macy’s will have plenty of surplus sales here in Chicago when they sell off all the Field’s property.

Mark Lilien
Guest
15 years 6 months ago

A few days ago, RetailWire had a story about the largest Whole Foods, to be built in Paramus. That store, plus a Target, is going into a Macy’s location closed a few weeks ago.

The May/Federated merger will create opportunities for more Targets, Whole Foods (if they have direct entrances to the parking lot), Kohl’s, Staples, DSW’s, Home Depot, Lowe’s, big boxes of every type that cater to the middle and upper classes. In some cases, the closed-down locations will be converted to a mix of big box and small box. Certainly the locations don’t have to be department stores.

Don Delzell
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Don Delzell
15 years 6 months ago

Nordstrom went through a rapid expansion phase in the recent past (well, rapid for them). In doing so, they discovered very important facts about the necessary population density of their target consumer in the surrounding area. Because of this, I believe that Nordstrom will move carefully, and with a great deal of due diligence before expanding substantially.

Rapid expansion forced Nordstrom to try to compete with Macy’s, rather than its traditional rivals of Sak’s, Neiman’s and so forth.

The major beneficiaries of the glut of available anchors are more likely to be regional department stores and national chains. Without looking at the exact locations available, I cannot say which is most likely to react. Best positioned include Kohl’s, JCP (remember the very aggressive growth plan outlined by the incoming CEO?), and perhaps even Target (recall the move to mall-type locations, with multi-level formats?).

Any niche specific retailer must be extremely careful to maintain the integrity of their site selection processes in the face of what appears to be opportunity.

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