Businessweek Talks with Erik Nordstrom

on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. The luxury department store chain Nordstrom. It has been around for more than a hundred years, a hundred and eighteen to be exact, expanding through the US UH and throughout North America, and until this week, did not have a store in what is really the

department store capital of the world. We're talking about New York City, so joining us to talk about that and more. Eric Nordstrom, he's co president of Nordstrom. Thank you so much for doing this with us and really appreciate it. We'll talk to us about the opening. I mean, New York has been here for a long time. Why did it take so long to open such a presence or

big presence here. Well, it wasn't from a lack of effort. Really, It's the only subject I can think of that has spanned literally generations for our company, my dad's Uh we opened our men's store last year. I asked him, was the first time he came New York about about having a store. He paused, and he said, it's right when I first became president company. It's thirty five. Well he's

eighty six now, so it's a long time. The biggest challenge, I mean, certainly location obviously to have a retail store locations. He said to me that you guys even looked at the location that is our building headquarters. Yes, you know Alexanders used to be here, and uh, I know my dad and my uncle's made a run at it and then but Bloomberg outbid us. So if we didn't get this one had a couple others actually signed deals that you know, there's a complexity to doing a big open project,

and they fell through. Um. But the big challenge, even more so than location, was the right space, uh, you know for what we do. Uh, and and knowing if we were to come here we had to be our very very best. Uh. And so that the space is super important for us to have high ceilings, big open space where customers can easily navigate and and uh find what they're looking for, discover new fashion. Um. And most buildings are office buildings, there are low ceilings and elevators

in the middle. So it this area and not only came up that we really like being a little oriented towards the west side, but being able to start from the from the ground and build the building that we want. Uh. Really what tipped us over and certainly accessible from both the east and west side uptown downtown. In terms of kind of a central location. Sure, yeah, I look for things. You know, there's three constituencies. Uh. Certainly started and really

end with locals people who live here. How how are we a part of the city, a part of the neighborhood, uh says location thing we think does that? Uh? There's obviously how people commuted intto work, and so the subway stops. The transportation is important. Uh. Then there's visitors. You know, New York such a great international destination, and to be close to the biggest tourist attraction in New York, Central Park and Columbus Circle there we felt really good about.

I gotta talk to you about the environment. Eric. I know you read the headlines. You fall obviously your space, But I mean I think about Lord and Taylor closing, Sacks closing a downtown location, Bendel's closing, Barney's going into bankruptcy. I mean, I think some people would say, wait, why are you doing this? Why you know, how does that or how has that factored in in terms of some

of the closings and what you folks wanted to do. Well, Yeah, there's certainly our industry, like a lot of industries, going through tremendous change, and uh, but it's actually not that much change. It's it's you know, people's shops as they want to shop. I certainly believe that customers are more empowered than ever before, less only to compromise any of their experience with shopping, including in that and uh, you know, in our industry, we talked about things like omni channel

and you guys hate that from what I've read. Yeah, I talked to customers every day. Uh, and I've never had a customer used to work channel with me. It's not that they think they just want great experiences, and uh, the reality is, if you are to force a definition channel, the vast majority of the categories we sell are bought in stores, but much more accurately is uh, people are on their phones and they're in physical locations, and they want it. Wouldn't they want it? They want it on

their terms. And uh, certainly New York is uh, you know, the greatest retail center, certainly in our country and maybe in the world. And uh, you know, for us to be a leader in our industry, and we've been at this a long time, and we've been a national company for a long time. But but to really be the leader that we think we can be, we have to have our best presence in New York. But I do think people think, Okay, so how will nord Strem be different?

Then maybe some of the troubles that a Lord and Taylor fell into or I'm not saying you guys are apples to apples, or you know, sex closing downtown or Bindl's, like, how will it be different for you? Well, there's all there's a lot of success stories out there. If you've expand the definition of retail, a lot of categories which we can get into. But there's a lot of UH stores and retailers that I would admire. Uh, but again, we've always been will served focused on focusing on the customer.

You know, we've we started as a shoe store over a hundred years ago. I grew up selling shoes and one of the things about selling shoes is you are literally on your hands and knees in front of the customer trying to take care of them. Uh. And that Uh, it's a good metafit for for for how we try to continue to run the business and if we focus on the customer and and certainly the customer wants things that are different and building a new physical store today

gives us some advantages. We have technology built into the store, WiFi, cell service, connect that connectivity so customers can be on their phone, and a lot of product discovery for what we sell fashion begins online and we know that over half of our store sales involved a visit to our website, usually on someone's phone. So Uh, there's a lot of features we can build there and the architecture of the place. It's very different historically, and we've we have fallen this

over the years. Historically, retail, especially mall based retail has been very inwardly focused, almost like a fortress. You enter a different environment and it's cut off from the rest, shield off from the rest. Uh. We want to do just the opposite. And keeping with that, I mean, you guys are incorporating food and I'm curious, right, you can be shopping, you can order some food. It's delivered to

you on a nice plate. Yeah, food or drenk Yes. Uh. Is that going to become kind of a significant separate revenue line for you guys, But it's not so much about a revenue line, it is. Uh. One of things we've really learned as we continue to get better information is the importance of engagement, just experiences. Whether there's a sale made explicitly in that engagement or not, isn't so much at the point. The point is the more we can engage customers, and food and drink is part of

that essentially. Well, No, we keep in there even if they don't spend that time. I love it because I think about what I'm shopping in and get hungry and then I leave and then I don't go back. Yeah, we don't like that. That's but there is there is that part, But there's also you know, even if people don't spend in that time, the more we can engage somewhere where it's just it's a it's an under piece of engagement. People come back more often digitally in physical locations,

the more we can engage them. And food is such ah, you know, it's such a century experience, often more so than a lot of other other experiences. It really is important tell us about how important this store in New York will be to North term overall in terms of sale because typically are a lot of times you see with these big chains or department store and the high end that the flagship in New York is typically a big driver in terms of revenues. Will this be your

number one driver of revenues? Will certainly be our biggest store, absolutely, they will be our biggest volume store by a healthy march, And it won't be as big a percentage of our revenue as it is mostly other competitors we have there. We're a bigger company that way, So um, it's not it's not gonna be the biggest driver in terms of revenues. We would be the biggest single revenue store we have, Yes, but we have stores, so it's you know, It's not

company's revenue by any means. It's a but as important it is the most important thing we've done, the visibility of being in New York and certainly that was our goal. We we didn't aim to open another Nordstrom store. We aim to build really a world class flakeship store. Our team spent several years scouring the world and really trying to pull out those elements through and drinks one of them.

Uh that you know what makes these these world class flameship stores that are really become, uh, these these integral parts of the city of urban life. And that's that's been our goal, a destination for locals. And um, I am curious to about the holidays, have you guys? I mean, your timing is impeccable. As we're all gearing up for the holidays, what are your expectations for fourth quarter? What about what? Well, I would say it's you know, it's

a challenging environment out there. I think there's some some reasons to be optimistic for holiday and I've seen some numbers that that we expected to be maybe a little bit higher than what we've seen in I've seen that too. US retailers. We tend to be optimistic, but uh, yeah,

I think there's reasons for the optimistic for holiday. Tell me about the consumer overall, because I love talking to folks like you, because I think we're at this time where we're trying to figure out is the expansion getting old? The big macro stories continue to bother us, whether it's trade, whether it's Brexit and so and so forth. Um, how do you see the qus consumer right now? And I know your higher end, but still, oh sure we are pretty broad range. It's uh, we really know. We talked

about carrying from Vans to Valentino. I mean that that is a key part of what we do is having a breadth of merchandise. And really I think that's how a modern customer shops stay. That customers doesn't buy one brand and stick to it or even one price point. There's a mix and matching that people put together. That's that's part of fashion, that's part of the interest of expressing who you are. Uh. That the health of the

customer is is good. Uh, but what we focus on it's much more about what we do or you were not an industry where you know there's this massive market share and really any movement has to be at a market level. Uh, there's plenty of places to buy shoes and clothes. Our success is much more on what we do. Well. That's interesting that you say that, because when you look at some of the retailers that have had problems, I mean, I really do feel like if you shop at North

Tom you know exactly what you're getting. The brand is very clear, the identity in terms of the store and the stores and those that don't do it. Yeah, well, well listen, I got all the fall out that we've seen in retail. Are we overstored? Yeah, sure we're overstored. There's uh, that's not big news flash that America has two many malls to many stores. Um and and when you have a shift to go online, people are online more. Now. Are there gonna be no stores? Well, of course not.

There's there's there's times where especially we sell people like to touch feels, the sizes. You're saying that our our online returns, the vast, vast majority customers choose to come in a store. Do it. We have free shipping around our online returns, but they'd rather come a store. It's just easier than putting it in a box. So customers are going to do what they want to do. Our job is not to try to course them into a

channel or a certain experience. That what we prefer. Our options, our challenges to give them options and let them do what they want to do. You guys definitely do give them options. And I want to talk a little about nords to local, which I find is a fascinating concept. Um. And I think we reported this past fall that you guys are also going to accept merchandise returns from rivals. Is that right? Yeah, yeah, we do. It's why it's not that big deal. It doesn't call that no, it's

basically we're a hub for ups. We can if that helps a customer, for us to take it and get sales out of that as well. We get also traffic. Traffic is good, interactions good by any measure. And um, these local service hubs have really been a real interesting and we think an important part of our future. It's uh, and it really is looking at what are the assets

that we can bring where customers live to serve them better. Uh. Certainly we have stores, but uh sometimes you know, getting in the car and go into the mall, is it's not the most convenient. I think one of the interesting things we've we've learned from these service hubs, like tailoring. It's yeah, so we are we don't Yeah, we don't

stock Marshy Center. But it's uh, it's services. So it's being able to do returns, merchandise pick up by online, pick up in the store, alterations, Uh, styling help our stylists can meet their customers. They're they're doing well, really well. And one of interesting things there's all source things and you know, customers they're spending this more than doubles when they when they interact with us in one of the

local stores. Uh. I think one of the interesting little effects there is is, uh we get returns back faster. And now that may not seem like a big deal, but part of selling fashion, especially online, returns our our effect of life and what we sell. Uh, it's not wine. It doesn't get better with age. There is a pershability to it. So getting it back faster is good for us,

certainly for our model. Uh, but it reflects that when we're here from customers is yeah, I've had this return to my trunk and I'm waiting to go to the mall and if I can do it more more conveniently. Uh. So it is serving customers in our terms. And we piloted these stores in Los Angeles and we opened to here in New York last month and it's been a bit of a were in we're in Los Angeles. Communicating to customers what it was took a little bit. Uh here rap the boat. People get it, and I think

it's understandable. And if you live in Manhattan, you know blocks matter. You're not you don't have your suv pullm up to a big parking lot. So but to be able to do and alterations or a return or in order pick up in your neighborhood on your terms, uh, is appealing and we're able to do it. Not all these these local service ubs are rack stores. We can do a lot of these services in our rack stores. We have a trunk club clubhouse here in Manhattan. So we really look at not just opening a store here

this week. We can it's how can we leverage these assets. We have physical assets to serve customers better. Well, what I do think, And it's funny. We were talking about actually in our makeup room this morning, about that there's not a lot of service out there when you go to retail. So I think, you know, you guys are

certainly um, really honing in on it. But so what I want to know is you've got the big North department stores, You've got Nords to local, you've got discount right, You've got um, you know, various ways of interacting with the consumer online of course e commerce. What's the makeup I don't know in three years from now in terms of what's the biggest driver. I mean, e commerce has been growing, that's for you. Are e conmerces about three percent of our business, which was bigger chunk than uh

some of our more direct competitors. We've been at it for a long time. We've been an e commerce over twenty years. Uh. You know, I kind of cringe. You get these questions out what are you see in three to five years? Um, no one knows. I mean, someone to come on here and say they know what's going to happen three years I would challenge them on that. So all of that then going to continue to be

an important Yeah. I think the point is, uh, the challenges to be nimble is to be actual and how do you have a platform uh capabilities that you can pivot to go where the customers going so to have for us, there really is a synergy to having a full price business and off price business e commerce and physical stores. UH. And to your point, physical stores have some some different elements to them. What's the right NIX the right makes those ingredients to to take care of customers.

I think that will different different store by store, but a couple of UH general area is that I do believe it's heading in. You know, I've talked about engagements important. How can we engage with customers across channels and services, uh to make their lives easier and better. UH. The other is inventory. It's what we sell. It's not commodities.

We don't have hundreds deep in the exact same thing. UH. There's a broad breadth and it can be pretty shallow, especially when you get down to size and color and our inventory, a lot of it sits in stores which is close to our customers and being able to connect the customer with the exact size and color they want.

By moving the mergation around in the market, which we continue to add capabilities to and the locals are those stores are part of it, UH, we can bring a much bigger selection to customers that can be available even same day and next day. Uh. Really more than anyone else can do it, because we have this inventory in our stores right right, and so customers can get it when they want it. I want to ask you a couple of questions if I may, um, the toughest long

term strategy decision that you're working on right now. I know you hate long term. I don't hate locked term, but it is to be more prepared for the long term. UM. Well, I think we have. You know, so much of our our focus uh has been on and big investment has been in opening New York. Uh, And so what what comes after that? Uh? You know, for us, most most of our investments after we get New York open is

in technology and supply chain. Uh. There's a lot of technology and supply change, and that the supply chain cap abilities to unlock uh that inventory to be productive and get customers really what they want in uh in a lot of speed. UH. Take some continued investment there. And that's probably the biggest challenge. Trade war is impacting you that much? Yeah, all right, what's um the biggest existential threat to your company or industry of Well, I don't know,

I mean, I don't think these things will happen. But I think I think if if if people all of a sudden, Yeah, I just looked at that clothing and shoes and accessories as commodities. It's just body covering and they didn't care what the brand is. And it's uh, yeah, that we wouldn't survive that. That's not our deal. We have to be a place that where people are just in finding something new that's interesting to them. Shoes will never be a commodity and don't laying it. I don't

think so. Um. What competitive do you most admire and why there's a lot of retailers that admire. Uh. I think Target is a trific job home depot Um. I think Walmart for a big, incredibly big retailer for some of the big bets they made and the things they have changed. Best Buy is something they've done and a lot of them. There's there's some common threads there of connecting the digital and physical experiences, leveraging the inventory that's

in their stores. Um, and uh on top of that, for us, we'd layer again that the importance of people and kind of genuine human interaction and an authenticity there. But those are something people I think do a great job. I got to ask you this because I can't imagine you because of your last name and your family and multigenerational. Um. But if you weren't doing what you're doing, I know you've been doing it for a long time. He started when you were younger and Star Wars twelve. What else

might you be doing? Uh? Well, it certainly wasn't as a teenage boy, it wasn't my dream too. Uh Yeah, I grew up in women shoes, selling stocking and selling women shoes. It wasn't that I had a passion for a woman's foot where I would have rather been a basketball player. But I certainly have a high I had, but I don't have the jumping for that. So when that ended, UM, I don't know. I mean really uh,

in all genuine as it's uh. I've always enjoyed uh work with my family and my brothers were been very close are all our lives and uh um. But mostly what I've I've liked is, uh, it's a team. Uh. You know. It was part of the shoe team. And part of shoes is you got the stock room in the back room that you have to get the merchandise for the customers just wondered what goes on behind there. It's it's fascinating, but there's a camaraderie there and and always like being a part of a team. Uh and

and that's all we have in our company. I mean, it's a big team, but it is, it is, it's you know, it's just that you know, our store this morning and uh, you know, our teams all fired up to open tomorrow. And and it's just feel very fortunate to have these people who are so passionate and their terrific pull on that they've they're on the front line. Yeah, and that they made a decision to hitch their wagon to us and be part of this thing is not

something to take lightly. So I don't know what else are you doing, but it would be part of being a team. Well, great to hear, and thank you so much. And it's been a busy week. Congratulations on the store. Thank you appreciate. Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio