Nordstrom: Where Did All The Brands Go?

When it comes to department store wars, perception isn’t always reality. Consumers view Nordstrom as a higher-end destination retail brand and Dillard's as a middle-market player catering to the tastes of less affluent consumers.?

But when secret shoppers for SWOT Report visited both stores in the midwest, the sales manager at Nordstrom turned their nose up at Dillard's, proclaiming she never shops there because “they don’t have anything.”

When they visited Dillard's, their jaws dropped in awe at what they saw because the store carries most of the world-class brands you expect to find at Bloomingdale's.??

Absence Doesn’t Always Make The Heart Grow Fonder

Which were nowhere to be found at Nordstrom. Conspicuously absent from their shelves, they couldn’t help but wonder why none of the big brands they asked about were carried there.?

Meanwhile, Dilliard's seemed to carry all of them. From Gucci, Louis Vuitton, Chanel, Prada, Burberry, and YSL to ?Mont Blanc, Ralph Lauren, Tom Ford, and Salvatore Ferragamo, the so-called middle market retailer has lined up a constellation of the world’s most upscale brands.?

Visible Chink in Armor?

In stark contrast, Nordstrom is losing these brands to Dillard's, being reduced to a shadow of its former self. Its salespeople are visibly distressed from being forced to say no to customers who request the big names, bolting in frustration when they discover they have moved to retailers that were previously perceived as second-class citizens.?

As of April 2023, Nordstrom has a market cap of $2.60 billion.?While Dillard's is now nearly double that size at $5.35 billion, which is on the tail of Macy-owned Bloomingdales and rapidly closing the relatively narrow gap.?

In response to changing consumer demand and looming recession worries, brand executives at Nordstrom are going on record saying that they are being “more conservative” on their buys. Perhaps they are abandoning the high end of the market to occupy Dillard's previous position in the middle market.?

Approaching its merchandising with this strategic mindset is defensive and appears to be missing the mark.?

In all fairness, Department stores as a whole have suffered in recent years because of declining foot traffic to malls, higher?demand for off-price products, and the rise of e-commerce.?

That said, as of 2021, nearly 81 percent of sales are still happening in stores, and the most valuable customers who represent the lion’s share of spend are seeking their luxury brands elsewhere.?

Nordstrom and Bloomingdale's are both trying to combat the changing dynamics of the economy and consumer shopping habits by focusing on e-commerce and their off-price outlets. Still, it's unclear what the future holds for these tactics.?

Rumors of Retail’s Demise Are Highly Exaggerated

Both Nordstrom and Bloomingdale's have been trying to combat the decline of department stores as a retail model by revamping their online strategies and offering perks like free returns and in-store pickup of online orders. But if they don’t carry the brands that affluent consumers demand, they miss the market segment flying above any recessionary pressure.?

With Dillard’s national footprint of 282 stores in 29 states, the upscale strategy is crushing Nordstrom by sweeping the best brands off the table and growing much more robustly.?

Although Nordstrom has 345 stores, its footprint is heavily concentrated in California, with 83 retail stores, which is a quarter of all Nordstrom retail stores in the United States. In contrast, Dillard’s has wider distribution for its now more upscale offerings.?

Its revenue increased 44.5% year-over-year to $1.48 billion for the fiscal third quarter, which ended Oct. 30, 2021.?

The Numbers Don’t Lie

The company’s net income grew 518.5% year-over-year to $197.30 million. Also, its earnings per share came in at $9.81, up 586% year-over-year. At a hefty $307.68, Its share price towers over Nordstrom which is stuck in a much lower trading range below $20 per share.?

Dillard’s is poised to capitalize on its momentum with its upscale strategy. But perceptions that it is still a middle-market retailer cast a long shadow over its brand.?

Strike While The Iron’s Hot

Now is the time to leverage its wealth to launch a $500 million advertising campaign rather than the $100 million it currently spends on digital and print advertising.?

Since the messaging would be about its unmatched collection of the most respected brands in retail and fashion, including highly coveted vintage items, it would be able to offload much of the cost to the brands themselves via coop advertising, changing consumer perception in the process.?

By relying solely on word of mouth, the emerging juggernaut could stunt its growth, giving Nordstrom time to work out deals with the big brands with a superior distribution and marketing value proposition.?

Executive leaders would be wise to shut down the opportunity to counter their position, especially if the country is thrust into a recession when media companies are hurting for ad dollars and selling exposure for 50 cents on the dollar.?

At the same time, if their rivals run for the hills and bunker down, Dillard's will be in a position to rapidly shift perception for a fraction of the cost and win market share when the market rebounds, especially in New York City, where it has no presence.?

Andrew Ellenberg is the President & Managing Partner Of Rise Integrated, an innovative studio that creates, produces, and distributes original multimedia content across digital touchpoints. If you want to submit story ideas or ask about custom multimedia publishing, please call 816-506-1257. Read more of his work in Forbes.