Discount concept to follow Nordstrom into new markets - Offspring 'Rack' now off-price chain

Discount Concept to Follow Nordstrom into New Markets

Nordstrom--the department store-sized apparel specialty chain noted for its well-merchandised stores and attentive sales help--expects to expand its Nordstrom Rack discount operation as it opens full-price stores in a number of new markets.

Started in the basement of a downtown Seattle Nordstrom in 1971, the Racks were rolled out as separate outlets in the early 80's. There are now 11 Rack stores, said Jack McMillan, exec vp, women's apparel, Rack stores and Place Two (a down-sized version of the full-line Nordstrom).

While first created to "clear the merchandise out of our full-line stores,' the Racks now also operate as an off-price chain, according to McMillan. And although the Rack was born out of necessity for Nordstrom's way of doing business, McMillan said "we can do it [run an off-pricer] as well as anybody.'

According to McMillan, the Rack stores' merchandise is a 50/50 ratio between former Nordstrom apparel and shoes, and goods bought directly for Rack from vendors.

A sign greeting customers at one store explained the Rack concept as: "Merchandise from Nordstrom stores and additional merchandise from regular vendors offered at 30 [percent] to 70 percent savings.'

Women's apparel accounts for approximately one half of the store, while women's shoes, children's apparel, and men's apparel and shoes make up the remainder.

When in pursuit of the off-price, non-Nordstrom direct merchandise, the Rack stores operate "the same as any other buying team,' explained Michael Dench, corporate merchandise manager for Rack apparel.

Currently there are three Rack stores in Seattle, two in Portland, Ore., and six in California, while the company operates 47 other stores including the full-line Nordstroms, a shoe store and Place Two stores. McMillan said the Rack stores typically draw merchandise from approximately three area full-line stores.

The first East Coast Nordstrom store will open next March in McLean, Va., followed by a second Washington, D.C., area store in spring 1989. The company's expansion plans call for seven more full-line stores in the near fulture. Expansion of the Rack stores will follow the regular stores' growth, Dench said.

Dench said the Rack stores are "as current as any off-price operation' by bringing in brand name merchandise. He said the stores' inventory turns average a little more than three per year.

In addition to bringing in well-rounded merchandise in terms of selection, the Rack buyers also look to fill out the stock they receive from the full-line Nordstrom stores, Dench said. Additionally, items like men's white dress shirts or socks are also purchased off-price since these items are rarely marked down at the full-line stores.

Twice a year--typically in January/February and August /September--Dench said the Rack stores get major shipments from the regular Nordstrom stores, but he noted, some merchandise continues to flow year-round. Although some of the merchandise is warehoused, Dench said the chain is trying to cut back on this, while working to increase inventory turns.

Rack buyers have some negotiating power when bringing in the full-line merchandise, but they have to devote a certain percentage of their open-to-buys to the regular store merchandise. "We'll never turn merchandise away from the main store, but we will determine the price,' Dench explained.

As the Rack division has grown, the stores have been altered through the years in order to maximize the concept and keep up with the industry.

"It was very obvious to us once we saw different series of stores, that we need to make some changes,' McMillan said.

Earlier Rack stores resembled their basement beginnings, McMillan said, but now they are designed in a more high-tech warehouse format. Black rubber flooring aisle ways, gray carpet, open ceilings, industrial lighting, and red and black accents are now featured in the Rack stores.

The store sizes have also increased through the years, with the newly-built locations averaging 30,000 square feet.

Nordstrom Rack stores do little advertising beyond a grand opening occasion, relying instead on the Nordstrom name to draw in traffic, McMillan said. This approach apparently works, as was evidenced in August when the company's latest Rack opened in Colma, Calif., just south of San Francisco.

Crowds eagerly packed the store, and according to Colma store manager Jeff Moseley, the Rack drew in people from the entire Bay Area.

Although the sales help at the Racks are not as attentive as they are at the regular Nordstroms--where service is overwhelming--Dench said most "customers realize the values we're offering them.'

Photo: Women's apparel accounts for approximately one half of the merchandise mix at the discount-oriented Rack stores, while women's shoes, children's apparel, and men's apparel and shoes make up the remainder.

Photo: Rack stores receive major shipments twice a year from regular Nordstrom stores, adding brand name and off-price items for a well-rounded mix. Turns average over three per year.

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