Nordstrom's Twilight Signals Mass Move to Recovery

(MoneyWatch)  Department store retail will never be the same again as Nordstrom and other luxury operators respond to the recession by launching mass-market style programs they might never have considered prior.

The department store world is changing and in more ways than one. While Macy's has adopted mass-market oriented brands such as Martha Stewart, J.C. Penney has taken its populist approach beyond its mass-market niche to become a more direct competitor of department store retailers. Yet, in one of the more interesting turns, glamorous Nordstrom has been particularly intent on using the kind of mass-market strategies employed by Walmart, TJX and others to win new customers and maintain existing ones.

One group Nordstrom has targeted with its new tactics is younger consumers. To that end, Nordstrom is working with Summit Entertainment in promotions around the launch of the new Twilight movie, offering fans a chance to meet cast members from Nov. 5 to 14 during appearances in stores from California to Massachusetts. The events not only support the movie release but also an exclusive recently released Nordstrom clothing and jewelry collection inspired by the film.

Nordstrom also is using the occasion to promote its website, where Twilight fans can find information about how to become one of 75 customers who will meet select cast members. Naturally enough, given the subject matter of the film. Nordstrom will related that information starting on Halloween.

There was a time when Nordstrom would have gone quite a ways to avoid comparison to a discount store, but Walmart ran a major promotion, including a microsite on line, in support of the original Twilight story's DVD release just a few months ago, and mass-market specialist Hot Topic is in on the latest Twilight-related promotions.

Hit hard by the recession, Nordstrom is among those retailers that have experienced better sales trends lately. In September, it reported a decrease in comparable-store sales, those in stores open for at least a year, of just over two percent, an improvement on the quarter to date, which has experienced an almost five-percent decrease, and year to date, which has suffered a 10-percent decrease.

Still, it has been doing better than many of its luxury retail competitors. In contrast to Nordstrom's result, department store rival Saks saw an almost 16 percent comp decline in the latest quarter.

Taking a page out of the mass-market handbook has, it seems, buoyed Nordstrom in the recession, and not just promotionally but in terms of bricks and mortar as well.

In fact, the company just announced it would open a 34,000-square-foot Nordstrom Rack, store in the vicinity of Pentagon City in Arlington, Va., for fall 2010 opening. It will be the closest Nordstrom Rack to downtown Washington D.C.

Nordstrom Rack is an offpricer similar to TJX's T.J. Maxx stores, in this case selling excess department store inventory ?€" and some developed for the store based on department store fashions ?€" at considerably lower prices than might be found at its sibling operation. Nordstrom has continued to open department stores in the recession, with a 138,000-square-foot full-line location opening during the current third quarter in Cincinnati. In contrast, however, it will open six Rack outlets in Minnesota, Texas and California in the same fiscal period.

Rack stores, which are a lot more affordable for middle-class consumers, have returned comparable store sales improvement in the recession, coming in at just under one percent in the second quarter compared with a comp decrease of just over 12 percent at the department stores. Overall, comps were down just under 10 percent.

Clearly, in looking at the economy, Nordstrom management has determined that it needs to plan for a future where it can get its share of the next consumer generation and better balance its overall business proposition by appealing to a wider demographic range. If wallowing in pop culture and churning out discount merchandise are the price it has to pay, then so be it. As the Macy's and J.C. Penney examples further indicate, the department store sector hasn't been capable of remaining aloof from the mass market in the recession and will have a have a hard time doing so even after as elite stores and even fashion designers take a broader approach to win sales from consumers who have grown more tightfisted.