Shopping Centers and Retailers and Simon Property Group and Fashion Mall at Keystone and Real Estate & Retail

Nordstrom new north-side store targets tonier shoppers

August 18, 2008

Come Sept. 19, Nordstrom Inc.'s got a brand new bag--and, well, shoes, hat and ensemble to match--as the department store opens a second Indianapolis location, in the Fashion Mall at Keystone.

Residing in Parisian's former quarters, the new store is poised to burnish the mall's reputation as the region's highest-end shopping destination--a major new draw that should benefit other tenants of the 600,000-square-foot center at Keystone at the Crossing.

"Nordstrom does well everywhere, but there's a bigger opportunity to be upscale in Indianapolis that hasn't been tapped yet," said Neil Stern, retail consultant for McMillan Doolittle in Chicago.

The mall, owned by Simon Property Group Inc., sits near some of the state's most affluent shoppers. The median annual household income in the surrounding area is $67,305, compared with just $29,413 in the area surrounding downtown. Not that Nordstrom hasn't tried the top-tier gig downtown; it just didn't take.

When Simon snagged Nordstrom as the Circle Centre anchor in 1995, it was only the store's second deal with a Midwestern city, after Minnesota's Mall of America and before Chicago. Nordstrom's arrival suggested Indianapolis was becoming a fashion-craving force to be reckoned with.

Herman Renfro, then a Simon executive who's now an independent developer, says that assumption was slightly off the mark.

"Within a couple years, Nordstrom noticed the high-end designer apparel wasn't moving, so they thinned that department significantly," he said.

Simon research during Renfro's tenure revealed that more than half of Circle Centre's business came from tourism, with the rest coming mainly from southern suburbs like Greenwood.

Renfro said this partially explains why Parisian, once an anchor at both malls, stocked its Fashion Mall store with more upscale merchandise than it did downtown.

"Circle Centre isn't penetrating those northern neighborhoods, so a Keystone Nordstrom won't hurt the downtown location, and it will help keep the north-side dollars within the market area," Renfro said.

When Indianapolis consumers resort to going to, say, Chicago to satisfy a designer-shoe hankering, real estate folks like to call the widespread phenomenon trade area leakage, something Simon has been trying to put a cork in for years.

Hence, recent Fashion Mall additions like Tiffany & Co., Crate & Barrel and Anthropologie. According to Richard Feinberg, consumer sciences and retail professor at Purdue University, a big name like Nordstrom could be the perfect sealant.

"Every retailer has a gravitational pull. The larger the planet, the stronger the pull," he said. "Nordstrom might just be big enough to tug those Chicago shoppers closer to home."

That's in addition, of course, to the drawing power of Saks Fifth Avenue, the Fashion Mall's resident anchor. Simon slid the glossy retailer into Jacobson's vacant department store spot in a 2003 coup that launched the mall's climb to alta moda status.

Since then, Parisian has been Saks' only department store competitor, if you can call it that since the two names were both owned by Saks Inc.

The common ownership ended in 2006 when another department store company, Belk Inc., bought the Parisian chain from Saks. It promptly put its Midwestern stores on the block, casting off its downtown location to Carson Pirie Scott and its Fashion Mall store to Nordstrom, which spent the past year revamping the space.

To customers, it might look as though a department store cat fight is in the offing, as Saks and Nordstrom tangle for the hearts--and wallets--of high-end shoppers. But Renfro said anchors tend to feed off, rather than on, one another.

"Some of our strongest stores are in centers with other strong tenants," said Nordstrom spokesman Michael Boyd. "It just means we have to be on top of our game even more."

Toward that end, the new Nordstrom will feature Burberry and Marc Jacobs handbag boutiques, apparel by Armani and MaxMara, plus collections by budding designers like Alexander Wang.

The new store will be about 40 percent smaller than the 216,000-square-foot Circle Centre location. Even so, it should pack the same punch, since newer Nordstrom locations feature more space for selling and less storage, Boyd said.

The new store will feature an e-bar with WiFi access, an update carried over from the downtown location, as well as a Cafe Bistro, a restaurant offering casual, sit-down dining.

Even as it courts affluent shoppers, the store will maintain Nordstrom's signature breadth of price ranges. It won't be taking a page from Saks' high-end-only strategy.

"We're looking to provide the $25 flipflop, the $200 jeans and the $2,000 handbag all in the same shopping trip," Boyd said.

Renfro said Nordstrom will help more than just its largest competitor. With no destination anchor in the west wing, shoppers have had little reason to leave Saks' side of the mall.

As the new Nordstrom draws traffic across the food-court bridge that separates the east and west wings, all the stores in between should see more business, Renfro said.

Simon hopes to build on the momentum. At last May's International Council of Shopping Centers convention in Las Vegas, it pitched plans to add 100,000 square feet of retail and restaurant space to the mall's west wing.

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