How many people noticed Nordstrom’s recent announcement that on October 3, 2017, the first Nordstrom Local will debut in Melrose Place, Los Angeles?
This may not sound like much of an event – after all, supermarket chains have always flexed formats, so it’s no great surprise that a luxury department store should try out smaller modules, allowing it to serve customers closer to their homes.
But look closer at what Nordstrom have planned and you learn that its loyal customers, hooked on a peerless brand of timeless customer service, won’t actually be able to shop at a Nordstrom Local. That’s right, this 3,000-square-foot store will offer personal styling, manicures, a tailor and a panoply of beverages including wine, craft beers, cold-pressed juices and a barista bar, but it will stock no physical merchandise. Nordstrom Local is a store without the shopping.
Nordstrom describe ‘Local’ as a “service-focused concept store” and a “neighborhood hub”, which is a brilliant idea but a move that should have the hospitality industry thinking hard about its own business model. Here’s why.
Review that list of amenities again and you’d be excused for thinking it described the lobby experience of a trendy, new lifestyle hotel concept.
For decades, hotel lobbies have served a dual role: part point of sale for its resident guests; part meeting point or neighborhood hub for transient locals. Combine the value of the non-guest spend in lobby bars, cafés, restaurants, boutiques, spas, fitness centres, meeting rooms and co-working areas, and these public spaces drive significant revenues for many operators.
In a retail environment where conventional wisdom holds that bricks and mortar is becoming obsolete, Nordstrom’s new format is an innovative commitment to a “redundant” channel. Or is it? It wasn’t the Nordstrom CEO who said, “A department store should be a social centre, not merely a place for shopping,” but rather one Harry Gordon Selfridge, speaking in 1909, when his eponymous Oxford Street store opened.
Nordstrom is not the only brand moving beyond conventional retail to enter territory that has traditionally been the preserve of hotels. Less surprising perhaps is news that Apple’s next-generation stores will be even more lobby-like than their present format. Immediately preceding its announcement of the iPhone X, Apple released fascinating detail about its own new store concept: “public spaces, complete with outdoor plazas, indoor forums and designated boardrooms for local entrepreneurs.” All of which sounds very like not only the lobby but the first floor and basement of many hotels that I know. Apple have even appropriated the “public spaces” terminology of hospitality to describe what it no longer refers to as a “store” but rather as “town squares”. Cultural agoras versus points of sale.
According to Angela Ahrendts, former CEO of Burberry and now head of Apple’s retail operations, the idea is “to create spaces where people can relax, meet up with friends, or just listen to a local artist on the weekends.” That’s a hotel, isn’t it?
Both moves, from Nordstrom and Apple, are effectively hotels without bedrooms, so where does that leave hospitality in this battleground of the public spaces?
Clearly the hotel sector enjoys a considerable advantage in the combined size of its estate – one small unit from a department store group and even Apple’s 361 global stores won’t present a significant commercial threat to hotels any time soon. But I do believe that the direction of travel indicated by their thinking presents a very real threat to conventional hotels.
Without doubt, powerful brands like Nordstrom, Apple and Samsung – whose Samsung 837, a 55,000-square-foot technology playground in New York City’s meatpacking district, doesn’t sell a single product – will fuel a wider trend within retail to make physical locations less about merchandise and more about immersive brand experiences. In that case, very quickly the exclusive – almost default – position that hotels have enjoyed as community meeting places will be under threat and could disappear overnight, particularly if hotels fail to innovate and stay competitive with these fresher offerings. Remember, Nokia and Blackberry thought they had the right to serve our mobile connectivity needs until Apple came , and pretty much overnight they were done.
Having encroached on the hotel’s public spaces, what’s to stop Nordstrom, Apple or any one of a myriad of strong brands with excellent service credentials making their next move into bedrooms? Actually, it’s been done before, and by none other than Selfridges, which ran its own branded hotel behind the Oxford Street flagship from 1972 to 2008.
If they are not vigilant and proactive, hotels may find themselves relegated again merely to bedroom factories. And when the bedroom factory model itself is under heavy fire from the disruptors like Airbnb, Homestay, HomeAway and Flipkey, will people need hotels at all a few years from now?
Hotels face the very real danger of losing their monopoly on the serviced public spaces business. If they allow that to happen and travellers become comfortable sourcing their lodging peer to peer, the whole game as we know it could be up.