Nordstrom is dipping a toe back into San Francisco's retail market two years after the retail chain shuttered its flagship store in the city’s struggling downtown mall, as well as a Nordstrom Rack store on Market Street.
At the time of the closures, the company cited deteriorating “dynamics of the downtown San Francisco market,” which was then plagued by concerns about rampant crime and street disorder.
As San Francisco enjoys a renaissance thanks to the artificial intelligence boom, the firm will open a Nordstrom Local store — where customers can try on or pick up online orders, make returns or get clothing alterations — this week at 1919 Fillmore St. in Pacific Heights.
“We’ve heard from our customers in the area that they want services such as online order pickup, returns and alterations closer to where they live and work,” Nordstrom President Fanya Chandler said in a statement.
The opening of the 1,750-square-foot outlet marks the introduction of the chain’s fun-size neighborhood retail concept in Northern California. Nordstrom launched its first Local store in West Hollywood in 2017 and has since opened a handful more in Los Angeles and New York.
The merchandise-free Nordstrom Local model takes a page from direct-to-consumer clothing brands like Bonobos, but it also harks back to the customer service ethos at the root of the Nordstrom brand, which aims to leave customers with a positive impression. The first Nordstrom Local store even offered manicures.
No 'formula retail'
The store in San Francisco’s tony Pacific Heights, a neighborhood of 19th-century Edwardian mansions and sweeping bay views, will offer local styling and gift wrapping. The idea is to use experiential retail to generate goodwill in urban neighborhoods.
The store won approval from the city’s Planning Commission in June, despite pushback from a handful of locals who tried to block the Nordstrom Local store from opening on Fillmore Street.
Those residents leaned on city restrictions on “formula retail,” rules that aim to stop corporate chains from dominating the city’s retail makeup. The neighbors objected that the new store would cause traffic congestion and parking problems. They further argued that it wouldn’t increase foot traffic like another small business would, given that the Nordstrom Local wouldn’t carry merchandise.
The space had been empty, aside from a temporary tenant, since the Minted stationery store closed early in the pandemic.
Nordstrom says it will offer validated parking at a nearby garage and sell the work of local artists. It will also accept used clothing donations to be passed on to a charity for needy families.
Retail exodus
Nordstrom’s exit from downtown San Francisco two years ago spelled the beginning of the end for the city’s largest mall, setting off an exodus of stores and prompting then-owners Unibail-Rodamco-Westfield and Brookfield Properties to walk away from the property. The nine-story San Francisco Centre is now 93% vacant and awaiting the outcome of a long-postponed foreclosure auction.
Since early 2023, the Seattle-based retail chain has closed some 17 stores in high-profile locations such as downtown San Francisco, blaming theft and declining shopper traffic for declining profits. The retail industry faces a challenging economy and shifting consumer behavior that has led to the nation’s highest level of store closings since the onset of the pandemic.
With a number of traditional retail chains downsizing formats and closing stores during the past decade, property owners across the nation are now counting on non-shopping, experience-focused tenants to fill space and increase customer traffic.
In a sign of shifting retail trends, Nordstrom's replacement in St. Louis will be Dick's House of Sport, a new experiential retail concept by the Dick’s Sporting Goods chain that has activities such as indoor climbing walls, golf simulation booths and batting cages, mall owner Brookfield told media outlets.
Even as Nordstrom has closed department stores, the retailer has opened dozens of discount Nordstrom Rack locations to capitalize on growing demand by price-conscious shoppers stung by years of rising interest rates and inflationary pressures.
Despite retailers' concerns over tariffs, a cooling labor market and rising occupancy costs, demand for store space remains robust, wrote CoStar National Director of U.S. Retail Analytics Brandon Svec.