Nordstrom Puts Off Decision Until 2020

The battle between Visalia and Fresno over which city will win the anticipated Nordstrom distribution center came to an anti-climatic end as Nordstrom put off its decision until 2020. A letter from Nordstrom to Visalia Mayor Steve Nelson and Visalia City Manager Mike Olmos said:

“I want to thank you for working so closely with Nordstrom over the past year as we considered a new fulfillment center on the west coast. Last year we met with Mike on site and we are truly grateful [sic] for the time and attention you dedicated to make the process as productive as possible.

Since our teams first met a year ago, the pace of change in retail has continued to increase. What’s most important to us is to evolve our business to best serve our customers. We will continue to invest across our business to competitively position us for long-term success and to deliver the products and experiences customers want.

While we feel confident that a west coast fulfillment center will continue to be a part of our longer-term plan, as we look at the broader needs of our business in the current environment we have re-evaluated the timing of this potential project. We now anticipate that an opening would likely not occur before 2020.”

The letter to the city was sent by Erik Nordstrom, one of three brothers who act as co-president of the high-end department store. One of Nordstrom’s main concerns with the company is Nordstrom.com, as e-commerce now represents 20% of the company’s sales, up from 8% just five years ago.

The decision to delay came after a February conference call with investors that said, according to The Business Journal, “the current retail environment requires us to pivot even more as we remain focused on improving profitability. In response, we are making adjustments to reduce expense and capital spending in 2016 and in the coming years.”

Nordstrom, along with other major U.S. retailers, reported disappointing first quarter results. The company also announced layoffs in late April of approximately 400 employees at its corporate headquarters. The current economic conditions do not make 2016 the best time for the one of the country’s largest luxury retailers to be building a new on-line distribution center.

Nordstrom’s numbers contrast with the announcement that Amazon plans to open two new warehouses in California, bringing their total to nine in the state. According to The Business Journal, retailers are “suddenly scrambling to find new and more effective strategies to compete with Amazon, which in the past year has gobbled up more and more market share across the entire retail spectrum.”

The decision comes on the heels of Nordstrom’s receiving $11 million in tax credits from California Competes Tax Credit Committee if they built their distribution center in California. According to Cal Competes, Nordstrom would lose the incentives if they decided to build in another state. The company will presumably have to reapply for the tax credits if they decide in the future to build in California.

“We have been working with Nordstrom’s site selection team for over a year now and we understand their caution in the timing of this fulfillment center. Nordstrom has important decisions to make considering their long-term view of their evolving market, and we look forward to continuing the conversation whenever they’re ready,” Olmos said in response to the news.

“Visalia has the real estate, the workforce, a streamlined entitlement process and we offer the best location for overnight delivery to practically anywhere in California and much of the western United States, so we’re confident that Visalia remains the ideal location in California’s Central Valley for e-commerce fulfillment centers. We’ll be ready to go whenever they are,” he said.

Visalians first heard of the possibility of Nordstrom building a million square-foot distribution center in mid-December of last year – and it has been a battle of the fittest with Fresno ever since. Fresno’s City Council voted on an incentives package in early December and Visalia matched that package dollar for dollar the following week.

The Nordstrom E- Center will service the entire Western United States and could provide up to 1,875 jobs to Visalia and the surrounding area when completely built out during the next decade. Nordstrom does $2.4 billion in internet sales annually, and operates 77 stores in California with more than half of them in Southern California. That gives Visalia another advantage because it is one hour closer to Los Angeles than Fresno.

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