Written by The Business Journal Staff
A plan by Nordstrom to open a new e-commerce distribution center in the Valley appears to have hit a speed bump.
The Seattle-based company announced earlier this year that it is considering opening a new West Coast distribution center to fulfill online orders. The company named Fresno and Visalia as well as an unidentified out-of-state city — speculation centers on Reno or Las Vegas — as the three finalists for the new center and promised to announce a final decision some time in the spring.
According to multiple sources, Visalia and Fresno remain firmly in the running to land the proposed $170 million project, which the company said could eventually create about 370 new jobs.
But after Nordstrom joined a host of other major U.S. retailers in reporting disappointing first quarter results — and announcing the layoffs in late April of some 400 employees at its corporate headquarters — industry analysts are speculating the company may not be so quick to pull the trigger on the new online distribution center.
Even though the company has already been awarded an $11 million tax credit by the Governor’s Office of Business and Economic Development (GO-Biz) as an incentive to build the new fulfillment center in the Golden State, Nordstrom, like other brick-and-mortar-based retailers, is 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.
And just last week, Amazon announced its own plans to open two new warehouses in California, bringing to nine the number of shipping facilities the company operates in the Golden State. Amazon’s newest order fulfillment centers will be located in Eastvale in the Inland Empire and Tracy in the Bay Area.
Meanwhile, with the retail economy cooling, the traditional department store sector is facing what one analyst called “the worst of the retail ice age” as fierce online competition and sagging corporate profits weigh on companies’ top and bottom lines.
Since announcing their intentions in late 2015, Nordstrom officials have been quiet about their plans to build the new online fulfillment center — in the Valley or anywhere else.
“We will never change our commitment to serving customers, but recognize how they want to be served has been changing at an increasingly rapid pace,” Blake Nordstrom, company co-president, said in a statement announcing the April layoffs.
“Meeting our customers’ expectations means we must continually evolve with them,” Nordstrom added, promising to make the company “a more efficient and agile organization that ensures we’re best positioned to achieve our goals.”
During a February conference call with investors, Nordstrom said that 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.”
In recent years, Nordstrom has spent heavily to build its e-commerce business as well as to expand its brick-and-mortar stores into Canada and grow the number of Nordstrom Rack stores, one of which is located in Fresno’s River Park.
Nordstrom’s e-commerce business now represents 20 percent of the company’s sales, up from 8 percent just five years ago.
Larry Westerlund, Fresno’s economic development director, said he continues to be in touch on a “weekly” basis with company officials. “We’re exchanging emails but right now, it’s hard to say when they could announce their decision,” Westerlund said. “I think the company is sensitive to the fact that a lot of their people just lost their jobs and so maybe now isn’t the best time to announce a new project.”
Visalia Mayor Steve Nelsen said Visalia officials expected an update from the company “by the end of May. Now we’re thinking it’s probably going to be some time in June.”
“One of the things working against us is that big-box retailers took a big hit in the first quarter,” Nelsen said. “These companies realize Internet sales is where it’s all going so I am a little surprised they are being so tight-lipped” and delaying the decision.
Nelsen said he remains hopeful his city can land the new Nordstrom’s fulfillment center.
“I still think we have the inside track on Fresno,” Nelsen said this week. “But I’m not so sure of our chances against a city in Nevada. My gut tells me that if Nordstrom decides to locate out of state, it will be partly because other places don’t have $15 an hour minimum wage laws like California.”
George Lurie | Reporter can be reached at:
490-3464 or e-mail firstname.lastname@example.org