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Nordstrom postpones an e-commerce fulfillment center

June 16, 2016 04:04 PM
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Nordstrom Inc. has tabled plans for a proposed e-commerce fulfillment center in central California until at least the end of this decade.

Nordstrom, No. 18 in the Internet Retailer 2016 Top 500 Guide, had been considering opening a fulfillment center in either Visalia or Fresno, Calif., but those plans are on hold until at least 2020. Visalia city manager Mike Olmos confirmed that the city had been in talks with Nordstrom’s site selection team for more than a year. A spokesman for the city of Fresno could not be reached for comment.

“We were exploring a West Coast fulfillment center and had not selected a city,” a Nordstrom spokesman wrote in an email, noting that that retailer was “only in the discussion phase.” He declined to provide further detail.

In a letter sent to the city of Visalia and provided to Internet Retailer, Nordstrom co-president Erik Nordstrom writes: “Since our teams first met a year ago, the pace of change in retail has continued to increase.” The letter also said, “while we feel confident that a West Coast fulfillment center will continue to be 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.”

The fulfillment center would have been Nordstrom’s fourth e-commerce facility and its second in California. The Seattle-based company has fulfillment centers in Cedar Rapids, Iowa; Elizabethtown, Pa.; and San Bernardino, Calif. A Nordstrom spokesman says the facilities in Cedar Rapids and Elizabethtown fulfill orders placed through Nordstrom.com, while the facility in San Bernardino fulfills orders from the company's off-price Hautelook and NordstromRack.com businesses.

Visalia’s Olmos hopes talks will continue in the future.

“We understand their caution in the timing of this fulfillment center,” he says. “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.”

In its Q1 2016 earnings report filed last month, Nordstrom reported online sales of $661 million, up 10.7% from $597 million last year, with online sales accounting for 20.7% of overall sales compared to 19.2% last year. However, after the retailer’s fourth quarter 2015 profits fell short of analyst expectations, chief financial officer Mike Koppel said that e-commerce growth was contributing to lower profit margins. He said that’s the case because every online order comes with significant variable costs, whereas stores sales—once they reach a point that they cover fixed costs—are more profitable.

 

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