High End vs. Bargain Basement 🥂

A Suburban Rhapsody

I grew up in a classic suburban situation. Before attending an affluent college, I thought my family was well off. But it turns out we were perfectly Middle class. 

Every aspect of life was budgeted. Aside from Christmas and birthday presents, I can’t remember many discretionary purchases growing up. 

Then I went to college and learned that the high end of life was limitless. I envied my new friends who I thought were rich and started to think I was poor. This was a head trip that got me into financial trouble in my early 20s. 

But I still hold many of the same middle-class sensibilities around money today. For example, I shop at Nordstrom Rack instead of the Nordstrom department store because I love a good deal. 

You see, Nordstrom and Nordstrom Rack purportedly have the same clothing on display. But one costs between 25-50% as much as the other. One is high-end, and the other is the bargain basement brand. 

You would assume that high-end is more profitable, so why would Nordstrom introduce a lower footprint store like their Nordstrom Rack brand? 

Well, the answer is that you need something for everyone. There are 95 Nordstrom stores in the US and Canada, and they produced $2.29 billion in sales in 2021. There are 241 Nordstrom Rack stores in the US and Canada, and they produced $1.18 billion in sales in Q1 of 2022. 

Traditional Nordstrom stores are more productive than discount Nordstrom Rack stores when it comes to revenue. 

But these lower-footprint stores teach us an important lesson: you make more money catering to multiple customer profiles. You just need to set expectations accordingly. 

The margins for a discount store can be just as high as a flagship department store if you plan accordingly. 

Combining high-end with the bargain basement is the best way to grow market share and profits.

This is exactly what I teach in my new book, called Service Stacking. And I’m happy to announce that the final version is at the printers and will be available for purchase soon. Stay tuned to this space!

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