Cities may wield more power than retailers think

It would seem that upscale, desirable department stores could write their own ticket to whatever market they choose. But American cities, even smaller-scale ones, are becoming savvy corporate consumers.

Take Nordstrom, for example. It receives proposals from cities all over the country. Cincinnati (with some help from the state of Ohio) is prepared to shell out a $48.7 million financing package for a downtown store. However, could the upscale retailer lose the upper hand in the deal?

To make sure the downtown store generates the revenue needed, Cincinnati city officials are trying to tag on a merchandise clause, requiring the Seattle-based retailer to stock the downtown store at an equal, or higher, quality level of merchandise than in another new Nordstrom going up some 20 miles away.

Nordstrom is balking, but Cincinnati sees it as getting something for its money.

To complicate matters, $12.7 million of the funding is dependent on the relocation of a Walgreen's store slated to go in across the street from the Nordstrom site. As part of a $3.7 million settlement, Walgreen's was uprooted from its original site to make room for a department store that never materialized. Walgreen's reportedly doesn't want to give up its site. Now, the city lacks the space for desired specialty stores that could complement Nordstrom.