Here's how Nordstrom Rack keeps its prices so low

Nam Y. Huh/AP

• Nordstrom Rack is thriving even as its full-price store struggles to find its footing amid an uncertain retail climate.
• During its most recent earnings call, Nordstrom reported eight consecutive quarters of sales growth for its off-price business, while its full-price department store posted declines.
• Here's how Nordstrom Rack keeps its prices so low.
• Visit Business Insider's homepage for more stories.

Since its humble beginnings in 1973 as a clearance center in the basement of a Seattle store, Nordstrom Rack has flourished into a go-to destination for discounted designer goods.

Nearly 50 years later, Nordstrom Rack has nearly 250 total stores and serves as an integral piece of the Nordstrom business. In December, Nordstrom reported that its off-price companies - which also includes the e-commerce company, HauteLook - posted positive sales and increasing inventory turns for the eighth consecutive quarter. In the third quarter of 2019, off-price net sales grew by 1.2% while full-price declined by 4.1%.

Discount retailers have been popular for decades, but they especially resonated with shoppers in the wake of the recession and continued to grow in subsequent years. Today traditional retailers are leaning on these models more than ever, and Nordstrom isn't alone in finding solace in the world of off-price: Macy's recently announced plans to expand Macy's Backstage in response to growing demand for discounts.

While Nordstrom Rack sources a significant amount of its inventory from overstock at its full-price store, it also produces some low-cost yet stylish items exclusively for the store.

Here's a closer look at how Nordstrom Rack keeps its prices so low: