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Macy’s Lundgren Lays Out Experimental Vision

At the Macy’s Inc. investor meeting on Tuesday, the firm laid out a wide range of ideas to stretch and improve their already thriving business. CEO Terry Lundgren said, “We will try everything. We’ll try 10 things and if two work, we’ll follow throw on them.”

This bold attitude could include using smaller stores primarily as showrooms to display product, fixtures that show actual and virtual items and allow customers to search across all inventory channels, bringing a full line store to an outlet mall, and using the My Macy’s customer localization program to expand into overseas markets.

The sampling strategy would allow smaller stores that can’t carry a full inventory of bedding and other bulky products to offer the ability for customers to see and interact with the products, then order them using fast delivery. The strategy relies on the company’s strong omni-channel focus, and hints at the business possibilities opening up for firms that are ahead of that trend.

Macy’s is also testing a full-line store at an outlet mall in Gurnee, Ill. If the concept works, Lundgren says, “It will obviously open up new ideas to think about, such as expansion in those centers with smaller footprint stores.” Until now, the firm has avoided opening in outlet malls, because those stores mirror the price points Macy’s offers during discounting.

“We’re investing big time in mobile devices,” he said. “We have a moil app, but there’s a lot more we can do to leverage that experience to blend technology with in-store to facilitate the purchase.” Including allowing customers to search dot-come and store inventory from the same fixture.

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Lundgren was asked during the Q&A if the company could support another $1 billion of debt. Responses varied, with chief financial officer Karen Houget saying that the firm did have some capacity to add debt, potentially.

Lundgren also expressed that the firm does not have much appetite for mergers and acquisitions in America, based on the retail landscape. He does see room for Bloomingdales to grow, but further expansion in the U.S. could duplicate things already offered at Macy’s.

Michael Gould, chairman and CEO of Bloomingdale’s, said overseas expansion depended heavily on finding the right partner. Of their Dubai store, the company’s first overseas unit, he said, “This is not just a concession business. I go twice a year.”

The firm would be interested in opening more stores overseas, but only using their own talent. They are move very slowly and avoiding leasing in order to preserve their brand integrity in new markets. Lundgren briefly commented on the Canadian retail market as well, saying, “There’s going to be an onslaught of retailers fighting it out for market share. My point of view is, I think it’s done. There’s going to be a big battle on there for the next 10 to 12 years.” He explained that Macy’s is not looking to expand into Canada, as a result.

Macy’s is also expanding their exclusive branding, including exclusive merchandize from Calvin Klein and Ralph Lauren, which is now in double digits according to chief stores officer Peter Sachse. “An example is exclusive capsules with Ralph Lauren for the Olympics. The buy started with Beijing and we’re going all the way. We’re creating gifting packages in the fourth quarter. We had a gifting strategy with key brands; most of it is exclusive.”

The My Macy’s initiative, which promotes localization of store offerings based on feedback, has also been growing well. Sasche spoke about Levi’s when discussing it, saying, “There’s a lot of competition on this one. What could we do? Assortment and exclusivity. Now 20 percent of Levi’s business is exclusive to Macy’s, with 236 styles, 65 washes, and 69 sizes. The district team tailors that at the door level.”

My Macy’s has also driven Macy’s to bring back some brands that it stopped selling. “Certain customers in the Midwest only want to wear Hans,” according to chief merchandizing officer Jeff Gennette.” Selling them Calvin Klein wasn’t working. We are taking on some of these brands largely on the My Macy’s initiative.”

The retailer is also pushing to improve its service by empowering store associates to make manager level decisions in order to satisfy customers. They are rolling out the program initially at 80 stores, with plans to expand it to all stores.

Overall, the firm is emphasizing a fusion between online and in-store, and greater decision making at a more localized level to empower associates, designers, and managers to meet customer needs. Lundgren said, “We wouldn’t have a multibillion dot-come business if we didn’t have Macy’s stores. I passionately believe more pure-play online businesses will be opening stores.”