I recently had the pleasure of attending a Young Jewish Professionals event where Tommy Hilfiger interviewed Macy’s CEO Terry Lundgren. Normally when high profile executives of publicly traded companies speak, I tend to leave disappointed, as it seems they always recite pre-prepped responses to all the juicy questions you want answered. This time, though, I was pleasantly surprised by how valuable I found both Hilfiger and Lundgren.
Here are a few of the key takeaways.
Bricks over clicks
When asked about the importance of physical stores in this quickly evolving omnichannel world, Lundgren stressed that physical stores are here to stay. Consumers still have a preference for touching and feeling their clothing, and Lundgren said he believes Macy’s has such a successful online business because of the vast presence it has in its physical stores.
Today’s consumer is informed and does her research. Most purchases start out on the phone—once the customer finds what they want, they then move on to a physical store to conclude the purchase. The more the customer goes into a store to try on and buy product, the more online business the retailer will ultimately realize. Maybe it’s another color of the same sweater or another pair of their favorite shoes that the customer will seek out online, but the key thing to realize is how complementary the physical store and the online store are to each other.
And to the naysayers in the audience who like to buy all of their clothing online and think the rest of America is no different, Lundgren made it clear that isn’t quite the case and they aren’t the average American. Not even close.
Lundgren may believe physical stores are here to stay but that doesn’t mean Macy’s isn’t betting big on e-commerce. When we think online business, how many people would put Netflix and Macy’s in the same sentence? Well, according to Lundgren, Macy’s is the seventh largest online business in the U.S., right behind Netflix. While he wouldn’t reveal exactly how much Macy’s Inc. has invested in technology, it was clear they are investing and looking for new and innovative companies, products and people to take their business further.
You cannot be everything to everyone
Lundgren praised the likes of H&M, Zara and Uniqlo as being the best in fast fashion, but despite their success, he didn’t seem to consider them too much of a threat. Macy’s isn’t looking to chase H&M—its price, quality, fashion equation isn’t one that works for the Macy’s or Bloomingdale’s shopper.
Fast fashion seekers may be looking to buy a $7 dollar blouse on Friday to wear Friday night, with little concern about whether the garment makes it to Saturday, and that’s not the market Macy’s plays in.
Zara may have product more akin to Macy’s, but these fast fashion players lack the breadth and depth of assortment the department store boasts, which is part of what differentiates the shopping experience there.
Bottom line: Know who you are, know your value proposition and do not dilute your offering. You can’t be everything to everyone.
If you can’t beat them, join them
The topic of competition continued on with the off-price market. When asked how he plans to compete with off-pricers like TJX, Lundgren was quick to answer “Backstage.” The idea behind Macy’s new off-price format isn’t to dilute the existing Macy’s business, but to offer a retail experience that rivals TJX and others.
For many vendors, Macy’s is the largest retailer they will do business with. So Macy’s feels an obligation to help those vendors grow or risk losing them to big volume orders from other stores. Backstage could help fuel more growth for Macy’s brand partners.
Lundgren warned brands and retailers about selling the same product to both full-price retailers and off-price channels. The customers are too savvy today, he said, and will expect all products to be discounted if they find the same styles in both store formats. Brands have to differentiate what they sell and take care not to cannibalize their full price business.
The science of sales: Invest in the future
Macy’s has invested in technology that allows it to predict what shopper is going to purchase based on their previous three transactions. While not always 100 percent accurate, collecting customer data, analyzing it and marketing based on the results is the best way to retain and grow an existing client base.
While Lundgren didn’t provide specifics, he was clear that Macy’s is investing in innovative technology and recruiting young talent to help propel the company forward.
Bottom line: Lundgren knows the deal
My biggest takeaway? Terry Lundgren is well informed. Whether its by visiting stores, meeting with young and emerging technology companies, attending focus groups or reading consumer emails, he has a pulse on what shoppers want today and he’s preparing his team and stores to know what his shoppers will want tomorrow.