Macy’s has a lot on its agenda.
Smaller stores used primarily as showrooms to display product; fixtures that show actual and virtual items and allow customers to search dot-com and store inventory; testing a full-line store in an outlet mall, and finding new ways to extract and apply information from the My Macy’s localization program were all among the topics discussed at the Macy’s Inc. investor meeting Tuesday.
“I can imagine certain stores that haven’t carried a full inventory of textiles [bedding and other products that take a lot of room to display] may be able to sample those products now,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s. “We will have great confidence in fast delivery. We may be able to have smaller-sized stores that are largely for samples.
“We will try everything,” Lundgren continued. “We’ll try 10 things and if two work, we’ll follow through on them.”
Another test: a Macy’s full-line store at the Gurnee Mills outlet center in Gurnee, Ill., which could become a template for a new concept. “If this works, it will obviously open up new ideas to think about, such as expansion in those centers with smaller footprint stores,” Lundgren said. Macy’s isn’t interested in opening bona-fide outlet stores because Macy’s sale prices and outlet store price points are very close.
“We’re testing [fixtures] that allow customers to see physical product and search all the inventory between dot-com and stores,” he said. “We’re investing big time in mobile devices. We have a mobile app, but there’s a lot more we can do to leverage that experience to blend technology with in-store to facilitate the purchase.”
During the question-and-answer session, Lundgren was asked if the company could support another $1 billion of debt. Karen Houget, chief financial officer, said, “We do have capacity to add some debt.” “Good observation,” Lundgren told the analyst. The ever-cautious Houget said, “Could be.”
The next question seemed logical: “As you look at the retail landscape, what is your appetite for mergers and acquisitions?” “You never know, but I don’t really see signs of opportunity for us in America,” Lundgren said. “There could be something elsewhere. We have close to 800 Macy’s boxes. There’s opportunity for Bloomingdale’s to grow. We’re in most of the key markets. If we acquired something [in the U.S.], it would be duplicative on the Macy’s side.”
Speaking of international, Michael Gould, chairman and ceo of Bloomingdale’s, which opened its first unit outside the U.S. in Dubai five years ago, sounded fairly bullish, but said everything depended on finding the right partner. “This is not just a concession business,” Gould said of the store. “Every major creative issue goes through us. I go twice a year.
“We know what the power of the Bloomingdale’s name is,” he added. “I’m sure there will be other opportunities. It says the Bloomingdale’s name has international cachet. We see Russian customers, Nigerian customers and customers from the Middle East. Performance continues to exceed expectations. It bodes well for what Bloomingdale’s is and what it can do in the future.”
“If we’re going to do it, we’re going to do it with our talent making sure our footprint is represented,” Lundgren said, referring to Macy’s. “That’s what’s happening with Dubai. It doesn’t look like a leased operation. Maybe that’s why we’re slow. It’s hard to do this way. I’m glad we weren’t quick to pull the trigger on [Dubai] five years ago. When there was construction in China, people would say, ‘Would you mind if we put a Macy’s name on this building?’ We would have made big, big mistakes. We want to make sure we do things the right way. If we go we’d go with a different perspective and more knowledgeable My Macy’s approach.”
One place Lundgren is not eager to go, however, is Canada. “We’ve looked at Canada longer than anybody,” he said. “We’ve been looking for 15 years and many opportunities came that we passed up. There’s certainly growth happening in the market. 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 going on there for next 10 to 12 years.”
Closer to home, Macy’s is tailoring buys at the vendor level. “We create a lot of exclusive product with nonexclusive brands,” said chief stores officer Peter Sachse. The amount of exclusive merchandise from Calvin Klein or Ralph Lauren is in the double digits, he said. “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 have a gifting strategy with key brands; most of it is exclusive.”
As an example of the My Macy’s initiative, Sasche cited Levi’s: “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.”
Macy’s has brought back certain brands that it stopped selling on the advice of My Macy’s. “Certain customers in the Midwest only want to wear Hanes,” said chief merchandising 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, whose service was never particularly distinguished, is “taking the next step” toward empowering its associates. “We’re allowing associates to make every decision a manager used to make,” Lundgren said. “We’ve empowered 80 stores where they can [do what it takes to] make it right for a customer. We intend to roll that out to all stores.
“The way the customer is shopping today is very blurred between store experience and online experience,” Lundgren said. “We wouldn’t have the multibillion dot-com business if we didn’t have Macy’s stores. I think we’d do a fraction of the business online if we didn’t have the store experience. I passionately believe more pure-play online businesses will be opening stores.”