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Parading through cyberspace.

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Appeared In
Special Issue
WWD Milestones issue 09/06/2008

It’s a pretty sure bet that the future of retailing, and, in fact, most things, is migrating to an online world. The speed at which this is happening is daunting for the modern consumer and business person, and far beyond what R.H. Macy could have ever imagined at a time that was just witnessing the first stagecoach service and mail deliveries between San Francisco and St. Louis—a journey that took 20 days—when he set up shop.

This story first appeared in the September 6, 2008 issue of WWD.  Subscribe Today.

Macy’s has been conducting online retailing since 1996. Peter Sachse, chairman and chief executive officer of macys.com, has overseen the site’s evolution, for sales as well as brand-building, since April 2006. Here, he discusses plans for Macy’s marketing, technology and e-commerce. Sachse, a retail veteran, was named Macy’s first chief marketing officer in June 2003. He was president and ceo of the company’s Bon Marché division (now part of Macy’s West). He began his retail career with Macy’s in Kansas City and was division merchandise manager at Macy’s Bullock’s division, among other roles in the organization.

WWD: You took on the task of integrating Macy’s e-commerce and marketing a year ago. What is the strategy and thinking behind uniting these two areas?
Peter Sachse: I was asked to oversee both disciplines, marketing and e-commerce—they were integrated prior to me having both of them. We view the Web site as a hub for all activity that can and does occur at Macy’s. That includes opening up a credit card, looking at an account balance, tracking a furniture shipment from purchase to home, looking up where the shipment is, finding a store, what’s the store’s telephone number, looking at a local store’s catalogue, etcetera. We tried to build macys.com as a hub for any interaction one would want to have with our brand.

WWD: So macys.com recently moved from San Francisco?
P.S.: It’s been located bicoastally for eight years. Merchandise and marketing are predominantly in New York. Technology, finance and human resources are predominantly in San Francisco. You’re right: It was born in San Francisco, but merchandising and marketing migrated to New York in 2000. It’s always been part of Macy’s. Is it more closely integrated into the operating ideology of the corporation? Yes, it is.

WWD: What marketing initiatives do you have planned in general and for the online store?
P.S.: The marketing initiatives of the online store reflect all the marketing initiatives of the company. Our 150th anniversary is coming up and the Web site will have a wonderful presentation of what’s occurred in the last 150 years and what will occur in the next 150 years. The initiative for the third quarter is we have a lot of celebrations around [the anniversary]. Specific initiatives I don’t want to go into because they aren’t public yet. There aren’t a lot of brands that can say, ‘We celebrated our 150th birthday.’ We’re glad we made it this far along, but what we’re really celebrating is the next 150 years.

WWD: Are you shifting dollars away from print advertising and toward online initiatives?
P.S.: We don’t divulge our media mix, but clearly the digital space has become more important over time. The eyeballs are going there and we’re spending where the eyeballs go. To say it’s coming out of print—we’re spending where the customer is watching. We’ve got to be where the customer is, and clearly she’s much more online in the last year or two than she was three or five years ago.

WWD: How should retailers respond to the rise of usergenerated content and media online?
P.S.: We have customer reviews on macys.com. It’s clearly a way for customers to talk to one another, it’s a form of social networking. We have had more than 140,000 reviews written on our products since we launched in 2006. We’re quite pleased with that. It’s the beginning of us launching a peer-to-peer conversation and we can see a direct link between positive customer reviews and sellthroughs of merchandise. They tell each other how an item fits, whether it might be a little small or a little large. It’s wonderful information that they’re sharing with each other.

WWD: Do you believe this is something that can help decrease returns, by giving customers more specific information about fit and color?
P.S.: I do, and it also has the potential to tell us further up the retail chain if the customer is bitterly disappointed with something, and we can take action. When we hear from [a customer that] “this toothbrush holder rusted my counter,” we immediately take action on it because we certainly didn’t buy it to rust her counter. So it works both ways. Bestsellers are great. We also watch the reviews closely and we have a plan in place if an item is getting terrible reviews.

WWD: Do you have plans to expand customer reviews…or add user profiles to the site?
P.S.: We look at it all the time, whether to add video to [customer reviews], but to date, the honest answer is, we don’t have any plans. We’re just looking [at adding user profiles]. They’ll tell us in the reviews whether they’re male or female or a Macy’s credit card holder. They share that information with each other.

WWD: What role does the online store play in Macy’s business as a whole? How big is it, how quickly is it growing, who are its customers and what does it sell? Is it different from the brick-and-mortar stores or the same?
P.S.: It’s a very big part of the store. It’s a successful e-commerce site—it does that very well. It also allows the customer to research before they go to the store. That’s a big deal, particularly in our higher-price categories such as furniture. We know probably upwards of 70 percent of our consumers are looking at macys.com and then making a trip to a store. So they are much more informed than they used to be. They do all this research online and they make two stops. Before they had to go to four or five different places to find out which guy has the best color. Macys.com has a big role to play in researching online and buying in the store, but if the customer chooses to buy online, we’re more than happy to sell it to her there. We are really channel agnostic—we don’t care which channel gets the sale. We facilitate the sale to the best of our ability.

WWD: How do you know customers research online before walking into the store? Anecdotally?
P.S.: They walk in with a picture from the Web site of a sofa, asking, “Can I sit on this?” Or they come with a printout of a cookware set, and they say, “Do you have this here?” A feature we are rolling out in the third quarter is the ability to find it in the store. You click on “Find it in store,” you enter your zip code and it will display all the stores near you that the Ralph Lauren blouse is carried in.

WWD: How does it work?
P.S.: It takes a lot of data feeds. We have to feed all the data from stores, the item files. We meshed it all together. We’re doing the same thing for furniture. All the furniture displayed on the Web site is not necessarily sampled in one of the furniture stores. We will tell them that sofa is sampled on Long Island or it isn’t, so they don’t make an unnecessary trip. We want to make it as easy as possible.

WWD: How long have you been working on it?
P.S.: We are constantly working on enhancements to the multichannel experience. It’s taken a year of programming and getting the systems to work together. We want to be a worldclass multichannel retailer. These are all things the customer will or already expects us to do for them.

WWD: Did you use point-of-sale data and tie it together with other existing systems, or did you create a new system?
P.S.: We have a data-feed item file—we know how much inventory we have on hand by store by UPC code and we feed that to the Web site so the Web site can look it up. It goes into this data file and displays, yup, it’s available in these quantities or it’s not available.

WWD: What software does the online store run on? Do the online and offline stores share sales and inventory systems?
P.S.: The online store [architecture] is IBM WebSphere, and there are a ton of software applications that go on top. The Mercado search engine is a big part of it. There are different inventory systems for online and brick-and-mortar.

WWD: Are the stockkeeping units on macys.com a subset of what is offered in brick-and-mortar stores?
P.S.: It depends on the category, but for the most part, we carry almost all the items we carry for the home, and accessories in varying degrees. Apparel is comparable to a Roosevelt Field [at 461,000 square feet] or Paramus Garden State Plaza store [at 485,000 square feet], a normal-size store.

WWD: In the future, will the online assortments be the same or similar?
P.S.: We believe very much in localizing assortments, so we believe what might sell in southern Miami is not the same thing that might sell in the Northern suburbs or Detroit. What the Web site does is reflect all our diverse customer base, so the online store probably won’t be exactly like a store in South Miami, but it will reflect the diverse customer base we have across America.

WWD: Are the customers the same online as in the store?
P.S.: For the most part, they are. The online customer is a little younger than the store customer and a bit more affluent. It makes intuitive sense. The Internet is a young business.

WWD: Is the online business still growing, and is it growing more quickly than the offline business?
P.S.: It’s growing very, very nicely. We’re happy with its growth rate. Like the Internet, it is growing at a faster pace than brick-and-mortar. The way we report it is direct-to-consumer will reach $1 billion in sales in 2008. That is macys.com, bloomingdales.com and Bloomingdale’s by Mail combined.

WWD: Are you working on any major initiatives?
P.S.: The biggest one is the one I mentioned in terms of the customer being able to find out if their item is available in a store near them. It’s a real big up-and-coming feature.

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