“The Macy’s brand — it’s bulletproof,” observed Jeff Gennette, who today takes the reins as Macy’s Inc.’s chief executive officer.
Others see department stores as broken-down business models, yet Gennette, during an exclusive interview, characterized them as “pillars of the community,” with market share opportunities to be as relevant as ever. His message is that this isn’t a rescue mission. It’s about accelerating change, “contemporizing” the shopping experience and regaining lost ground.
“My opportunity is to lead the team with a set of quarterly objectives to get our business back,” Gennette said. “I take it very personally and confidently. There is an opportunity with our brand to burnish it up and make it stronger and I have a plan to do that.”
A week before officially becoming ceo, Gennette, who also holds the title of president at Macy’s, gave a taste of his agenda for turning around the struggling $25.8 billion department store chain, and laid out his case for why the brand has staying power and a better future ahead. He spoke of “aggressively” testing goods and services not part of the Macy’s business. He said food and beverage hold great promise, even possibly establishing food halls at select flagships or high-traffic sites. And he emphasized creating “new layers of marketing to tell the Macy’s story in a fulsome way.”
According to Gennette, there is potential to “drive more of the digital demand to experience the store” with buy-online, pick-up-in-store being integral to the effort. There is also potential to further drive up the AUR [average unit retail price] on private brands and market exclusives, with higher quality and value.
“If you look at the private brands, some we believe have much more opportunity to reach higher,” Gennette said. Hotel, Charter Club, INC and Alfani “all have more value in them and are commanding higher retails than ever. We are more dogged about understanding where our customers live, what they want and what they need from us and using our private brands to provide that,” he said. “We found that in some cases we were undershooting our customers. We were too much in commodity price points. We had the opportunity to raise [the quality of] our fabrics, increase our trims and embellishments, put more value into the product to command a higher retail price,” helping to offset reduced foot traffic in the stores. “Some private brands are at opening prices. They serve a commodity customer and you are going to see us hold them there.”
Underscoring what he would consider a culture of testing, Gennette said Macy’s will experiment with different formats for the fledgling Backstage off-price and Last Act clearance operations, with the intent of expanding both through the chain. In addition, a “super cash wrap” centrally located on a floor, and abetted by roving associates with mobile checkout devices, will be tested.
She basically kicked my butt and said, ‘If you don’t start learning how to delegate, if you don’t come up with a really clear strategy that everyone could follow and hold people accountable by delegating to them, you are never going to make it.’
Changes have to happen, amid the rise of Amazon and online shopping and consumers shifting discretionary dollars to travel, restaurants, health and entertainment, and away from fashion. After two down years in a row and trying to keep up with rapidly evolving consumer shopping patterns, as well as the distractions of having activist shareholders push for change and a putative bid from rival Hudson’s Bay Co., turning around Macy’s seems a daunting proposition, though Gennette said, “I don’t experience it that way” when asked about the challenge. “I don’t get discouraged by it. I look at the possibilities. We have a lot we can control ourselves to make our brand better and help us take market share.
“What I am focused on are three things — our team, our brand and our plan,” Gennette said. “We have incredibly impassioned people that really want to win, and have a rich history of winning, with the exception of a couple of dry years. But they get out of bed every day ready to fight. I have a lot of confidence in the team. I was in the store organization for many years. I know their character. I know their grit.”
In succeeding Terry J. Lundgren, who ran Macy’s for 14 years and shifts to executive chairman, Gennette has big shoes to fill. Industry individuals who know Gennette said he’s a broad-gauged executive, a “modern-day merchant prince” with experience in operations as well. He’s considered analytical with a mind that works fast, and is able to connect with people. Those who know him say he’s not impulsive and is hands-on. As one vendor said, Gennette is more “in the weeds” than Lundgren was, with more direct reports and a flatter management structure.
“He is a student of the business,” said Lundgren. “He’s got a curious mind. He never thinks he’s got all of the answers and can take advice and input from people above him, below him and his peers. He’s walking through stores like I have always done, learning by seeing and listening to those who are on the front lines with our customers.”
Lundgren said he got to know Gennette best when Gennette was a general merchandise manager at Macy’s West and early on was regarded as a rising star with ceo potential. “I was very impressed and moved him to Atlanta as head of stores for Macy’s South,” the former Rich’s. “He had already proved himself as a merchant but I wanted him to have direct responsibility for the stores organization. He took to that beautifully.”
Gennette was later promoted to ceo of the former Bon Marché division of Macy’s in Seattle, which became Macy’s Northwest, and when Macy’s in California and Macy’s Northwest consolidated in 2008 to form Macy’s West, Lundgren put Gennette in charge.
“He is a humble leader,” Lundgren said. “He’s never afraid to ask questions and is always prepared to give credit to someone else, even when he may have been the one responsible for the success.”
“He’s a pragmatic innovator,” said one retail expert. “Innovative, creative but still very operational. He’s a thoughtful risk-taker.” Gennette is seen as confident, not arrogant, and likely to let more of his team attain a level of visibility, being less of a showman than Lundgren has been.
Gennette rose to chief merchandising officer in 2009 and became president of Macy’s in 2014, making it apparent he would succeed Lundgren and giving him the license to reshape the corporate team. Gennette selected Richard Lennox as chief marketing officer; Elisa Garcia as chief legal officer; Justin McFarlane was named chief strategy, analytics and innovation officer, and Cheryl Heinonen, was most recently named executive vice president of corporate communications. A few key appointments remain to be made, and two key veterans — Karen Hoguet, chief financial officer, and Jeff Kantor, chief stores officer — are sticking around.
I want to get more productivity and footsteps into my mall stores. That is job one.
In the interview, the 55-year-old Gennette described himself as a delegator, highly structured, a family man with a husband and daughter in high school, and a creature of habit.
He has breakfast meetings twice a week on average at Andrews Coffee Shop on Seventh Avenue near Macy’s. “I get into work at 6:25. My morning breakfast at Andrews starts at 7 a.m., so I am able to able to do a lot in that half hour. Then I duck over to Andrews and it’s a very efficient breakfast. I always have two poached eggs — crispy bacon — no toast, no bread. The same waitresses have been there for years. It’s a wonderful team. They know my order and it’s a great spot.” He typically leaves work around 6 or 7 p.m. for dinner with the family at home in Park Slope, Brooklyn.
Gennette, a native of El Cajon, Calif., near San Diego, is a graduate of Stanford University, where he majored in English literature. He describes himself as an avid reader and a movie buff who’s particularly fond of James Bond. “I’ve seen all the Bond movies at least once.” (Curiously, “On Her Majestry’s Secret Service” with George Lazenby in his only James Bond role, is Gennette’s favorite in the series, though most critics panned it.) In further contrast to Lundgren and many of his peers, golf is not his thing.
At work, “I have always been a driver,” said Gennette, who joined Macy’s in San Francisco in the executive training program in 1983 right after college, initially seeking “a quick” management experience. “I was a young kid and didn’t expect to stay long.”
He managed the “Tiger” shop for young men’s merchandise, among other areas, at Macy’s in Stanford, Calif. “We didn’t have a lot of fixtures but we had a lot of stock in the back room and I had to make choices all the time about what made the light of the day — what came onto the floor and what didn’t.”
One day he put a candy stripe short-sleeved woven shirt, with the Kingston Trio label, on the back wall and 25 percent of the merchandise sold the first day. “I moved it to a fixture right in front of the register and called the buyer and said this thing is selling like hotcakes. Send more. Through the summer, I went through like 10,000 units of that one short-sleeved woven shirt.
“What hooked me on retail was this idea that from the action you took, you could see immediate results. The change I made today could give me results I could see tomorrow. That’s when I decided to stay in retail. That was 33 years ago. What I love about retail is the change. There is a constant diet of change and a constant diet of consumers you serve. Their needs are changing. There is great art and there is great science in this business and I love it.”
At the Stanford store, Gennette said he worked 80 hours a week “doing everything myself” until he encountered a salty, veteran sales associate named Betty Owen, who was from Manchester, England.
“She was a part-timer and she took me under her wing,” Gennette recalled. “She was one of my first career mentors. She basically kicked my butt and said, ‘If you don’t start learning how to delegate, if you don’t come up with a really clear strategy that everyone could follow and hold people accountable by delegating to them, you are never going to make it.’ From her I learned how to pick my shots, how to hold together that team of 30 associates who were all much older than I was. That lesson — to strategize and to delegate and really assign accountability — has taken me all the way through my career.”
Gennette also reflected on how department stores were once eclectic emporiums of all kinds of goods and services. “We now have new economic models by which we can add those businesses back into the department store,” he said. “Some of those are services. Our success with LensCrafters is a good example. There are not enough optometrists to satisfy the needs of how fast we want to roll out this business as a service in our stores. We are going to have up to 500. The big rollout started last year and will probably take until 2018 to complete.”
LensCrafters, he noted, requires two to three visits to fill the subscription, thereby getting customers returning to the store. Another advantage — LensCrafters “marries well” with Macy’s in-store Sunglass Hut shops, Gennette said.
“You will see us add things like that. When you look at the mix, there are going to be new businesses that come into the fold. They could be fashion businesses. They could be services. They could be new categories that we don’t carry in the building. We have a list of those businesses [leased and nonleased] that we are considering and know we are going to be testing all along the way. What we are looking for are those we can be big with. Food is a big opportunity. It is solidly on our radar screen.”
So is technology.
Last year, Macy’s introduced Apple watches in 200 doors and the “Apple Experience” format, which presents a variety of Apple products at Macy’s Herald Square, and other retailers. “We just met with all of Apple management in the last week and talked about our growth strategy going forward.”
The Apple Experience shop inside Macy’s Herald Square is the most productive Apple Experience in the world, Gennette said, without disclosing statistics. It’s likely to be rolled out to other Macy’s doors.
Last year, Macy’s installed 20,000- to 30,000-square-foot Backstage off-price areas inside 15 of its locations. Thirty more are being opened this year in an attempt to raise productivity of those boxes and to provide categories like home decor, toys and kids shoes not carried in those stores, to minimalize any cannibalization with the rest of the store.
Backstage is also about introducing off-price shopping to a mall setting where it generally isn’t found. Off-price retailers are primarily in strip or outlet centers.
“We are not declaring victory with this. What we are testing right now is encouraging,” Gennette said. “We’ve got four tests going on in different store permutations. I want to get more productivity and footsteps into my mall stores. That is job one.”
One test starting in April involves integrating Last Act, Macy’s clearance section for second and third markdowns, into Backstage. “All of a sudden you got this side of the store with second and third markdowns, and you can compare with great Backstage prices, and you’ve got the balance of the building with all of your regular prices and a much richer branded experience with first markdowns only.…If you are a ready-to-wear apparel customer and you have always depended on having the markdowns in the same area, will you go to another floor to find it? We are going to find out.”
Changes in Macy’s marketing and advertising will be seen. “You wouldn’t argue with me if you say it feels too promotional,” Gennette acknowledged. “We have a much richer story to tell. We are always going to be a promotional department store. But how do we open up dollars with our great vendor partners and create a whole layer of marketing that is going to be about being a fashion authority, and a whole other layer of marketing about our iconic events, our special events, that notion of a department store with rich shoppability and browsing and being part of the community.”
Chief marketing officer Lennox has been charged with taking the marketing budget to “dimensionalize and really tell our brand story in a much more fulsome way,” Gennette said. “We have the dollars to play that story.”