BOSTON — Macy’s is actively investigating opening stores in China, but chairman, president and chief executive officer Terry Lundgren said there’s no immediate time frame to ink a deal to put the department store brand in the world’s most populous nation.
This story first appeared in the March 17, 2010 issue of WWD. Subscribe Today.
“I’m going there every year and we’re taking our time,” said Lundgren during the opening keynote address of the Sixth Annual Retail & Luxury Goods Conference at Harvard Business School earlier this month. “We’re looking for the right partner.”
The group opened its first international store outside the U.S. last month — a Bloomingdale’s in Dubai — under a licensing arrangement with developer Al Tayer Group LLC. Lundgren said the deal didn’t require any capital investment from Macy’s, but gives the department store operator “complete brand control” and should yield a steady stream of revenue.
Lundgren recently appointed Janet E. Grove, vice chair and ceo of Macy’s Merchandising Group, to head international expansion efforts. Lundgren said he’s eyeing two parts of the world for expansion, but did not name the second. Entry into China wouldn’t yield immediate profits, he noted, but implied that because of its large and growing middle class, the Asian nation is squarely in Macy’s sweet spot.
Accompanied by his wife, Tina, chief financial officer Karen Hoguet and several recent HBS grads now working for Macy’s, Lundgren gave a freewheeling keynote that talked about the challenges of 2009.
“We said, ‘Any change we’re thinking of doing, we’re going to get it all done in 2009.’ We knew 2009 was going to be tough anyway and we wanted to be ready when the customer came back” to shop, he said, referring to the decision to cut 7,000 jobs (saving $400 million this year) and consolidate operations in New York and Cincinnati.
The company has made two major investments. The first is new store pricing software from SAS, which is being tested now and will be rolled out over the next 18 months. Following its customization strategy for merchandise, the software will allow the company to also price locally, meaning it can put winter coats on sale earlier in generally more temperate Washington, for example, than it does in Boston. In the past, he said, retailers have been “a bit lazy” on pricing and overreliant on markdown money from vendors to account for buying mistakes, a practice he thinks is unsustainable.
Macy’s has also signed an exclusive agreement with Dunn Humby, a U.K. consumer research firm that’s worked with Kroger and Tesco. The firm is analyzing Macy’s copious transaction data to produce insights it hopes will drive sales, Lundgren said. For example, a woman who buys a Clinique foundation product has a 60 percent chance of returning within 30 days to buy earrings. Now, Macy’s automatically mails that beauty customer a jewelry flyer, said Lundgren, adding the goal is “anticipating what the customer will do next.”
Lundgren shared other tidbits, such as the fact that Macy’s sold $3 million worth of Beyoncé Heat, Beyoncé Knowles’ debut fragrance, from early February to early March, and 72,000 bottles during the hour she signed autographs in Herald Square. Growth is accelerating for $1 billion macys.com, which saw double-digit gains in February, he said.
In his closing keynote, Gucci Group ceo Patrizio Di Marco spoke personally about his journey from modest roots to head of the world’s second largest and most profitable luxury company. Formative experiences, he said, included going to study in Japan when he was 19, turning down a job offer from Procter & Gamble Co. in order to work for Prada, and resuscitating the Bottega Veneta brand at the behest of Domenico De Sole.
“I was scared,” he recalled of the assignment. “The products were truly pieces of crap. But then I went to the factory in Vincenza and saw what the craftsmen were capable of. And Tom Ford picked [designer] Tomas Maier; he picked the right person.”
Of his years at Louis Vuitton, where he was senior vice president of sales and marketing, Di Marco recalled Stephen Sprouse designing the famous graffiti bag amid a cloud of cigarette smoke and the boundless energy of chairman and ceo Yves Carcelle.
Gucci revenues, up 50 percent since 2003, break down as follows: 58 percent leather goods, 14 percent apiece ready-to-wear and shoes, and 5 percent watches. The brand generates $900 million in profits annually and employs 45,000 craftsmen in Italy, Di Marco said.
He doesn’t expect the precrash consumption mentality to return anytime soon, if ever.
“There has been a structural change in the consumer,” he said. “They are more careful, more conscious [in purchasing] than ever.”
In between keynote addresses, panelists convened to discuss mass luxury, sustainability trends in apparel, e-commerce and brand building. During an e-commerce panel, ShopBop.com divisional merchandise manager Darcy Penick, a former buyer at Bergdorf Goodman and Saks Fifth Avenue, said regular customers visit the site every 48 hours to troll the What’s New section.
“We have about 100 new items daily and we pass our reorders through there, too, so customers can see if something is back in stock in their size,” she said, describing the site’s strategy as testing styles in What’s New and then chasing winners in-season.
Flash sales site Rue La La grabs half its sales within the first hour of a boutique opening, said Mark Weinberg, senior vice president of Boston-based parent company Retail Convergence. He said experiences — such as travel packages and spa services — have become popular. For instance, the site recently sold $100,000 worth of hair removal services in two hours.
A panel on sustainability including Lauren Bush and Howard Brown of the Stewart+Brown line tossed around the notion of a “slow fashion” moment (à la slow food) to focus shoppers on choosing fewer, higher-quality and more ethically sourced pieces for their closet.
Bush is doing her part on this front. She recently launched Lauren Pierce Atelier, a limited-time program with Barneys New York. Women select both a dress silhouette (Bush designed five) and a one-off fabric panel hand-dyed by a Congolese women’s collaborative. The finished dress ships six weeks later with a label listing both the customer it was made for and the woman who dyed the fabric.
“What is hand-made and hand-touched is done in the developing world,” Bush said. “We want to really connect the customer to where their fashion comes from.”