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Macy's Star Performance

Introducing the 2012 VMSD/Peter Glen Retailer of the Year

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In 2005, VMSD honored Federated Department Stores as the master of department store reinvention. At the time, the company, which changed its corporate name to Macy’s Inc. in 2007, was in the midst of turning its 450 store locations into two national brands – Macy’s and Bloomingdale’s. During that same year, Federated took on a new level of opportunity by acquiring the 500-location May Department Stores Co. VMSD lauded the department store for being aggressive and willing to take chances.

While much has changed since then – the Great Recession, fluctuations in consumer spending, the rise of the Internet and mobile technology – Macy’s has shown commitment to that spirit of innovation and leadership. The department store chain continues to drive change throughout the marketplace with its My Macy’s program, exclusive brand offerings, unique in-store events and collaborations. In 2010, it opened its first international location with the debut of Bloomingdale’s in Dubai. The four-year-long renovation of its Herald Square flagship in New York is one of the most talked-about design stories of the year. That’s why, in 2012, we’ve named Macy’s the VMSD/Peter Glen Retailer of the Year.

National brand, local style
Long before Starbucks Coffee Co., McDonald’s and national grocery store chains moved from a one-size-fits-all strategy to a more regional focus, Macy’s was reinventing its organization and how it did business at its more than 800 department store locations.

In 2007, Macy’s was a collection of seven standing divisions (Macy’s East, Macy’s West, Macy’s South, Macy’s Midwest, Macy’s Northwest, Macy’s North and Macy’s Florida), each with its own ceo, president, cfo, merchants, planners, stores and marketing organizations. “Essentially, we were seven different companies,” says Jim Sluzewski, senior vp, corporate communications and external affairs, Macy’s Inc. (Cincinnati).

The company began testing an initiative called My Macy’s, followed by a reorganization in 2009 into a single centralized organization, with field teams totaling more than 1000 professionals.

My Macy’s helped the retailer on the ground in each market, tailoring merchandise and adjusting assortments by size, color preference, fabric weight, brand and category. Regionally based executives helped drive localized messaging into the retailer’s marketing, philanthropic contributions and special events.

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“We’ve learned that stores that are 15 miles apart along the interstate highway – much less across the city or country – can have very different customer profiles and expectations,” Sluzewski says.
The effort has enabled Macy’s to adapt faster to evolving customer preferences than some of its competitors. For fiscal 2011, Macy’s Inc. reported its third consecutive year of financial growth. Same store sales were up 5.3 percent for the year, following a 4.6 percent growth in 2010.

In-Store Innovations
As more and more shoppers enter the physical store armed with smartphones and an array of technology, retailers have been forced to reckon with shoppers’ expectations for convenience and mobile devices. Macy’s has been experimenting with several technologies, both in store and online, to improve the customer experience, including tablet computers in select departments, tap-and-pay mobile technology, paperless digital receipts and QR codes. The company has also set up 23 locations to pick up and ship orders from other stores or the Internet, with plans to have 290 locations enabled for shipping by the end of this year.

“[Our] omni-channel strategy involves integrating our stores, the Internet and mobile devices so we can surround our customers at every turn and deploy all of the company’s inventory to serve their needs,” chairman, president and ceo Terry Lundgren told shareholders in his annual address.

That technology helps put Macy’s shoppers in touch with a growing assortment of brands and select merchandise. In 2011, more than 40 percent of merchandise sold at Macy’s was exclusive or in limited distribution; its private label brands, including INC International Concepts, American Rag and Hotel Collection, accounted for nearly 20 percent of sales. Known for its established relationships with Sean John, Tommy Hilfiger and Martha Stewart (thanks to some star-studded commercials as well as in-store shops), the department store continues to look for fresh, new partnerships, including an upcoming collection by Nicole Richie for its Impulse department.

Those brand offerings provide a point of distinction for Macy’s as it competes with other department store chains as well as a robust fast-fashion market. “Customers come to Macy’s because of the brands we offer,” says Steven Derwoed, Macy’s vp, store design and merchandising.

Renovating an Icon
Occupying nearly 2.2 million gross square feet, Macy’s Herald Square flagship opened in 1902 in the Broadway Building and was expanded in three phases to its current form, which spans nearly an entire block at 34th and Broadway, by 1931. Today, the company is investing nearly $400 million during the next four years to transform the iconic building into a modern-day statement of the department store.

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“It’s our company’s most productive store, and experience shows that improvement in the location consistently results in higher customer traffic and sales volume,” says Lundgren.

In reinventing a symbol of the Macy’s brand, the department store is focusing on restoring and preserving the integrity of the landmark building while creating a shopping experience that addresses the needs of a new generation.

“In many cases, product will be organized by lifestyle to help customers create looks and build wardrobes across categories,” Sluzewski says.

The massive project also includes a new hall of luxury brands; a restoration of the first floor great hall with a new presentation for cosmetics, fragrances and fine beauty; and expansion of the men’s department to about 200,000 square feet over seven floors of the Seventh Avenue building. Food is also a focus with the addition of a brew pub that will remain open beyond normal store hours and a sixth floor table-service restaurant, among other eateries and food service stations throughout the store.

Future Experimentation
Looking ahead, Macy’s plans to focus on its Herald Square location while continuing to expand its Bloomingdale’s nameplate with smaller, edited fashion stores planned for Glendale, Calif. (in fall 2013) and a replacement store in Palo Alto, Calif. (in spring 2014). The company will continue to test its Bloomingdale’s outlet concept, which launched in 2010, by adding five new outlets in 2012. “We are committed to continuing to experiment, including piloting and testing new ideas that we can scale up quickly if they are successful,” Lundgren says.

It’s also focusing its sights on millennials as a category for growth, creating a new Impulse presentation of contemporary apparel and accessories for these young shoppers at Herald Square, while other stores test digital mannequins that can be updated daily with new looks and displays.

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Interactive Beauty Spot kiosks at some stores allow consumers to shop from several brands with the assistance of a sales associate who collects the items for faster, more convenient service.

“[Millennials] will be the single-biggest purchasing group, bigger than baby boomers,” Lundgren told Women’s Wear Daily. “We must be the place of choice for this consumer.”

It’s the kind of focused, laser-sharp thinking that’s fueled Macy’s success for more than 150 years.

Macy’s will receive the VMSD/Peter Glen Retailer of the Year at the International Retail Design Conference, September 5 to 7, at the Renaissance Chicago Downtown. Amy Hanson, Macy’s executive vp, property development and credit and customer service, will accept the award and share the brand’s story. For more information, visit irdconline.com.

 

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