Gen­nette Spells out Macy’s Recipe for Suc­cess

WWD Digital Daily - - News - BY

The ceo says Macy’s is adding new ex­pe­ri­ences, eco­nomic mod­els and for­mats to the busi­ness and is aligned with ven­dors.

Jeff Gen­nette, chair­man and chief ex­ec­u­tive of­fi­cer of Macy's Inc., says the com­pany has “a recipe for suc­cess.”

“It's what we are do­ing with our dig­i­tal strat­egy, get­ting brick-and-mor­tar health­ier and hav­ing a mo­bile plat­form and app that ties it all to­gether. That's what we have been re­ally fo­cused on,” Gen­nette ex­plained.

Gen­nette has re­shaped the Macy's man­age­ment team since be­com­ing ceo in early 2017, and has helped re­cast the per­cep­tion of the $25 bil­lion Macy's as no longer be­ing slow to change. Dur­ing his con­ver­sa­tion with WWD's deputy man­ag­ing ed­i­tor Evan Clark, Gen­nette said the com­pany con­ducted a foren­sic di­ag­nos­tic of the cus­tomer and es­sen­tially, she's fo­cused on five things: fash­ion, in­spi­ra­tion, great value, con­ve­nience and ex­pe­ri­ence.

“There are two buck­ets of ex­pe­ri­ence,” Gen­nette said. First, the ta­ble stakes for cre­at­ing a sat­is­fy­ing con­sumer ex­pe­ri­ence is about “elim­i­nat­ing that fric­tion” in the shop­per jour­ney. It's got to be fast and easy to buy on­line, with prop­erly trained peo­ple at the call cen­ter to re­solve cus­tomer is­sues, and it's got to be fast and easy to buy or re­turn prod­ucts in the stores, Gen­nette stressed.

The sec­ond bucket of ex­pe­ri­ence is about “en­gage­ment,” Macy's ceo added. “That's more com­pli­cated for us. Some­times that is like go­ing back to ba­sics, get­ting back to what depart­ment stores were known for — spe­cial events, trunk shows, do­ing that on­line or in stores. We are now look­ing at events across our en­tire store port­fo­lio and on­line.”

Story, the Chelsea store Macy's pur­chased this year which changes like a gallery ev­ery four to eight weeks and sells prod­ucts, and The Mar­ket @ Macy's, a new pop-up for­mat fo­cused on in­no­va­tive prod­ucts, each play a role in mak­ing Macy's more ex­pe­ri­en­tial. Ex­pect an an­nounce­ment soon “about what Story means in Macy's to re­ally help with the ex­pe­ri­ence in a num­ber of stores in 2019,” Gen­nette said.

Years be­fore Story was pur­chased, Macy's pur­chased Blue Mer­cury and most re­cently bought a stake in B8ta, a tech start-up that helps Macy's power The Mar­ket @ Macy's.

Dis­cussing po­ten­tial ac­qui­si­tions, Gen­nette said, “We have been very care­ful about ac­qui­si­tions that we make. When I look at all of our ac­qui­si­tions, it all ba­si­cally serves a cus­tomer through our strat­egy. We were in trou­ble with beauty. We had a vi­brant fra­grance busi­ness but we had strong com­peti­tors tak­ing mar­ket share from us in color and treat­ment so what was the so­lu­tion? We looked at the over­all land­scape. We looked at Blue Mer­cury and it was a cus­tomer-cen­tric model, a brand-cen­tric model. It also gave us a beauty play that was off mall, and then we could take Blue Mer­cury and drop it into Macy's doors.”

The Mar­ket @ Macy's pro­vides “a car­a­van of new con­tent that comes into the space,” Gen­nette said. Cur­rently, the Mar­ket is housed in­side 12 Macy's stores, though the com­pany plans to take it to many more. The range of prod­uct can be wide, Gen­nette noted, cit­ing any­thing from Warner Bros. prod­uct launches to hand­bags or 3-D print­ing of in­soles. In any case, “it's all cu­rated for that par­tic­u­lar store and we use B8ta tech­nol­ogy for that. So that's a new eco­nomic model that brings in­ter­est­ing things into the store that makes sense for us, for the brands, and cer­tainly makes sense for cus­tomers look­ing for new­ness and rea­son to come in and shop.”

“We re­ally have to cu­rate for the cus­tomer in the store and you've got to get re­ally good at it, and in the past we used to do that with hu­man be­ings. Now we do that with much more sci­ence than ever be­fore,” Gen­nette said. “The lo­cal store is be­ing cu­rated for the cus­tomers that shop in that zip code. But on­line, you need to have a much broader as­sort­ment. It's like nar­row­ing your stock­keep­ing unit as­sort­ment in the store, re­ally get­ting to the most im­por­tant things, and hav­ing a much broader sku as­sort­ment on­line, and us­ing your full menu op­ti­miza­tion tools to cus­tom­ize that at the cus­tomer level.” He noted that Macy's emails, get­ting per­son­al­ized and cus­tom­ized, are also part of the in­gre­di­ents of the suc­cess recipe.

Macy's, Gen­nette con­tin­ued, is uti­liz­ing “new eco­nomic mod­els help­ing to make the brand more in­ter­est­ing to­day,” in­clud­ing play­ing “more ag­gres­sively” with leased shop con­cepts and the ven­dor di­rect strat­egy, which also known as drop ship­ping.

Drop ship­ping, where the or­der is taken by Macy's but shipped by the ven­dor to the con­sumer's home, has trig­gered a mas­sive ex­pan­sion of the num­ber of sku's Macy's presents on­line. “On­line back in April, it was about 900,000 and now you are look­ing at about 1.5 mil­lion,” Gen­nette said. “It's an op­por­tu­nity to cu­rate that through an­a­lytic en­gines and to touch new cus­tomers. We looked at failed searches. We looked at cat­e­gories that cus­tomers want us to have that we didn't. We took ven­dors that we did great busi­ness with and put their en­tire as­sort­ment on­line, and we are see­ing lots and lots of new busi­ness as a re­sult of do­ing that.”

By com­par­i­son, Macy's has about 150,000 sku's in its typ­i­cal store, ac­cord­ing to Gen­nette.

The ven­dor di­rect pro­gram, Gen­nette said, main­tains “the cu­ra­to­rial per­spec­tive of a Macy's mer­chant. We want to make sure that what is on the site is with the cus­tomer in mind.”

Much of the mer­chan­dise added to the site over the past six months has been in home cat­e­gories, in­clud­ing elec­tron­ics, home decor and oc­ca­sional fur­ni­ture.

“When cus­tomers go to our brand, they may not ex­pect us to have a speed­boat or a wash­ing ma­chine and those types of things, but you would see those cat­e­gories that are nat­u­ral ex­ten­sions of our brand,” Gen­nette said. “We don't want (cus­tomers) to feel like they just got it from a third party. We want them to feel like it's a Macy's ex­pe­ri­ence.” So, for ex­am­ple, in many cases, a re­turn could be made to Macy's.

Dis­cussing the leas­ing model, Gen­nette said that Euro­pean depart­ment stores are 40 to 60 per­cent leased while those in Asia are vir­tu­ally 100 per­cent leased. But Macy's is less than 10 per­cent leased “so Macy's is go­ing to grow,” the amount of space it leases to brands. “It's go­ing to be north of 10 on the Macy's side.” Bloom­ing­dale's, cur­rently north of 10 per­cent, “may go up a cou­ple of points but we are about where we want to be. Bloom­ing­dale's is prob­a­bly go­ing to grow a lit­tle bit, de­pend­ing on the busi­ness and the store and what part of the coun­try it's in.”

“Any­thing we can do to in­crease the ex­pe­ri­ence in a build­ing, and the amount of time a cus­tomer spends in a build­ing, is al­ways good,” Gen­nette ob­served. “What you are see­ing with us is an in­crease in the amount of cat­e­gories there are within a build­ing...It's not just ap­parel and ac­ces­sories. Leas­ing gives us an eco­nomic model that can make the ex­pe­ri­ence more in­ter­est­ing.” A leased shop ar­range­ment could also bring in a brand or cat­e­gory, a ser­vice such as Len­sCrafters, or food and bev­er­age, that was lack­ing in the store.

But you just can't do that with any brand. “When the brands have their own in­fra­struc­ture. When they have their own out­lets. When they got their own teams com­pe­tent in op­er­at­ing re­tail,” then a leased shop could be con­sid­ered, Gen­nette ex­plained. “For most brands, the bulk of their busi­ness is the whole­sale model. They are not equipped to do a lease model.”

Asked if Macy's could bring a big­ger up­scale com­po­nent to its as­sort­ment and ser­vices, Gen­nette replied, yes, to a de­gree. “With par­tic­u­lar stores, where you have a very high-end cus­tomer in the Macy's port­fo­lio, you are ab­so­lutely go­ing to see that from a leased model or from an ag­gres­sive owned (mer­chan­dise) model, to get in the best prod­ucts to serve the high­end Macy's cus­tomer.”

With the Macy's di­vi­sion, “We have the op­por­tu­nity to reach down or reach up,” de­pend­ing on where the store is lo­cated and the cus­tomer pro­file of the store, Gen­nette added.

Un­der Gen­nette's lead­er­ship, Macy's has evolved into a nim­bler, stream­lined or­ga­ni­za­tion able to make changes faster hav­ing fewer lay­ers of de­ci­sion-mak­ers. He said the com­pany is “fit for growth” largely due to changes made in the team struc­ture, in­volv­ing hav­ing col­lapsed three or­ga­ni­za­tions — pri­vate brands, mer­chan­dis­ing and plan­ning — into one. Be­fore the changes, “If you were to poll ven­dors, they would have said Macy's is too slow. Macy's is about the deal. Macy's is not cus­tomer-cen­tric. Those were things we used to hear.”

A more up-to-date per­spec­tive is that Macy's has “win-win part­ner­ships” with ven­dors, Gen­nette main­tained. Out­side their own stores and web sites, “Macy's and Bloom­ing­dale's are the best ex­pres­sion of these brands in Amer­ica,” Gen­nette said. “We bring these brands to life the way they were in­tended to be brought to life. We show them in their com­plete­ness...We are work­ing closer with our ven­dors than ever be­fore. We are in this to­gether. There is al­ways de­bate and con­ver­sa­tion that goes on be­tween us, but we are aligned.”

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