CEO: ‘My Macy’s’ Working
Terry Lundgren, chief executive officer at Macy’s
Inc., is happy with the department store chain’s 20-area test of its “My
Macy’s” customer
micro-marketing program.
The program, which matches executives and buyers with
a small number of stores, is focused on delivering a selection of products
in demand in local markets. According to Mr. Lundgren, the typical “My
Macy’s” store carries
10 to 15 percent of unique inventory based on location.
To date, stores in “My
Macy’s” markets have achieved sales
increases of 2.5 percent versus control locations. The company plans
to expand the program to the rest of its stores by February of next year.
A Knowledge@Wharton article
referenced another piece from The Columbus Dispatch that reported
on the types of changes brought about with the “My Macy’s” program. Buyers
in the area, noticing that locals wore golf attire not just on the course
but also to church, expanded offerings in local stores. With Columbus
being the home of Ohio State University, buyers also added Buckeye products
while expanding jeans for the large population of college-age consumers
in the area.
Mr. Lundgren told attendees at a lecture held at the Wharton
School of the University of Pennsylvania that he sees the consumer insights
work his company is doing with dunnhumby as critical to achieving the
type of personalized approach needed to achieve the full potential of
the “My Macy’s” program.
Before, he said, the company used to send out
four different catalogs for fall based primarily on climate. It
sent out 695 highly-targeted versions this year.
“When you start sending
a petite customer a large-sized catalogue, she says, ‘You know, you really
don’t get me — you really don’t know who I am,’” Mr. Lundgren said. “So
what My Macy’s means is that when you get something from us in the mail
or when you walk into a Macy’s store, you say, ‘This is my Macy’s. This
isn’t just a Macy’s for everyone.’”
Discussion
Questions: What is your evaluation of the “My Macy’s” program? What do
you see as the opportunities and challenges facing Macy’s as it rolls
out the program chain-wide?
The “My Macy’s” initiative is worthwhile, and other national retailers have figured out how to tweak their local assortments in the context of a centralized buying office. However, if I were an investor in Macy’s I would have a few pointed questions after the latest earnings release:
1. If “My Macy’s” is an apparent volume driver, what’s taking so long rolling it out to the entire organization? Wouldn’t a couple of extra points of comp sales move the company closer to profitability?
2. When will Macy’s return to consistent profitability, not just in the fourth quarter but on an ongoing basis? Several of Macy’s key competitors (Kohl’s, for example) have delivered profits every quarter during a difficult 2009. Will Macy’s ever get out from under the crushing cost of its interest expense?
If you inspect the latest quarter closely, Macy’s continues to bleed from “division consolidation costs,” which have been going on at least since the May Company acquisition. It seems to me that “My Macy’s” needs to be a front-burner initiative, in order to start leveraging these acquisitions and division mergers once and for all.
With Macy’s stores sitting so far apart, it would be difficult to assess the “My Macy’s” initiative at the store level, so you’d have to say that the numbers speak for themselves in terms of results.
I do think that localized assortments are an opportunity area for Macy’s competitors; J.C. Penney in particular could take a page from its own past in that regard. They are crow-barring brands from urban to career into stores without regard to what might work best on a local level. I’d like to see them break up the brand clog that exists in every store and segment the brands based on localized insights.
I have high hopes for the “My Macy’s” program. dunnhumby has already proven its capabilities in grocery (Tesco, Kroger) and home improvement (Home Depot), and I see no reason why they can’t achieve significant assortment and marketing improvements for Macy’s.
I am also interested to see how many of the other aspects of dunnhumby’s grocery programs (such as data sharing with vendors) make their way into the “My Macy’s” offering. Data sharing is a major source of revenue for the Kroger/dunnhumby entity today, and I imagine the same could be true for the “My Macy’s” program.
The biggest challenge I see comes from the industry shift. Purchase frequencies in grocery are dramatically higher, and shoppers buy more items per trip, so shopper data accumulates much faster. I wonder how much longer a shopper’s history at Macy’s will need to be before dunnhumby can make meaningful inferences about that shopper’s preferences.
Clearly Miami/Aventura must not be in the 20 city test group…because for the past 18 months, every time I’ve walked into a Macy’s I’ve said “There is nothing for me here…this is not my Macy’s.”
I know it sounds cold, but it’s true. And I know the people/demographics of those who who shop the stores I am walking into can’t relate to the odd assortments I’m seeing on the racks any more than I can. Now bear in mind, I’m a “plus-sized woman” so maybe that category is not part of the 10-15% tailored assortment part.
Macy’s was always my “go to” store when I needed business casual or sportswear. I don’t even go in there anymore…and the layouts have become so confusing, it’s even hard to buy a handbag there.
There is CLEARLY opportunity. Is it being taken? Not as far as I can see.
Read that through twice! This is not Macy’s doing things that are new, innovative, or even smart. They are just doing stuff that is obvious to any merchant. Yes, they are fixing some of the things that are broken but in no way are these programs doing things that are beating anyone or creating any competitive advantages.
The stores they took over (Marshall Field’s, Filenes, etc.) all were regional and local and had always been doing things tailored specifically to their markets. Catalog retailers have been customizing their mailings to specific customers for many years now, so what’s the big deal?
I think this CEO is saying “Wow, look at us, we are not screwing up as badly as you think we are!” Time will tell.
After all these years, Terry Lundgren has figured out that one-to-one marketing is better than mass marketing. What caused the epiphany? Has he not been reading basic management books for the last 10 years? How much does this guy get paid for running this company?
Sorry, but I cut him no slack. He has done nothing but lead this company into a tired, lackluster, no excitement department store. At the same time, he continues to earn significant compensation. For what? A 2.5% sales increase in a select number of stores?
He receives no accolades from me. Happy Friday!
I’ll second Mike and Joel’s comments. My father was a VP for a regional men’s clothing store in the 60s and 70s, and he would laugh to think that “My Macy’s” was a new strategy. It’s how they did business then and it’s how we should do business now.
I guess if we’re going to give kudos, it’s for going back to the future in what worked. There’s a long list of failed retailers who stuck with their new way of doing things…even when it didn’t work.
Terry Lundgren’s annual pronouncements remind me very much of the old Soviet Union–a new “5 year plan” every year.
Are we not going back 20-30 years in the department store world where there were all these small regional chains that tailored their assortment to the local customer? This is where Macy’s can leverage their size because they will present an overall statement that is a national trend which still has bits of local flair to keep their stores fresh in the customer’s mind.
Marshall Field – “Give the lady what she wants.”
I’m mostly a booster of Mr. Lundgren’s “My Macy’s” initiative and of dunnhumby’s segmentation and targeting methods, but this discussion leads me back to the same core reservation: They can plan, but can they implement?
A more nuanced, complex set of merchandising plans, based on shopper loyalty data, local cues and other insights, leads inevitably to the challenge of compliance and measurement at the store and department level. The issuance of 695 individual catalog versions underscores the risk–that “My Macy’s” could lead to what I call the “intricacy trap” without offsetting gains in productivity.
The folks at dunnhumby know this is a limitation of their methods (although they generally don’t emphasize this). While the company is very good at the planning part of the equation, it doesn’t handle the in-store implementation. That’s left up to Macy’s and its suppliers.
This means Macy’s must tackle some significant organizational and business practice changes in order for “My Macy’s” to achieve its potential. One core area is the alignment of store operations with merchandising. Another is sensing and measurement of in-store conditions. This won’t be easy, but Mr. Lundgren seems to grasp that “local” is the new “big.”
I guess I’m missing something. Is the consumer in Miami the same as in San Francisco, in Columbus, in Seattle, in Phoenix? Of course they aren’t. If you understand and merchandise to these differences, will you do more business? Of course you will. The reported 2.5% increase is very small in terms of potential.
What’s basically happening is that Macy’s is recognizing the downside of a decade’s worth of implosion, which was supposed to improve profitability by consolidating decision-making in NY and leveraging their marketing expense. In other words, “all customers are the same. What do we need all these local merchants and marketing people for?”
The biggest challenge that Macy’s faces is cultural. For “My Macy’s” to be successful, the center of gravity of decision-making (merchandising, marketing, etc.) must return to the individual sales floors, ala Bed, Bath, and Beyond. Like all large, centrally-managed organizations, transitioning to this culture for Macy’s will be a very tall order. Over time, a company’s culture attracts and retains individuals who are comfortable with that culture. Macy’s center of gravity has always been in NYC. The organization in place today will undoubtedly struggle (and resist mightily) to adapt to this new approach. The jury is definitely out on this one.
The “My Macy’s strategy” has always been far less about any true assortment improvement–and far more about keeping the company’s name out there on a regular press release cycle to pacify stockholders. (Has anyone here noticed that the important holiday shopping season is upon us? Yes, I thought so.)
The examples of brilliant customization Terry Lundgren offered for the article are laughable on their face and I am amazed that business reporters who cover retail don’t call him on it. There are many, many other clues which lead people to know that Macy’s management doesn’t “get it” beyond a petite woman receiving a plus-size catalog.
James Tenser hit the nail on the head. Some targets are too easy to spend time being critical about, and hindsight isn’t useful. Clearly, local tailoring of assortments is generally accepted as a “best practice” for any national chain. Like it or not, the business model for Macy’s is that of a national chain…and it suffers from the same limitations other such national chains have, and has the same type of opportunities.
It is not possible to run a national chain at a localized level and make attractive shareholder returns. The economics do not allow for it. Ask anyone who’s studied it and the answers are all the same. Centralization, rationalization, and leverage of infrastructure are critical components to improving shareholder value. That being said, it is also imperative to actually tailor assortments at some form of local level.
James’ comment is the critical thing to consider. It isn’t “Is this a good idea?” It is. The question is “how does this get implemented” and then sustained. Clearly, technology is a huge part of it, but not all of it. Business processes MUST be tailored to work in concert with the technology to use the data appropriately within the constraints of profitable and economic decision making. Big sentence. Really, really, really hard to do. And the retail landscape is littered with companies that tried it and failed. More local personnel. Less local personnel. More discrete plan-o-grams, local autonomy in plan-o-grams, more local buying, less force distribution on major private brand programs, etc, etc, etc. Each one of these has implications and ramifications. It takes time, effort, a multi-discipline approach and the willingness to really dig through the chaff in order to come up with a realistically viable implementation approach.
Sadly, it is rare that retail puts that type of coordinated project management into an initiative.
Macy’s reminds me of Wild Oats. They need to emulate Whole Foods instead, and get down to the single-store level for assortments. “My Macy’s” doesn’t go far enough, and I agree with others–2.5%, even during a recession, could have been much larger had they truly embraced local decision-making.
Pure hype! The reality is that Macy’s is having some success with comp numbers simply because last year was so awful. If you look at Department stores’ business over the last 10 years, you’ll see a steady decline in sales, store closings, eroding margins, talent drains…basically the last gasps of a dying retail model. It’s great that they’re trying to innovate, but obviously, too little, too late.
There is a huge difference between tailoring assortments based on local customers and being customer-relevant. Until Macy’s figures out how to connect with and engage customers so that they are willing to receive (relevant) messages about new goods in the store, they will not consistently go. This is even harder than tailoring assortments and will take them much longer.
Doing some simple math, this tells me that Macy’s feels that 85-90% of their assortment works for every customer in every corner, and a few islands, of the United States. BUNK. If I was their Board I would split the company in five pieces and give each near-complete autonomy as Macy’s (NE), Rich’s (SE), Marshall Field’s (Midwest), Bullocks (West), and Foley’s (Southwest). America is not Canada, a population of 300 million plus consumers can certainly support five regionally-focused department store chains if the assortments are right.
Macy’s must accept that there is no need for an “everyone’s” department store, find their customer, and tailor their complete assortment from fashion to home store to exactly what she wants. Dorothy Shaver would know how to fix this problem. Belk’s is getting this right, and Kohl’s always has.
The ghosts of Marshall Field and John Wanamaker must be sitting on a cloud right about now, chuckling.
It sounds like Macy’s is moving in the right direction. Retailers must make their “value add” clear to the consumer. If the consumer feels they can get the same thing online or at a competitor for a cheaper price, they are going to do it. But if there is something special about the assortment, the staff, or the ambiance of a store that they can’t get anywhere else, they will be back.
It is also nice to see “the suits” getting down to the needs of each location instead of looking at them all from 100,000 feet.
I have to ask the question. Is the department store concept even viable anymore? You just don’t get that ‘high fidelity’ experience (Thanks Doug Stephens for introducing me to that awesome term) at department stores anymore. From what I’m hearing, the program is sterile and really hasn’t done much to spruce up the mix at the store level. But if they have numbers to back it up, more power to Macy’s. I think it’s time to reevaluate the entire layout at this point.
I would have to second (third? sixth?) most of the comments offered here, and also add that while this embracing of retailing fundamentals is nice, it says or does little about Macy’s OTHER problems: dirty stores, deferred maintenance, undertrained/inattentive staff…and if these conditions don’t really exist, then the perception that they do (yes, Social Media is alive and well).
Macy’s, of course, has been a lightning rod for criticism since it achieved that Pyrrhic Victory over MayCo 4+ years ago, and more particularly since it decided to obliterate the collection of surviving nameplates it had inherited (most particularly THAT nameplate). But this continuity isn’t surprising, because in this time nothing much has changed: the same unexciting comp-store sales, the same PR releases on “new and exciting” (read: warmed over) ideas, the same CEO…even the same spokesman. I can’t see the first two of these changing until the third does (the spokesman can stay).
Oh, Happy holidays.
My Macy’s may turn out to be too little, too late. Time will tell. But I see it as part of a broader trend of Department Store retailers trying to a bit harder to retain their core customers rather than having to fight to win them back from other Department Store chains. If that is Macy’s true goal, then I think micro-merchandising is less important than initiatives with more stickiness, like loyalty programs and well-executed multi-channel.