2014/04/08

Macy's Growth Will Be Through Merchandising

By Walter Loeb
The appointment of Jeff Gennette as President of Macy’s Inc. is a giant step in the right direction for the department store industry. Macy’s has always been a great merchandising organization and Mr. Gennette continues that legacy. It is through merchandise that the customer experiences Macy’s mission to offer value, fashion, and service. The future growth of retailing in general, and Macy’s in particular, depends on how well an organization merchandises its offering across various channels of distribution.
The appointment of Jeff Gennette (52) to the new post of President will give him an opportunity to develop programs that will enhance the merchandise the company is selling. Moreover, if I judge him right, he will also develop a vision for the company’s future solidifying why he should become Terry Lundgren’s successor as CEO. It is not the glitzy main floor of Macy’s Herald Square that foreshadows the future of the company, it will be his understanding of what Macy’s stands for now and his vision of how it will serve the costumer in the future. We are living in a fast moving world where change happens in the blink of an eye and in unexpected ways.  It was former Macy’s CEO Ed Finkelstein, in the late 1970’s and early 1980’s, who first experimented in San Francisco with transforming the store’s basement into a housewares mecca and then successfully brought the revolutionary concept to New York.  Before Finkelstein’s innovated idea reinvented the basement level and made it an exciting place to shop for the newest ideas in home fashion, there was always a bargain atmosphere in the basement with people looking for heavily discounted merchandise and special deals. The repositioning of the basement to a floor with special demonstrations and upgraded merchandise was brilliant. It lifted the image of the whole store.
Terry Lundgren (62), the present Chairman and CEO of Macy’s Inc. is the now creative and intrepid leader Jeff Gennette will report to directly.  Mr. Lundgren is the merchant who had the vision to elevate the importance of the private brand across the organization. Today the company features many highly successful private brands – from I.N.C. to Charter Club, Alfani, Hotel Collection, Style&Co and many more. Some brands are carried by both the upscale Bloomingdale’s division as well as Macy’s stores. He learned the retail trade at the Bullock division of Federated Department Stores (now Macy’s Inc.) and Neiman Marcus, becoming President of Macy’s, Inc. in 1997 and CEO in 2004.  As the best leaders do, he surrounds himself with strong executives, notably Jeff Gennette, Peter Sachse (Chief Stores Officer) and Karen Hoguet (Chief Financial Officer). He continues a legacy of brilliant merchants such as David Yunich, Herbert Seegal as well as Ed Finkelstein, each of whom kept merchandising the main mantra of the company.
What do I think lies ahead for Jeff Gennette? Today stores like Macy’s, J.C. Penney, Kohl’s are facing the reality that as many as 1000 of their stores may become unprofitable in the next five years. As I have written about in previous blogs, on-line retailing is shifting profitability and productivity in ways that were not anticipated 10 years ago.  While Macy’s omnichannel approach fulfills online orders through fulfillment centers combined with 500 store units, it may still be difficult to keep some stores open if the local foot traffic is insufficient to support the store.  My recent article on HDC’s (Hub Destination Centers) dated March 31, 2014, suggests a solution that includes the development of renewed excitement in fewer but bigger malls.
The plight of brick and mortar stores is only one dimension on which retailing is changing.  We are officially in the digital age where younger consumers have no concept of life before Google, Amazon, tablets and smartphones.  The most effective approach to merchandising and marketing needs to be reconceived when customers shop in multiple distribution channels at unpredictable hours. The idea to introduce fashion trends on the Internet through high resolution images, rather than in stores and store windows, is a challenge but could become a necessity in order to reach younger tech-savvy customers. Edgy cosmetic brands and stylized accessories are also an opportunity. Ultimately it is not the designer’s name but the styles, the products, and the color palette that will intrigue customers.
Macy’s marketing will surely have to change in the digital age.  The name has become synonymous with an endless number of sale events.  Last week the company heralded the “lowest price of the season. “  That sale banner is so overused it is no longer believable. New ways to attract consumers have to be found and sale events rethought. Nordstrom, in my opinion, has found ways to attract their clientele with fewer sales, but greater, more impactful, events that offer values in a variety of ways consumers understand and want.
Today there are very few merchants heading up department store companies.  Blake Nordstrom, Terry Lundgren–and now Jeff Gennette, Karen Katz (Neiman Marcus Group) and Marygay McKee (Saks Fifth Avenue) are the key leaders that will drive innovation and create excitement through a vision of the future for their respective companies as well as the industry

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