MAKING BOLD MOVES AT MACY’S

Like the Titanic, the world’s largest department store had always seemed too big to fail. Unfortunately, success in today’s department store world has become increasingly complicated: Small is the new big, emerging brands are cooler than broadly distributed labels, touch screens trump human sellers and traditional rules of retail are changing at lightning speed.

Fortunately, under the sage direction of Macy’s chairman and CEO Jeff Gennette, a new team of visionary top execs has joined the ranks and the momentum is already palpable. Here, MR chats with the retailer’s recently appointed president Hal Lawton and top menswear merchant Mark Stocker to learn how this iconic store is reinventing itself.

Hal Lawton: Never More Relevant

Hal Lawton fell in love with retail (after UVA business school and a four-year stint at McKinsey) during his 10-year tenure at Home Depot. There, he ran both the online business and then the merchandising operation; he left to run the Americas unit of eBay—a $35 billion operation. Lawton joined Macy’s in September 2017 with responsibility for the full Macy’s brand: merchandising, marketing, stores, operations, technology, strategy, analytics and the website.

He describes himself as a disciple of servant leadership: an inverted triangle where empowering your frontline leaders means they can better serve your customers. “Our ultimate goal is to stay in tune with (and ahead of) our customers, so my job is to make sure we’re evolving at the right pace and that everyone is philosophically aligned so we can think and act like one cohesive organization.”

Among the many new initiatives at Macy’s, Lawton is most excited about:

■ The acquisition of the independently-owned Story boutique this past May, and the prospect of Story impacting the customer experience at Macy’s with the addition of its founder Rachel Shechtman to the Macy’s exec team. “We look forward to bringing some version of Story into Macy’s across a significant number of doors. We believe stores need to get more experiential, to create moments for their customers and to give them a reason to come back. We’re not counting on Story to be the entire solution but it’s a piece of it.”

■ The rollout of Virtual Reality and Augmented Reality. “We have the nation’s largest rollout right now, in close to 80 doors. In our furniture departments, for example, customers can touch and feel the furniture they might want to buy and see how it will look in their home. This also applies to our beauty departments: An AR-enhanced mirror can allow the viewer to see how

various shades will look on her. We’ve also translated these types of experiences into our app so that by using your camera function (on an iPhone 7 or higher), our furniture can appear in your living room.”

■ The expanded use of RFID. “The vast majority of product in our store will soon be RFID-enabled, meaning our associates can wave a wand and know what’s on display and what percent of the stock is backroom. Our associates check this several times weekly. We measure our stores on it; we hold our people accountable for keeping that number low. This ensures sizes and colors are available on the selling floor and makes the experience for our sellers far more efficient. We’re also excited about other ways to use RFID in the future: everything from theft detection to store navigation.”

■ A consistently strong online business: Macy’s invested in its website early on and can now boast 17 consecutive quarters of double-digit comps. Although Lawton declines to give figures for in-store vs. online sales (“It makes no sense since the two are so intertwined…”), Macys.com is consistently ranked among the top five or six online retailers in the country.

■ Market@Macy’s: The Market@Macys concept, for customers who love to discover new brands and experiences, features a rotating selection of unique items. At present (November, December, January), Macy’s is showcasing a collaboration with Facebook featuring cool product, from about 100 e-commerce brands across nine Macy’s doors. In addition to adding excitement to the selling floor, the concept helps emerging brands reach new audiences.

■ More exclusive-to-Macy’s product that will ultimately contribute 40 percent to the mix including both private label and exclusive product within national brands.

■ A new customer loyalty program that’s a year old and going strong, especially since its recently added bronze level program allows non-Macy’s cardholders to get the benefits.

Sums up Lawton, “We’re merging the best of Macy’s history with new vision, new technology and new initiatives for the ultimate shopping experience. Our recipe is grounded in a healthy and vibrant brick & mortar business, a robust e-commerce business and a fantastic global app. We’re very happy with our store count (650 locations in 44 states plus more than 100 international locations via our website), we’ve reported positive comps for the past four quarters and we feel that Macy’s has never been more relevant.”

Mark Stocker: Fashion Focus

Dressed in fashionably distressed jeans and ultra-cool Nikes, the General Business Manager for Men’s and Kids at Macy’s looks very much like his new target customer: stylish, sophisticated, just a bit edgy. It’s a refreshing change from the buttoned-up look to which most retail execs ascribe and a clear reflection of Mark Stocker’s philosophy of life, boldly displayed on his office wall: ‘Have the courage to live life the way you want to!’

A Pittsburgh native, Stocker graduated with a degree in finance, then worked in banking and institutional securities. “I liked but didn’t love it and was looking for a career to love. My two years at Kaufmann’s (Pittsburgh’s then preeminent department store) filled that niche, followed by stints at Gymboree and William-Sonoma. I then joined Macy’s West as director of strategic planning and moved to New York with the My Macy’s initiative as national planning manager.”

Stocker describes how insecure he first felt with this position. “I’d never worked in the field; I didn’t know anything about store organization. But I was told that Macy’s encourages execs with multiple experiences to tackle new challenges. With 90 people all over the country reporting to me, I learned ‘on the job’ about communication, delegation, empowerment. I relied on and learned from my team which was the most important lesson of all. I didn’t know if I was doing it right but since the My Macy’s localization initiative was brand new, no one could say I was doing it wrong.…”

Insecurity overcome, Stocker is clearly enjoying his role as menswear’s top merchant. “We’ve taken the department store menswear model and reinvented it. We still cater to traditional consumers but have added fashion-forward ones by distorting the penetration of fashion. And we’re taking some big risks, not just in Herald Square but online and in many of our doors. Younger customers in particular are liking what they see, even in brands that we’ve had for a number of years.”

Asked for examples, Stocker cites Polo, Hilfiger, Calvin Klein. “The risks we’re taking with exclusive product from these brands is paying back. We’ve got to set ourselves apart, even within brands the customer knows well.”

In addition, Stocker believes in focus, in cutting back assortments, sometimes by 20 to 30 percent. “It’s safer to take risks trying 10 different things but then you never get a good read because the message is watered down. When we stand behind something, we do it in a really meaningful way. Instead of 10, we’ll focus on three to five things that help us connect with that new customer. And the reaction has been strong: we’re not walking customers; we’re bringing in new ones!” Currently hot with Macy’s customers, old and new: activewear, the exclusive INC brand, classic categories from Polo and open-sell shoes. “We’ve had amazing results with an open-sell format for men’s and kids’ shoes. We still have a very well-developed dress shoe business but we’re seeing the mix skew toward fashion athletic. (Editor’s note: Stocker admits to personally owning 55-60 pairs of sneakers, forget all the dress shoes.…) We’re in Europe with the fashion office a few times a year, shopping collections and studying the retail landscape. We can’t be stagnant in driving our assortments: we’re constantly evolving the mix and distorting the penetration of fashion based, in part, on trends from Europe interpreted for the U.S. market.”

With tailored clothing still a major focus for Macy’s, Stocker sees much opportunity to get even more out of it. “Tailored for us is mostly a separates business with a growing fashion component; many of our clothing brands have added sportswear to their collections. We’re working on the right adjacencies, on incorporating tailored pieces into an overall lifestyle.”

On the other hand, he’s shifted denim, t-shirts and fleece to a classification approach. “These categories used to be merchandised by brand but this new approach allows the customer to see the full range of what we offer. We do the same for men’s shoes: if you want a black lace-up dress shoe, you can go to that section of the shoe department and see the entire assortment.

I’ve found that customers, especially young customers, are not as brand loyal as they are classification focused.” He offers himself as an example of this eclecticism: his wardrobe runs the gamut from Polo and Patagonia to All Saints and Scotch & Soda. “I especially love the scarcity model: I try to get my hands-on things that few to no one else might have.…”

Summing it up, Stocker declares that “consumers are changing more rapidly than ever. Our focus is to anticipate what they want next and to ensure that Macy’s is the first place they turn to buy it.”