Terry Lundgren’s strategy and execution behind Macy’s transition from Chapter 11 to a retail powerhouse

Get close to the customer

Following the name change, Macy’s was on the move. However, the financial collapse in 2008 caused customers to cut down on shopping.

“They literally put their credit cards away and stopped shopping,” Lundgren says. “We knew we had to do something, and I wanted to do something anyway, but this was a really good time for change.”

Macy’s got rid of three operating divisions in the Midwest from seven and replaced them with a new idea.

“The idea of having a division that’s based in Cincinnati, Atlanta or San Francisco was to be closer to the customer,” Lundgren says. “The problem was we had gotten so big now that each division was looking after 100 or 200 stores, and they were in three, four or five states. They weren’t close to the customer. We had lost that connection.”

Macy’s took the three divisions that it eliminated and replaced them with 20 small satellite groups called districts. The districts had approximately 20 people acting as merchants and planners in each of these areas that would supervise 10 to 11 stores.

“They are in these stores every day, they are talking to our customers and sales associates and they are guiding us for what we should buy for Cincinnati or Columbus, Ohio, or Detroit and Chicago,” he says. “They are the ones who are influencing size, color, types of fabric and the brands that we need to carry.”

Becoming more in tune with the local communities forced Macy’s to do a lot of communication.

“It’s a missed point by a lot of big companies,” he says. “Lots of face time with me and my executive team is important. People want to follow your lead. They want to do what you want them to do, but you have to be clear and consistent.

“You can’t have a list of 28 things. You have to be clear, simple, direct, and you’ve got to say it over and over and over again. If you do that, people will respond.”

Having that local focus made all the difference in the world. It worked so well that even in 2009, when the recession was still clearly under way, those stores were outperforming the rest of the country because of the responsiveness to the local city.

“It didn’t take long for us to say, ‘We’re going all the way,’” Lundgren says. “We eliminated the other divisions and replaced them with 69 of these district teams around the country and had one buying office.”

Creating one buyer in New York City for all of Macy’s rather than the previous seven was a crucial move.

“Most of our suppliers are right up the street on Seventh Avenue in New York City,” he says. “One buyer goes to the Ralph Lauren showroom and says, ‘I’m ready to place my order.’ And they are standing at attention because instead of one of seven buyers, they better hope we like the line, because we’re a third of their business.

“We’re a third or 40 percent of everybody else’s business — Estee Lauder, Coach, you name it — Macy’s is the largest customer for almost everyone that we do business with.”

That consolidation has turned Macy’s into the only store you can buy certain brands because of the power it has with the one purchase mentality.

“The combination of that with the localization of the stores has really made all the difference in the world,” he says. “That was all rolled out in 2009.”

Macy’s executed on that strategy in 2010 and had one of the best years in the history of the company.

“We picked up more than $1 billion in same-store sales that year,” Lundgren says. “The year 2011 was significantly better than 2010. We picked up another $1.2 billion in same store sales. In 2012, we are off to a great start.”

Macy’s Inc. had fiscal 2011 sales of $26.4 billion across its more than 800 Macy’s department stores, 37 Bloomingdale’s stores, seven Bloomingdale’s Outlet stores, bloomingdales.com and macys.com. The company employs 175,000 people.

“I really relate it to that structure — the name change and allowing us to have a national presence but to act locally, and then the strategy, which we have executed the last couple of years,” Lundgren says. ●

Takeaways

  • Look for the opportunities to build your business.
  • Make strategic moves that position your company for growth.
  • Understand what makes your business more effective for customers.