Terry Lundgren (CEO, chairman and president) The Model Under Pressure New Strategies - One Macy’s - My Macy’s Ongoing Threats - Customer Mix - Customer Service - Omnichannel Executing in an Uncertain Environment - International Expention - Investing in Human Resources - Creation of Freestanding Speciality Stores for Private Label Brands

Terry Lundgren His Life Early Working Life The steps to Macy’s Born in 1952, South California The son of a hardworking dad Started working part-time when 19 His Life In 1975, started as a trainee at a divison of the company Federated 10 years in different positions In 1994, became CEO of Federated Early Working Life Integration of merchandising functions of Federated and Macy’s In 2004, became CEO of Macy’s In 2005, Federated purchased Macy’s In 2007, name changed to Macy’s The steps to Macy’s

The Model Under Pressure: Macy’s Respond 2008/2009: biggest crisis since Great Depression Decline of retail sales, productivity New opportunities for significant changes in Macy’s operating system Time to take risks A massive reorganization and cost cutting program: Leveraging the size of Macy’s by consolidation and centralizing all key functions (One Macy’s) Customizing the offering of stores in every local market (My Macy’s)

One Macy’s - Until 2008, seven semi-autonomous regional operating divisions. - Performing functions in divisional level created inefficiencies. - Inability to focus on company strategies and customer needs - One Macy’s: centralization for reducing administrative expenses, improving nationwide strategies, increasing speed - Conversion of all chains to the Macy’s banner (except Bloomingdales) - In 2009, all divisions unified. - One centralized organization for each key operating fuctions - Stores in 69 districts with 10-12 stores each. Districts grouped into 8 regions. - The new structure: reduction of local operations executives’ control area and increase of their ability to make products

My Macy’s - Roots of the strategy: 2007 -Problem of One Macy’s: Insufficient understanding of customers’ needs - A new organizational model: city level insights on consumer preferences - More responsibility to district executives - My Macy’s concept: never marketed explicity, but realized by customers

Ongoing Threats Customer Mix Omnichannel Customer Service

1. Customer Mix Already focused on Gen-X (born from mid 1960-1970) and Baby Boom (born from mid 1940-1960) As customers aged, shifting spendings from product to experience such as clothing to vacations Cause spending less on retail To hedge against this risk, enhance its appeal to customers (13-30) called millenials Difficult to apply: going beyond target customer range Created a private brand, Bar III, for millenials Opened a temporary pop-up store in New York City In addition, created Impulse Beauty makeup department offering brands popular with younger customers To do that, focused on social media -> e-commerce

2. Customer Service product and service Trade off between Offered large product assortment No support extensive number of salespeople Solution: Training program “Magic Selling”

“Magic Selling” Meet and Make a Connection Ask Questions and Listen Give Options, Give Advice Inspire to Buy ... Sell More Celebrate The Purchase

3. Omnichannel Strategy Creating seamless shopping experience Creating a connection line between customer, Internet and mobile technology Goal Showing they surround customers Respond their needs independent from the way they prefer To Support Investment in system called “Search & Send” Enable salespeople access to products at any store Order it for delivery to customer’s home

New Opportunities International Expension Investing in Human Resource Creation of Freestanding Specialty Stores for Private Label Brands

1. International Expension needed because ... Growing in US difficult Intense competition Low productivity of the department store format Broader economic trends By this way Reach to global customer Get closer to supplies

2. Investing in Human Resource Macy’s thinks... Important to engage with customers Understand their needs Use technology to convert those needs to sale Support idea “Right person in right place” In long term -> salesperson -> expert

3. Creation of Freestanding Specialty Stores for Private Label Brands Tested this strategy in late 1980’s on three private label lines Aeropostale (casual apparel for teens) Charter Club (classic apparel for women aged 25 to 55) Fantasies by Morgan Tailor (intimate apparel) Fantasies by Morgan Tailor discontinued, others sold

Question is that...? How would Macy’s grow in the future? Should it invest in specialty stores or not?