Business of Fashion

Terry Lundgren

Macy’s Expertise in Business

Three key strategic initiatives — My Macy’s localization, omnichannel integration and MAGIC Selling — combined to drive sales growth at Macy’s in 2011. We believe we still are in the early stages of implementation in each, and we have intensified planning for future improvement in 2012 and beyond.

With My Macy’s localization, we continue to tailor the merchandise assortment and shopping experience in every store location for the customer who shops there. We believe this has created a sustainable competitive advantage for Macy’s, and we have made significant progress over the past three years to offer our customers the right products in the right place at the right time.

In late 2011, we launched a new internal initiative called “My Macy’s 2.0.” It involves a series of targeted initiatives — each guided by a team of our most talented executives — aimed at further refining the way we serve local customers.

The omnichannel strategy involves integrating our stores, the Internet and mobile devices so we can surround our customers at every turn and deploy all of the company’s inventory (no matter where it may be located) to serve their needs. A pivotal part of the omnichannel strategy is our capability to allow associates in any store to sell a product that may be out of stock locally by selecting merchandise from other stores or our online fulfillment centers for shipment to the customer’s door. Likewise, our online fulfillment centers can draw on store inventories nationwide to fill orders that originate on the Internet or via mobile devices.

At the end of 2011, we had 23 Macy’s stores set up to pick and ship orders from other stores or the Internet. By the end of 2012, we expect to have approximately 290 Macy’s stores set up for shipping, on top of the inventories in four primary online fulfillment centers that will be in operation by year-end.

We continue to experiment with a wide range of new technologies, both in store and online, that improve the customer shopping experience. These include using tablet computers in selected departments in stores, piloting tap-and-pay mobile technology, offering customers paperless digital receipts, accelerating the adoption of QR code technology to engage shoppers, and delivering special offers to shoppers via Foursquare, Shopkick, Google and Facebook, among other pervasive social media.

Best Brands, Exclusive Merchandise – Macy’s continues its legacy of offering merchandise from the best and most-wanted brands, and in providing customers genuine value — the right combination of fashion and quality at a good price. Much of Macy’s merchandise assortment is clearly unique. In 2011, about 43 percent of merchandise sold at Macy’s was exclusive or in limited distribution. This includes Macy’s outstanding portfolio of private brands, which account for about 20 percent of sales.

Focusing On The Millennial Customer – We will intensify our efforts in 2012 and beyond to better serve the needs of Millennial customers, those between the ages of 13 and 30, now our nation’s largest generation. Our plans include re-focusing the merchandise assortments in the Mstylelab and Impulse departments so they are more exciting and relevant to these fast-fashion customers, as well as stepping up the shopping experience and store environments.

Herald Square Flagship Renovation – In early 2012, work began on one of the largest capital investments in the history of our company — the top-to-bottom renovation of Macy’s Herald Square flagship store in New York City. This four-year, $400 million reinvention will make Herald Square the world’s most exciting, interesting and technologically advanced department store. In the course of the project, we will be repurposing 100,000 square feet from offices and stockrooms to selling space, restoring the grandeur of the building’s exterior, creating dazzling, updated presentations of new and expanded merchandise space, and significantly expanding the men’s store. To the delight of shoppers, we are creating the world’s largest women’s shoe department (with 39,000 square feet of continuous selling space), which is expected to open in fall 2012.

Private Brands – Macy’s portfolio of private brands, including Alfani, American Rag, Charter Club, Hotel Collection, I.N.C. and Style & Co., continue to thrive in Macy’s stores. These private brands deliver outstanding fashion, quality and value to the customer. And their approach to the marketplace has been strengthened through the local focus of My Macy’s. Merchandise for each private brand, available “Only at Macy’s,” is developed to appeal to a certain customer lifestyle and is supported with marketing programs that create a precisely defined image. Macy’s also develops private label goods to meet specific customer needs and to fill gaps in the assortment. Private brands continue to account for about 20% of Macy’s sales.

Social Media – Macy’s and Bloomingdale's have a rich presence in social media including enhanced programs on sites such as Facebook, Twitter, YouTube, and Pinterest. Active involvement in social media is key to the company's ability to interact effectively with a new generation of customers – the emerging Millennial customer included. Macy’s now has more than 6.8 million fans on Facebook and has implemented a rich Twitter strategy with a range of Twitter feeds focused on strategic aspects of the business.

Giving Back to Our Communities – Macy’s, Inc. believes in giving back to our local communities. Our contributions, leadership and volunteer efforts help create stronger, healthier places for our customers and associates to work and live. Collectively, contributions in 2011 from the company and the Macy’s Foundation — as well as employee contributions through workplace giving campaigns and customer contributions through our signature giving programs — totaled more than $66 million. Our associates gave more than 111,000 hours of their personal time for community service.