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Retail Trends

Working His Magic

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T erry Lundgren juggles a multitude of roles. An innovator in retail merchandising and marketing, a proponent of branding and a champion of localization, he is first and foremost chairman, president and CEO of Macy’s, Inc. He’s also the commissioner on Women’s Economic Development in New York, chairman of the National Minority Supplier Development Council and co-chairman of the New York City Partnership. In the nation’s capital, Lundgren is recognized as the chairman of the board of directors of the National Retail Federation. He was appointed to the post in January 2009, and will turn the reins over to Saks CEO Steve Sadove next month. There’s no disputing that Lundgren’s signature achievement has been overseeing the transformation of Macy’s, but the impact he’s made in Washington cannot be overlooked. Lundgren and NRF’s executive and volunteer leadership have worked diligently and effectively to raise the profile of the retail industry on Capitol Hill and at the White House. Lundgren became NRF chairman as the retail industry — and the rest of the economy — was battling the initial fallout from the recession, with ripple effects felt for the next two years. About that time NRF was going through its own changes, welcoming new president and CEO Matthew Shay. At Shay’s request, Lundgren agreed to stay on for an additional two years. Though he’ll pass the gavel next month, Lundgren expects to continue playing an active role in lobbying for the retail industry. He recently answered questions from STORES on his NRF tenure and career in general.

You stepped into the role of NRF chairman at a difficult time in the retail industry. What were some of the earliest challenges you faced? Our biggest challenge was — and in some cases, still is — how to harness the incredible size and scope of our industry so we are speaking with one voice in the national dialogue on key issues, and particularly in Washington. We have made a lot of progress in adding new members to NRF, including retailers large and small. And around the NRF table, we are doing a much better job working together on issues of common interest — things like less onerous interchange and swipe fees, tax fairness, free trade and easier access to visas for international visitors.

Partisan dissention is a stumbling block. What advice would you give to those looking to connect with our elected officials about overcoming some of those hurdles? It’s time for our elected representatives in Washington to come together to address our country’s most pressing problems. We need to prioritize job creation in America. We must work together to avoid the “Fiscal Cliff” by aggressively reducing our national debt. These are not Democratic or Republican problems — they are American problems that affect every individual and industry, including fashion and retailing. Financial uncertainty and excessive debt stifle growth and innovation, and we must overcome these issues if we are to continue to create jobs. We in the business community must be prepared to be supportive of genuine long-term solutions that will help our nation to prosper and create jobs.

What are you most proud of as you look back on your tenure as NRF Chairman? We assembled a terrific and collaborative group of leaders representing a wide range of retailers who became our executive committee, and this group accomplished many things during my tenure. First and foremost, we hired Matt Shay to become CEO of NRF, and that has turned out to be a very good decision. There are a number of tactical decisions and issues we led, such as convincing Congress to require that debit card swipe fees be reasonable. This benefitted consumers who shop our stores and online sites. At a broader level, I am very proud of our “Retail Means Jobs” campaign. By pointing to the enormous impact our companies have on the country, we have been able to change the conversation. When we started pointing out to opinion leaders and elected representatives that the retailing industry supports 42 million American jobs and $2.5 trillion of GDP, they paid much more attention to our point of view.

Was there one issue where you felt NRF was particularly effective in making its voice heard and driving change? One very clear-cut example is the activity around tourist visas. There are millions of people in nations such as China and Brazil who want to visit the United States to experience our culture. The money they spend results in more American jobs and additional tax revenue. But the process for getting a visitor’s visa has been onerous — long and complicated. With NRF’s strong encouragement, the Obama Administration streamlined that process and minimized the bottleneck. Today, more international tourists are coming to America from those countries. It’s a clear win for everyone involved.

What do you see for NRF in the near term? Are there things NRF should do more of? Less of? NRF has become much more focused in the past few years around the subjects that matter most, and where we can provide the greatest value. Going forward, we need to strengthen the intensity of that focus, as well as leverage it to our collective advantage. We have to drive home to the White House and Congress that a healthy retail industry means economic growth, more jobs, more tax revenue. Consumers really do drive our economy, and retailing is how that engine translates to economic value on the ground every day for our country. We need to maintain the focused, clear message and speak loudly and consistently to our political leaders until everyone in Washington, D.C., understands and believes that Retail Means Jobs and that many of these jobs will translate into outstanding careers.

Switching gears… In the past three years, we’ve witnessed enormous change. Macy’s has not only kept pace — it has set the pace. Tell me about the culture at Macy’s and how it has been shaped under your leadership. We reinvented our company in 2009 and instilled a culture of growth: We fundamentally changed the way we do business. Everyone’s job changed, including mine. Previously, we were decentralized and fragmented. Today, our organization is unified. We centralized core functions such as merchandising and marketing in New York City, yet we also created a new nationwide field organization with experienced merchants in 69 markets so we could tailor our merchandise locally, store by store. We adopted new strategies that have resulted in Macy’s and Bloomingdale’s being at the vanguard of omni-channel retailing — stores, Internet and mobile. We have invested in training our associates to more effectively engage customers. Today, the customer is at the center of all decisions at Macy’s, Inc. The plaque outside my office door says “Chief Customer Officer.” We have really taken to heart the philosophy of customer centricity.

I know that Macy’s has a full-court press on for Millennial Shoppers. That cohort’s size and scope make it enormously important, but its shopping behavior makes it a challenge to cater to. What needs to be done to connect and serve Millennials? You are correct that Macy’s is pursuing a very aggressive new strategy to serve Millennials. We define this demographic as customers ages 13 to 30. It’s now America’s largest generation, and this customer buys $65 billion a year of the kinds of merchandise sold by Macy’s. So how do we hit the mark with Millennials? For us, it starts with product. We are in the process of launching 13 new and exclusive brands at Macy’s that are specifically aimed at serving the needs and interests of this customer. We are expanding another 11 brands that already are successful with Millennials at Macy’s. We are experimenting with new technology and environments in our stores aimed at the Millennial generation. We are working on a range of new marketing programs, including innovative uses of social media. It is a comprehensive approach that even led us to create a whole new multidisciplinary Millennial organization within Macy’s. We have spent a lot of time and resources studying this customer. But even more important, many of our executives working on the Millennial business at Macy’s are themselves members of the Millennial generation. They are energized with great ideas because they know and understand the opportunity first-hand.

It feels like our industry is at a point of convergence as e-commerce, mobile and social come together and steer retail reinvention. As you look to 2013, what are you most upbeat about — and conversely, what keeps you up at night? I’m glad you asked about convergence. Omni-channel is one of our key strategies at Macy’s and Bloomingdale’s. We have taken a 360-degree view of the customer, and positioned ourselves to serve her needs whenever, wherever and however she wants to shop — in stores, online and via mobile. And we are making the entire inventory of our company — no matter where it may sit — available to satisfy the customer’s demand. So I have to say I am very upbeat about omni-channel. After all, our online sales are up by nearly 40 percent year-to-date in 2012. That’s on top of an increase of 40 percent last year, about 30 percent the year before that and 20 percent the year before that. I sleep very, very well, so not much literally keeps me up at night. But I do think a lot about the challenge of continuing to move quickly enough to stay ahead of the customer when it comes to technology and innovation. We are working day and night on new ideas — continuously testing and learning. I always think about how we can do even more.

What’s the best advice you’ve ever received? That’s a tough one because I have had so many incredible mentors over the course of my career. And as a result, I’ve gotten a lot of really helpful advice at every step along the way. But here’s what comes to mind right now… At the end of 2008, when the economy fell off the cliff and we thought the sky was falling, someone pointed out to me the famous quote from Winston Churchill: “If you are going through Hell, keep going.” I thought about that a lot and it gave us inspiration to use the economic downturn as the opportunity to make many fundamental changes in our business to prepare for the future. So we made lots of controversial changes in 2008 and 2009 on the philosophy that our risk was low because the level of business couldn’t get much worse. Those decisions — and the new strategies we have put in place — really have paid off. We have now delivered sales and earnings growth for 11 consecutive quarters, and we have gained a significant amount of market share. I have to say, Churchill was right!