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Harnessing the Might of Macy's

Chief executive officer Terry J. Lundgren is out to prove that bigger really does mean better.

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Beauty Inc issue 04/22/2011

Clearing room for a hair care assortment is a bit like crossing the Rubicon since department stores have historically left those products to the mass market. “It’s an obvious opportunity for us,” says Gonzalez, acknowledging that Macy’s does not sell hair products in its main beauty department.

“We’ve been talking about it for a long time,” adds Lundgren. “It’s one of those businesses that if you bring in one vendor, is it going to be enough volume in every store to pay for an associate who can talk about hair? The answer has been ‘no’ in the past,” says Lundgren. “Now, bringing it in as part of Impulse you can make that work. It’s a natural for us.”

He clarifies that the products have to bring innovation and lend themselves to an assisted-sell environment.

“There are certain customers who care a lot about the hair products that they use,” he says. “If all you care about is the lowest possible price, you can just put soap in a bottle and call it shampoo. There is plenty of that out there.”

On the subject of whether the early Impulse Beauty units are showing a compstore increase, a Macy’s spokesman says, “Results have been very positive, both in the original pilots and the rollout locations.” Although Macy’s refused to comment on the amount, one industry source said the chain is aiming to do $500,000 at each Impulse Beauty unit “and has succeeded in quite a few cases.”

Macy’s continues to tinker with the concept to improve productivity. “One thing I learned was that we weren’t using the end-cap displays correctly,” says Gonzalez. “So, in some of the new [shops] that we’re opening up, we’re actually merchandising the end caps with product and that’s an opportunity to use our space more effectively. Also, in some of the very early pilots [stores] we tried duplicating product that was already in another part of the floor. That was too confusing to the customer. We didn’t need to do that.”

Since Macy’s trump card in competing with the mass market is the service provided by beauty advisers, the question then becomes what can Impulse Beauty offer that is not already available in the market. “We have a staff there and they’re trained on all the brands,” says Gonzalez. “We have a person who coordinates all the information from all the vendors so that we can make sure that [the staff is] fully trained.”

 

Last fall, Macy’s implemented a storewide sales strategy for its employees called Magic Selling, an acronym that stands for: Meet and Make a Connection; Ask Questions and Listen; Give Options, Give Advice; Inspire to Buy and Sell More and Celebrate the Purchase.

“[Service] is the next major step for us,” says Lundgren. “We trained 130,000 employees last year. We’re retraining them now, because you just can’t do it once and then just hope for the best, you really have to make it a culture shift and a change and a focus on engagement as opposed to just ringing the register.…It is the most expensive training initiative we have ever embarked upon.…We’ve made incremental progress each year, it’s time to make big progress.”

Gonzalez adds, “This is about selling skills, it’s not about product information. It is about selling skills that you can use whether you’re selling fragrance, treatment or selling a handbag. It’s how to engage with a customer.”

With the budding Impulse Beauty experiment and so many Macy’s doors, the organization has been reorganized to give senior merchants and planners a telescopic view of what’s happening at the grassroots level.

In the spring of 2009, Macy’s put in a structure that pairs every gmm with a companion general planning manager with the same product scope. Likewise, every divisional merchandising manager has a divisional planning manager. And all buyers report to the chief merchandise planning officer, Julie Greiner.

As a gmm, Gonzalez works with Farrell Foster—executive vice president and general planning manager of cosmetics, fragrances and shoes—who leverages the broad brand strategies down to a door-to-door level.

While Gonzalez is working on assortment strategies on the top level, Foster says his job is to implement those decisions by each location “and make sure that we register who the customer is in each one of the buildings, make sure we’re distorting the categories that are right for each one of our buildings and make sure that we deliver on our commitment in regards to receipts to drive the sales piece of it at a location level.”

Lundgren sums it up: “Muriel buys it and Farrell distributes it.”

Beneath that level there are eight merchandise planning managers responsible for planning cosmetics. They report to a national planning manager, who reports to Greiner. In addition, in each of the 69 local store districts, there is a district merchant for cosmetics, who is responsible for store-level execution in 10 to 12 stores. These district merchants are part of the store’s organization. “With this structure, the district teams are organized around approximately 10 stores, and the whole team is active in those stores every week. They live in these 69 cities around the country, that’s what they do. The information that they feed up is filtered through these eight regions and then that gets to Farrell and Muriel for their decisions and execution,” explains Lundgren.

“It should’ve been done this way forever and probably was 50 years ago when we only had eight stores in each one of these companies. It’s almost back to the future,” he says.

“We now have this filtering system through the organizational structure that allows information to fl ow to Farrell’s organization to help us respond to the product they’re looking for and become locally relevant.” Lundgren continues, “That was really our vision. We said, ‘How do we get closer to the customer? How do we capture the information we know that the cosmetics department in NorthPark, Dallas, has that we couldn’t capture when we were trying to buy that product from San Francisco? Now we’ve got an organization structure that, to my knowledge, no other retailer has.”

Macy’s interest in local buying habits enables the team to zoom in on retail hot spots. One such hot spot is the Impulse Beauty unit in a D-level store located in, of all places, Delaware. That little shop turned out to be the most successful in the Impulse location, right behind the Herald Square outfit in New York.

“Through on-the-ground intelligence and feedback from the field, we really know who this customer is,” says Foster. “This particular store is located near a university, so it’s a younger customer base. Understanding the right product for the right store with a great selling effort has made this the number-two store.” Gonzalez adds that another hot spot was found in the Flushing section of Queens in New York. “We discovered certain stores that were in heavily Asian areas that, when we put the right selling people behind the counter, the business absolutely skyrocketed,” she recalls.

Each small success helps to boost the company’s confidence.

Lundgren says, “There is a broad group of competitors in the beauty world today and we’ve demonstrated in this past year that we can take market share from everyone and we intend to do that in 2011 and beyond.

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