'Zero Limitation' on How Federated Will Grow Macys.com
Federated chairman Terry J. Lundgren made that confident prediction yesterday at a standing room-only session organized by Shop.org and its National Retail Federation parent. Macys.com, Federated's e-commerce flagship, will gain boost after boost as regions are introduced to Macy's.
"There's zero limitation on how we grow [Macys.com]," Lundgren told the audience of retail executives attending NRF's 95th Annual Convention & Expo.
Macys.com has been up and running for almost nine years, he said. It will benefit from the surge in the number of Macy's stores -- 425 today, 450 by September and eventually to double to 850. The macys.com site continues to get more integrated as the Macy's brand spreads through the United States.
"But it's clearly gained in importance, both in marketing messaging and its importance to customers," Lundgren said.
The site is based in San Francisco under the supervision of Macy's West. A staff of 100 in that office supports the site with help from another 125 in New York who handle merchandising.
Multichannel Strategy Key
Macys.com's role in multichannel retail is critical. Lundgren said 59 percent of macys.com customers bought in Macy's stores in the past year and 40 percent of the transactions were on the Macy's charge card.
"We know the multichannel customer spends 20 percent more than the single-channel customer," he said. "Seventy-two percent of macys.com transactions come from ZIP codes within 20 miles of a Macy's store."
Customers, however, shop offline for the emotional experience, although sales of bridal wear and home furnishings are up online. Even apparel and accessories are growing online, Lundgren said.
Representatives from macys.com are invited to all meetings with stores to ensure that all divisions are on the same page.
But there was a time when Federated was worried by e-commerce and its effect on its various retail brands.
"In the early days online, the fear was that it would just get away from you," Lundgren said. "What promises do you make to the consumer?"
What if someone had a bad experience with Ralph Lauren? He or she would not blame the retailer Bloomingdale's, but Ralph Lauren the brand. And Ralph Lauren is a major account of Bloomingdale's.
During the dot-com heyday, "anybody could be in the business," he said. "Now there's no capital. It's narrowed the field dramatically. Now those who are in the market are in the market to make money."
Panel moderator Carrie Johnson, vice president and research director at Forrester Research, asked where e-commerce's priority was within the organization.
"I used to look at it like a store," Lundgren said. "Now it's heading up to be our largest store. Already macys.com is several hundred million [dollars in sales]. Now we look at it as our single biggest store with a momentum to grow."
Asked about cannibalization, Lundgren didn't even pause.
"I worried about it -- 'Gee, are we trading sales here?' Well, I stopped worrying about it. Because that's what the customer wants."
So rather than lose business to other online opportunities, he would rather have preferred the customer to shop via another Macy's channel. Of course, Lundgren recalled a time when a store manager said he had a bad month because "customers bought everything online and returned that to my store."
"Every time a customer comes in for returns, turn that around into a loyal customer," Lundgren told Macy's managers.
One weak link in Federated's e-commerce strategy is with the Bloomingdale's brand. This writer asked what was the company's e-commerce strategy for Bloomingdale's its site was not as rich as macys.com.
Lundgren said Federated was converting 400 to 500 stores into Macy's, while opening only four to eight each year for Bloomingdale's. So the Macy's brand has more strength to push online sales.
"Once we believe the infrastructure is set, the technology is set, all the details brought together … all the backend will be the same," he said.
However, for all of the attention lavished on it, macys.com still has some way to go in terms of profitability.
"I believe it'll be a while before our online business will be as profitable as our department store," he said. "But the ROI is there."
The company is using marketing to targeted groups to drive traffic online, including tools from e.piphany, he said.
With 40 percent of Americans shopping online, Lundgren was quite upbeat about his company's e-commerce prospects.
"I believe this business will continue to grow for us significantly in the double-digits," he said. "The question is, at what point in time does it become a mature business. We'll fuel it as long as we can."
When asked why e-commerce predictions made 10 years ago were still not met, Lundgren said the projections didn't have logical and sound business models. Besides, things were different then.
"Ten years ago, the Internet was a few guys from Stanford e-mailing each other," he said.