Walmart Pledges $25MM On Katrina Anniversary But The Region Needs Stores


The anniversary of Hurricane Katrina is cause for reflection. The disaster — both the natural and man-made ones — continues to impact the gulf coast. Charitable efforts continue — Walmart recently made a large monetary pledge — but the real charity may be opening stores in areas sill under-served by retail and in desperate need of goods and services.

As Hurricane Katrina approached the gulf coast, retailers were among the earliest making preparations and strategizing relief. Walmart arrived in the effected area before FEMA, and it wasn’t alone. Notably, Home Depot and Lowe’s arrived with building materials, generators, and other items critical to first survival, and later rebuilding. Electronics stores and auto supply outlets made equipment available and all worked tirelessly to ensure the safety of their employees.

But it was Walmart in particular, that got called out for the efficiency and speed with which supplies made it to effected areas. The retailer had established an emergency operations center at its Bentonville, Arkansas headquarters and used it to plan relief efforts.

Retailers during Katrina functioned far more efficiently than municipalities. They had stores and employees to protect and took precautions that preserved their investments. Then they went further.

Many companies empowered local employees to otherwise unusual things. CVS permitted a loss prevention coordinator to set up a mobile pharmacy to serve evacuees from New Orleans and filled roughly 20,000 prescriptions from a temporary site inside the Houston Astrodome, according to Loss Prevention Magazine.

There have been social media posts regarding these retail efforts as people note the 10 year anniversary of Katrina, all thankful and grateful to these companies for either treating them right as employees or for the much needed goods supplied.

In all, Walmart raised $20 million in cash, donated 1,500 truckloads of merchandise and enough food for 100,000 meals, the Wall Street Journalreported in 2005. It also promised a job to all of its displaced workers.

While Walmart wasn’t alone in these efforts, its size, advanced technologyand data centers allowed to respond faster and bigger than any other retailer. It’s also worth noting that Walmart was quick to respond to the World Trade Center disaster on 9/11. One reporter friend recently recalled the sight of Walmart trucks heading into New York City as the bridges and tunnels were clogged with those heading out. Walmart had no stores there at the time, it still doesn’t, but it sent supplies in to help relief workers.

Retail trade associations have been deeply involved in emergency response efforts. The Retail Industry Leaders Association and the National Retail Federation have members that sit on the Department of Homeland Security’s council. And it’s not just about disaster response, but company’s advanced data collection and analytics capabilities often put its predictive and planning capabilities ahead of the government’s.

For all these successes, there have been quite a few ways in which retail has failed in the aftermath of Katrina. Notably, many of these stores never re-opened in some of the most devastated areas. There are good business reasons for this of course, the lower population can’t support big box stores and operating at a loss as a customer service isn’t much of an option. Big businesses aren’t charities, but can be charitable.

Walmart last week pledged $25 million over five years to support organizations in disaster recovery and resiliency efforts worldwide. Part of this money is earmarked for grants to select local nonprofits in the U.S. Gulf Coast region.

Here’s a thought: What about pledging to open locations or aid small independent retailers in doing so?

New Orleans has recovered much in these 10 years, but it’s still very much  work in progress. The poorest areas like the hard-hit Lower Ninth Ward are still suffering and the lack of retail has hindered the rebuild and return of residents.

What if national retail chains opened some of the newly developed small format stores in these underpopulated areas? What if grants were made available to small businesses? Could a company the size of Walmart or Target let an independent operator tap into its purchasing power or distribution system, to get goods to markets too small to warrant a bigger box?

I don’t have the answer to these questions, but it’s hard to imagine that an organization big enough to achieve first responder status in a national emergency couldn’t figure out how to seed a different kind of recovery, the kind that brings people back, feeds, clothes and nurtures them with the goods and services that only retail can provide.

Macy’s Launches Personal Stylist Shopping Service


The retail giant is set to launch its new stylist service My Stylist@Macy’s this fall, complete with complimentary personal shopping and the ability to make in-store appointments online.

In a company release Wednesday (Aug. 26), Macy’s said its free service will be available at 135 select stores nationwide, with the goal of helping shoppers find the perfect items for themselves, as well as guiding customers in selecting gifts for family and friends.

“We are ecstatic to bring this unique shopping experience to our customers,” Susan Bertelsen, Macy’s group vice president of My Stylist@Macy’s and Wedding & Gift Registry, said in a company statement. “Macy’s prides itself on offering the best range of fashion and accessories, as well as gifts for loved ones. With My Stylist@Macy’s, we will bring this expertise to the customer on a more personal level, and help ensure that they walk away with exactly what they need, from every day to life’s biggest moments.”

The launch of My Stylist@Macy’s is the company’s latest move to continue enhancing the shopping experiences of its in-store consumers while also fighting against the aggressive push many of its eCommerce rivals are making into the retail sector.

Last week the retailer announced plans to upgrade its fitting rooms in select stores with high-tech gadgets in order to build upon one of the few advantages brick-and-mortar retailers have over their eCommerce-only counterparts.

Macy’s digitally revamped dressing rooms will use technology such as smartphones and tablets to enhance the customers’ experiences.

According to Bloomberg, Macy’s is piloting these new fitting rooms in the women’s swimsuit and athletic department at a store in Manhattan Beach, California, where customers can browse products displayed on mannequins and use a Macy’s app on their mobile device to have a particular item delivered to a dressing room in their selected size.

Once in the fitting room, customers can request additional sizes and other items using the same mobile app. The goal is to have customers spending more time trying on clothes and less time rummaging through racks.

Boosting the in-store customer shopping experience with new technologies and services may be Macy’s best bet in its ongoing competition with eCommerce giant Amazon.

A recent prediction from analysts at financial services firm Cowen foresees Amazon becoming the No. 1 U.S. apparel retailer by 2017, “comfortably passing” Macy’s for the top spot.

The team of Cowen analysts, led by John Blackledge, said it estimated Amazon’s U.S. retail apparel gross merchandise value will rise from $16 billion in 2015 to $52 billion in 2020, with the company’s U.S. market share increasing to 14 percent, up from 5 percent.

Gap to End ‘On-Call’ Shifts For Workers


Apparel retailer Gap Inc said it would end on-call shifts at all of its stores and improve scheduling policies to provide employees with at least 10-14 days’ notice.

The decision follows an inquiry by New York State attorney general Eric Schneiderman’s office into the legality of on-call shifts at 13 retailers, including Gap, Target Corp, JC Penney Co Inc, Abercrombie & Fitch Co and TJX Cos Inc.

On-call shifts require workers to be on call for shifts that may be canceled with little notice. The system allows retailers to adjust staffing based on store traffic forecasts made by scheduling software. Companies can then reduce over-staffing and under-staffing.

Each of Gap’s five brands were aligned to phase out on-call shifts by the end of September and had committed to phase in the new schedules by early 2016, Gap spokeswoman Laura Wilkinson said in an email.

When Schneiderman began the inquiry in April he said on-call shifts might violate New York law which calls for employees to be paid for at least four hours at the basic minimum hourly wage for any scheduled shift they report for.

“I commend Gap for taking an important step to make their employees’ schedules fairer and more predictable,” Schneiderman said in a statement on Wednesday, which made no further comment on the findings of the inquiry. (

Abercrombie & Fitch said this month that it would end the practice for all workers paid by the hour, while lingerie retailer Victoria’s Secret, owned by L Brands Inc said in June it would end on-call shifts for workers.

6 Reasons Utah Is Taking the Tech World by Storm


There are many areas in America–San Francisco, Boulder, Austin, New York, Washington DC–that are widely-known as hotbeds for technology and innovation. Utah isn’t as widely-recognized, but is quickly rising up the ranks as a focal point for tech and startups.

Here are some of the reasons the Beehive State is taking the tech world by storm:

1. Environment

In four of the last five years, Utah has been ranked by Forbes as the best state for business in America. There are many contributing factors–large talent pool, low cost of living, technology hub, job growth, favorable economic climate–and the time ahead is just as bright, with Forbes projecting Utah to continue as a pro-business powerhouse into the foreseeable future.

2. Quality Over Quantity

Utah is never going to lead the nation in quantity of venture-backed tech startups, that’s Silicon Valley’s area of expertise and it’s not changing anytime soon. Where Utah’s tech startups are making noise is in the quality of venture-backed deals, specifically the amount of money raised on a per-deal basis. 2014 saw two Utah hotbeds–the Provo-Orem area ($51.3M) and the Salt Lake-Ogden area ($17.2M)–rank in the top three nationally for dollar-per-deal average. Quality over quantity might be an overused statement, but it rings true here.

3. Homegrown Talent

While Utah has shown a propensity for attracting top out-of-staters, it’s the homegrown talent that really speaks to a bright future in the Beehive State. Nearly all of Utah’s biggest success stories, from Pluralsight to Vivint to InsideSales, follow similar paths–native Utahns starting a company, keeping it headquartered in Utah, and slowly but surely building an empire. And with two of the nation’s leading collegiate entrepreneur programs–The Rollins Center for Entrepreneurship & Technology at BYU and The Lassonde Entrepreneur Institute at University of Utah–continually feeding the talent pool, Utah can rest assured that even as times change, the talent remains the same.

4. Mormon Missionaries

I know this might sound a bit out of the norm, but think about it. Sending 18-19 year old guys & gals all over the world to teach anyone they come in contact with about religion!?! That is one of the hardest ‘sales’ job anyone can have. I am biased, as I served my mission in southern Brazil, learned to speak Portuguese, loved the Brazilian people, and essentially matured to become a fairly responsible adult.Mormon missions are completely voluntary, to be exact, you have to pay your own way to go. I saved up my entire childhood in order to pay for the 2 years abroad. But the reason I bring it up here, is because it made me 10x better at my interpersonal communication…aka sales skills.

Utah is full of bi-lingual, returned missionaries, who know how to work incredibly hard (you may have seen the missionaries knocking on doors in your neighborhood), they have high integrity, and they know how to communicate with people. This is why companies like Oracle, Thumbtack, EA Sports, Microsoft, Adobe, and so many more companies are building offices in Utah to take advantage of not only lower cost employees (it’s cheap to live in Utah), but also for the quality and experience of the talent pool.

5. Events, Events, Events.

There are numerous weekly events–Startup Grind, Startup Conversation Series, One Million Cups, Startup Weekend–designed to highlight the rising tide of the Utah tech and startup scene. A number of Utah startup heavyweights, including Domo, Instructure, and Qualtrics, have created multiple-day events to let others learn what it takes to create a successful business. There is even StartFEST, Utah’s largest grassroots startup festival that encompasses an entire week (Aug. 31-Sept. 5) in downtown Provo and features 100 speakers, events, workshops, and concerts. Just like there can’t be smoke without fire, there can’t be successful startup events without a successful startup community.

6. Utah Venture Capital

CB Insights wrote in October 2014: Don’t Sleep on Utah. With Funding Nearing $1B, the State Has Become a Venture Capital Hub.

There are fantastic Utah investors such as:

  1. Peterson Partners/Ventures
  2. Kickstart Seed Fund
  3. Peak Ventures
  4. Pelion Venture Partners
  5. Mercato Partners
  6. Signal Peak Ventures
  7. Zetta Venture Partners
  8. Subtraction Capital
  9. Epic Ventures
  10. Sorenson Capital
  11. Dolphin Capital Group
  12. Banyan Ventures
  13. Aries Capital Partners
  14. Clarke Capital Partners
  15. Crocker Ventures
  16. Alta Ventures
  17. Stoneway Capital

Some alternative investors or angel groups also include:

  1. InnoVentures Capital Partners
  2. University Venture Fund
  3. BYU Cougar Capital
  4. Campus Founders Fund
  5. Decathalon Capital Partners
  6. Salt Lake Life Science Angels
  7. Rock & Hammer Ventures
  8. REES Capital
  9. Utah Angels 2
  10. Plus550
  11. Park City Angels
  12. SLC Angels
  13. Lendio
  14. USTAR
  15. Utah Microenterprise Loan Fund
  16. BoomStartup

If I forgot to mention someone–please add it to the commentary below, so we can have a full list to be as relevant as possible. Also, what are other reasons you believe Utah is on the rise?

Macy’s Forms Joint Venture to Test E-Commerce in China


Macy’s, Inc. has announced it has formed a joint venture with Hong Kong-based Fung Retailing Limited to explore retailing in China.

The joint venture, which is 65 percent owned by Macy’s, will start with an e-commerce pilot. For Macy’s, the joint venture is expected to develop significant new lessons on customer preferences and buying patterns in China.

Under the joint venture, Macy’s plans to begin selling in China in late 2015 through an e-commerce presence on Alibaba Group’s Tmall Global, a marketplace that connects overseas branded retailers to Chinese consumers. To be based in Hong Kong and called Macy’s China Limited, the joint venture will curate a Macy’s online merchandise assortment especially for Chinese customers and fulfill Tmall Global orders from Hong Kong through local logistics channels, including LF Logistics, an affiliate of Fung Retailing.

“By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales said Terry J. Lundgren, chairman and chief executive officer of Macy’s, Inc. “We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China.”

“We believe that, through the joint venture, Macy’s online presence on Tmall Global will give us insight that will serve us well in evaluating future international initiatives,” added Peter Sachse, Macy’s, Inc. chief innovation and business development officer.

“The potential for growth is significant,” said Sabrina Fung, Fung Retailing’s executive director. “While the Chinese online consumer is already one of the savviest in the world, there are untapped spaces to fill. There is demand for the quality and variety of power brands and authentic products associated with the world-famous name of Macy’s.”

Macy’s China Limited will be led by Kent Anderson, who will serve as managing director. Anderson is a veteran Macy’s, Inc. executive and long-time president of Sabrina Fung will represent Fung Retailing’s interest on the board of the joint venture company.

“As is always the case with Macy’s, we will test and learn as we progress and grow our business in China. We will take one step at a time,” Sachse said. “We intend to be a long-term player in this region of the world, and that requires we understand the customer so we can deliver an online shopping experience that Chinese shoppers will appreciate, value, and love.”

Macy’s began selling overseas into China and about 100 other countries with an edited assortment on in 2011. These goods are shipped to international customers from the United States. In the upcoming e-commerce test, Macy’s China Limited will ship to Chinese customers from inventories in Hong Kong, which is expected to improve speed, flexibility and pricing for the customer.

No physical Macy’s stores are planned for China at this time, but may be considered in the future based on the company’s experience in its e-commerce pilot.

Macy’s China Limited is expected to invest approximately $25 million in the operations of the joint venture over the next 18 months, of which Macy’s, Inc. will fund 65 percent.

Stores Are the New Black

The Grove Shopping Mall - Los AngelesTerry Lundgren, CEO of Macy’s, borrowed this quote during his opening remarks at the University of Arizona Global Retailing Conference in Tucson back in April, attributing it to NYU-Stern Marketing Professor Scott Galloway, who also happens to be one of the world’s experts in digital marketing.

Calling stores “the new black” is a nod to that old-fashioned expression referring to something that’s come into style. Simply said, it means they are not only not going to be replaced by e-commerce, they will thrive as the “in vogue” standard-bearer for retailing. In fact, even more dramatic than Galloway’s assertion that stores are now in vogue is his prediction that pure-play e-commerce is actually going away.

Bolder still, at a DLD event in Europe earlier this year, Galloway said, “E-commerce companies are either going to open stores or go out of business.” On the other hand, he also said, “(brick-and-mortar) retailers need to be excellent at digital or they will go out of business.” He went on to say, “I also believe that Amazon cannot survive as a pure-play retailer. Stores are the new black in the world of e-commerce. We’ve discovered these incredibly flexible robust warehouses called stores … retailers are not befuddled prey waiting around to be disrupted. They are in fact growing their e-commerce businesses.”

Wow. Amazon won’t survive as a pure-play? I think I’ve heard that somewhere before!

So, stores are here to stay, and of course I’ve been saying that for years. Forget about the panic among traditional retailers in the early 2000s over the fear of e-commerce decimating brick-and-mortar business. Fifteen years later e-commerce represents a paltry 7 percent of all retail sales, with the remaining 93 percent channeling through stores. However, the smart traditional retailers are changing, and changing in some pretty dramatic ways, if they want to be successful.

12533951The big change is that it’s not about online and off-line any more, it’s digical, (a mash-up of digital and physical), to use Galloway’s term, and yet another word for omnichannel, or allowing customers to shop how, when and where they want. And digital, while rapidly growing, is simply synergistic with physical stores.

Galloway also said that Amazon’s Achilles’ heel is its shipping costs, which are exploding 40 percent per year. “Over the last nine months those costs have gone up actually by more than 40 percent, which is not sustainable, not even for Amazon. It took in shipping fees of $3 billion, but spent $7 billion on transportation costs. Two-thirds of Christmas packages were brought to you free, up from one-third in 12 months. This is a race to the bottom. They’ve forced other retailers into free shipping. Click and collect: Order online, pick up in-store. Pretty boring but it’s a big trend, because it turns out that stores are great flexible warehouses.”

The New Rules Of Retail

“Shopping hasn’t changed. Consumers love shopping in stores, and retailers continue to focus on winning the war on traffic and conversion.” — Margo Georgiadis, president of the Americas for Google.

In fact, as reported many times here, the CEO of Walmart was quoted in The Wall Street Journal a year ago, making a declaration that Jeff Bezos should be very concerned about it at the very least, and shaking in his boots, as it potentially becomes his worst nightmare. The Walmart chief said, “…We don’t have 4,500 stores (referring to their total number in the U.S.), we have 4,500 distribution centers that also (double) as retail stores.”

Bezos should be shaking in those boots and opening physical stores sooner rather than later, because Walmart will crush Amazon once it puts its mind to doing so.

So, a decade after multiple dot-com bubbles have come and gone, the simple truth is that people love to shop in stores, and they’re not going to stop doing so. Furthermore, they can now shop online and pick up their purchases in the store (a.k.a., distribution center).

From “The War Is in the Store” to “The War Is Before the Store”

Regardless of Galloway’s credentials, the fact that Lundgren chose to endorse the statement is of particular significance, given the fact that Macy’s is considered by many experts to be the poster child of “all-line innovation” and omnichannel retailing. Last year, the retailer was the seventh-largest online retailer in the country, after Amazon, Apple, Walmart and others. Yet many people, even those in our industry, consider Macy’s a traditional department store. Macy’s was also named Mobile Retailer of the Year by Mobile Commerce Daily.

Lundgren’s endorsement not only signals his understanding of the store as a more important touchpoint than ever before—as the ultimate experience for customers—but also his recognition that while the “war” for the consumer’s purchase used to be waged primarily in the store, today the war begins on many different fronts just to get them to come to the store, to build traffic. And what used to be called “marketing 101” is now on the steroids of the Internet, smartphones, apps, social networks, big data and whatever new technology that popped up five minutes ago.

So for those of you who are cutting back on store budgets in order to invest in technology because you think that’s what will prepare your business for the next five years, let me tell you it’s not an either/or thing. It’s imperative to do both.

That’s a bummer, right? Spend millions on IT infrastructure and front-end systems and back-end systems, and on top of that, build out spectacular physical stores with analog and digital experiences that will knock customers’ socks off and make them loyal to your brand so that they’ll think of it first?

No fair, you say? Ha! I’m only getting started here.

Macy’s, for example, committed to enormous investments across both the online and offline platforms. It started when the recession hit with a major reorganization, transitioning its buying offices to 60 districts, moving all the merchandising people to New York, to be close to suppliers, and moving its Innovation Lab group to San Francisco, because that was the best place to compete for the Silicon Valley talent. Brilliant, no?

Macy’s invested in no fewer than 11 innovations last year, including Apple Pay, Mobile, Same Day Delivery, iBeacon, Image Search, RFID and more. There will be even more investment this year. They’re building fewer brick-and-mortar stores, and putting 150 percent of the savings into technology. They’ve found that by touching the customer through mobile, desktop and in-store, they can forge a more powerful relationship. The consumer who starts on her phone, then comes to the store, then tries on product, then goes back and looks on the desktop—spends 8 times more than the customer who experiences the brand through only one touchpoint.

Also speaking at the conference in Tuscon, Margo Georgiadis, president of the Americas for Google, and a former retail consultant at McKinsey, said, “Shopping hasn’t changed. Consumers love shopping in stores, and retailers continue to focus on winning the war on traffic and conversion.”

But the battleground is bloody. During the last two months of 2010, according to Google, retail traffic was 39 million in the U.S. Five years later, it was 18 million, almost half. Yet total retail sales grew from $641 billion to $737 billion in that period. So while consumers are making fewer trips to stores, once they get there, they spend more. Conversion rates are higher. Maybe in the past, a shopper would go on one reconnaissance mission for every actual buying trip. Today, lots of that recon work, or research, can be done online, resulting in a consumer who’s more ready to buy when she walks into the store.

People do 3 billion searches every day on Google. A full 20 percent of them, or 600 million, are shopping related. People are essentially walking around with every store, mall and brand in the world sitting comfortably in their pockets 24/7. Most of the buying will still happen in stores, but the shopping, browsing, evaluating and comparing steps are all moving online.

According to Healey Cypher, former head of innovation at eBay, 78 percent of consumers now practice webrooming, preshopping online before visiting the store. EBay’s research found that of consumers who went online pre-store and checked mobile or used some kind of interactive digital in-store, 86 percent of them converted, or bought something. And the lift to spend was a whopping 40 percent.

And the technology tools that retailers are using in-store to engage, delight and surprise consumers, and make the shopping experience neurologically addictive and one that they will seek out again and again, include digital mirrors and robotics to bring product to dressing rooms; interactive screens to see and order product; digital payment to cut down on waiting … and the list goes on and on.

Georgiadis said that to win the war for traffic before they come to the store there are three steps: 1) Own your “tribe” (know your customer) and build the entire value proposition around that customer’s dreams, 2) Commit to all-line—become seamless with respect to channels and touchpoints, and 3) Surprise and delight the customer. Deliver magic moments.

Surprise, Surprise: Millennials and Gen Y Prefer Stores

Clay Cowan, CMO at luxury off-price e-tailer Gilt Groupe, said that contrary to what most people think, online is not the preferred fashion channel for millennials or Gen Y. Their favorite way to shop is in mono-brand stores, where the experience, authenticity and storytelling of a brand come to life. But retailers must beware of this uber-sophisticated group of shoppers: “Gen Y is extremely price conscious. Having weathered a recession, they know how to game the system. They research a ton before they buy, and they’re very savvy.”

Cowan added that retailing has always been a social activity that people do with friends. Now, rather than literally going to stores with friends, the trend is that millennials’ pinning, liking, following, blogging or sharing their finds digitally is opening up all kinds of opportunities for retailers to engage with their consumers, and enabling consumers to engage with others in their networks, before, during and after the store. This is just another punctuation of the fact that the war is before the store.

And of course, adding to the importance of all the aforementioned points is the statistic projected by Forrester Research that by 2020 between 30 and 40 percent of total retail spending will be done by millennials.

A Final Note

At the end of the day, all that has been written about a “new black” is a static new standard or rule. It is all fluid and dynamic. Therefore, strategy and process always need to change because technology and the consumer are always changing.

As Terry Lundgren said: I’ve heard for many years that everyone’s going to kill the department stores, but
I feel better than ever…We’re not slowing down, we’re not stopping, the custom the same thing.”

And the war I’ve been using as a metaphor is also not just one war today. Indeed, the war is on two fronts: the war is before the store, and in the store. Do you think this is making our lives more complex, costly and anxiety ridden? You betcha!! But live with it. There is no option except to embrace all options.

Macy’s CEO Lundgren on Tight-Fisted Consumers


There is good news and bad news when it comes to Americans’ balance sheets. The good news is we’re getting healthier because we’re saving more money, and the national savings rate is back up to 5%. That’s also the bad news, because we’re saving our money rather than spending it. That keeps the retail business limited and caps economic growth. We continue to see evidence that while things are getting better, this economy remains fragile as the once red-hot Chinese economy slows, and people here at home worry about their jobs and finding work. I caught up with one of the leaders in retailing, the CEO of Macy’s, to find out what’s happening. And while Terry Lundgren, has yet to see a real pickup in spending, he’s not waiting around for it. Instead, he’s expanding into China and growing his online business, waiting for some of that savings to pour back into the economy. Our interview follows, edited for length and clarity.

Q: What are you seeing right now in terms of the consumer?

A: The consumer is saving more aggressively than they have in the past. He or she is spending in certain categories like housing, home improvement and automobiles. They’re going out to restaurants. But it’s not adding up to dynamic growth for the U.S. GDP. So it’s actually pretty sluggish. And we’re not getting our share. So there’s not a lot of activity on the apparel, accessories, footwear side of the business. We’re benefiting when somebody buys a house — they often will buy furniture and mattresses and things of that nature. But we’re just not seeing them in the rest of the categories (in which) we had hoped they would be spending by now. Tourists are also not here because of the strong dollar making things expensive.

Q: A lot of people are also talking about these off-price competitors —  the cheaper outlet versions. Is that part of the industry taking market share?

A: Yes. The consumer has been trading toward these off-price alternatives, and we’re actually getting into that business at Macy’s for the first time. We’ve had Bloomingdale’s outlet stores in the past. We’re continuing to open more of them. But for the first time, we’re opening Macy’s Backstage Stores so that we can participate in this off-price, in some cases discontinued merchandise, from a prior season offering that some of these other stores are benefiting from.

Q: Gaso prices have been declining, putting more money in pockets. And we’re expecting them to put that money back into the economy. But they’re not. What’s holding people back?

A: People are saving more than they have in the past. And I think some of those big-ticket items are eating up not only their ability to spend, but their time. I do believe that they’ll circle back over time once they’ve got their house, their car, repaired their home, or put in a new patio, etc., and purhase more broadly in the discretionary category. This economy doesn’t work unless consumption is robust in a fairly broad way because it drives GDP growth. It’s two-thirds of the economy and it’s driven by consumption. And so for us to see jobs, and the productivity of those jobs, be robust, it has to be because consumption. But it has not been as strong as we would have expected it to be. Once they start spending again, that will create more jobs and put more money back into the economy.

Q: Do you think they’re worried about their medical care? Is that why they’re saving so much more money?

A: They have been spending more on health care. That’s one of the categories where you’re seeing consumer spending increase. And I suspect that that will continue to happen throughout the balance of the year.

Q: You lowered your guidance for the rest of the year. Are you expecting promotions and expenses to weigh on things going forward?

A: I lowered my sales guides because of our sale of our adjacent property to our Brooklyn store, and … because of the weakness that we’ve had in the first half of the year. I’m making sure we don’t buy inventory for a higher plan than what we can expect to sell through. And so those are the precautions we’re taking as we guide for the second half of the year.

Q: But should we expect some promotions and sales?

A: This last quarter I actually took a major promotion out of the June period, a friends and family event, and frankly, it hurt us. What you’ll see is a very similar calendar at least in the case of Macy’s and Bloomingdale’s in the second half of the season. So yes we’ll be as promotional as we were last year.

Q: Let me turn to the China story. You entered an agreement with Alibaba to bring a Macy’s to China consumers.

A: Yes, the Fung Retailing Group. it’s gonna be 65% owned by Macy’s, 35% owned by Fung Retailing Group. They have a tremendous amount of experience in China. They have 1,000 stores already in China, specialty stores and vast knowledge. And we’re gonna set up a business there that’s going to be an online business working with Alibaba and their online division. And we’ll launch this fall season.

Q: China is the story of the moment for markets and the global economy because people are worried that the economy there is actually slowing. Perhaps this is actually not the time to enter China?

A: I actually think, Maria, this is the best time to enter because if you’re already there and you’ve had the benefit of the last several years of growth, it’s a challenging time for you. I think this is a good time for businesses like mine that were not there, but actually can build from a lower base. And, without any question, that’s where the middle-class consumer of the future is going to reside.

Q: There has been a lot of intervention by the Central Bank there. At one point they closed and stopped trading in Shanghai because they wanted to stop the bleeding. Do you worry that there’s too much government intervention in China?

A: This is a moment in time that there’s a lot of chaos and turmoil. If you were in China as I was three years ago, and attending some of the meetings with the president and other governments leaders, you know that while there’s going to be rocky moments along the way … they really do believe in a 7-year plan. They’re going to make mistakes. We all are. And with a growing economy like they have, we’re complaining about the growth slowing down. But it’s still growing at a rate significantly faster than the U.S. economy.

Q: Let me ask you about brands because that’s one thing that’s very important to the Chinese are logos and brands. But recently people have been saying, “Look, you don’t want to show excess. You don’t wanna wear the logos.” I know Michael Kors and Ralph Lauren are two very popular brands sold at Macy’s. Do you see a weakness there?

A: Whenever you see Ralph Lauren results or Michael Kors’ or Calvin Klein’s results, you can assume that we’re not far off of what it is they’re reporting about their businesses because we’re the largest customer. And when any of these big brands slow down, that affects our business. But I would never count out brands like this. These brands have had such a history of performance not just with us, but around the world.

What we all have to do is excite the customer and find product that they don’t really have, but, in fact, do want. There’s going to be a point in time where they’re going to go to their closet and say, “You know what? I really do need something new here and fresh.”

Q: What’s the catalyst to get things moving again?

A: Customers have to feel better about their financial situation because of the savings rate, which is higher than it has been traditionally. If you go back in time, Americans have had savings rates at the zero level for many years. Now that range is up to about 5%. At some point they’re going to say, “We can afford to splurge again.”

I also think frankly that fashion has to stimulate some of that activity, and we haven’t had a great deal of new fashion cycles that demand to change your wardrobe. And finally, I think you’re starting to see some real growth again.

Q: Where does the growth come from at Macy’s?

A; We’ve made one acquisition in the last 10 years and that was Blue Mercury. We’re opening 10 more of those. We’re the seventh large Internet company in America. And so we clearly have an advantage in the online space in terms of competing with other pure play online retailers.

Here’s Macy’s Plan to Revive its Slumping Sales, Profits


Macy’s M -0.84% keeps skidding.

The department store chain on Wednesday reported itssecond quarter in a row of declining sales, and blamed everything from a drop in international tourism to shifting consumer spending priorities to a corporate re-organization earlier in the year that continues to distract executives.

Macy’s, which also owns the upscale Bloomingdale’s stores, said comparable sales fell 2.1% in the three months ended August 1- while Wall Street analysts were expecting them to rise 0.4%. And its profit fell 26% to $217 million. The poor showing led the retail to lower its full year forecast halfway into 2015, and now Macy’s expects total sales to slip 1% for the year, rather than increase by that amount.

It’s unusual to see Macy’s on the ropes. Coming out of the recession, it deftly outmaneuvered competitors like J.C. Penney JCP -0.97% and Kohl’s KSS -8.83% of years, thanks to earlier investments in e-commerce and those stores’ merchandising missteps. It also benefited from have a more middle-class customer, less squeezed by the poor economy.

But more recently, Macy’s has been struggling to keep that edge: in a symbolic turn of events, TJX Cos, TJX 1.44% the owner of T.J. Maxx and Marshalls which has been siphoning business from department stores for years, finally surpassed Macy’s in size in 2014. And despite Macy’s digital muscle, analysts still expect to surpass it in 2017 as the #1 seller of apparel in the U.S.

Let’s have a closer look at what ails Macy’s, and at the steps it’s taking to get back on track.

1) Shift in consumer spending away from categories like apparel and home furnishings to travel, entertainment and electronics:

Chief Financial Officer Karen Hoguet said Macy’s again struggled with these consumer spending patterns last quarter, a big problem for a retailer that gets virtually all its business in those categories. Of course that doesn’t explain why Macy’s fell short of expectations, given that it has been calling out these trends for a few quarters now.

“We see opportunities for generating more sales from our customers,” Hoguet told analysts on a conference call. “It is clearly getting harder. As I said, there’s a lot of competition for the dollar in categories other than what we sell.”

2) A drop in international tourism:

Macy’s gets about 5% of its revenue from international tourism, or $1.5 billion a year. The Manhattan flagships (including Bloomingdale’s) and stores in San Francisco and Chicago are a big draw for international tourists. Hoguet said that drop in tourism lowered its comparable sales by a percentage point. She shouldn’t expect any relief anytime soon between the weak euro and the Chinese yuan, which has been devalued for two days in row. That is especially true of Bloomingdale’s, which felt the pain of fewer tourists last quarter than Macy’s did.

3) Increasing competition:

Kohl’s and Penney are back on the upswing (we’ll know more this week whether that has continued, when both retailers reported their second-quarter earnings), and T.J. Maxx continues to grow, squeezing Macy’s in its traditional department store business.

Both Kohl’s and Penney have made huge strides in integrating their stores and e-commerce, narrowing their tech gap with Macy’s. What’s more, both Kohl’s and Penney have been upgrading their own stores brands, which generate half of sales and also are exclusive to them, meaning they have more pricing power and are an attraction when those items are a hit with shoppers. Macy’s gets about 25% of its sales from house brands.

4) Sluggish economy:

Unemployment might be a multi-year lows and the economy humming along, but that’s still not translating into robust business for Macy’s, or retailers in general. Last month, the National Retail Federation lowered its 2015retail spending forecast.


So how is Macy’s responding?

1) Expanding outside the United States

Unlike Penney, Kohl’s or Sears, Macy’s has a cachet abroad, and it will try to see if that can translate into a sales bonanza when it opens its first international store in 2018 in the UAE. Macy’s on Wednesday also announced the creation of China Limited, a joint venture with Chinese retailer Fung Retailing Limited to launch an online flagship store on Alibaba’s online shopping mall for brands, Tmall Global. This will be Macy’s second attempt at e-commerce in China.

2) Taking on T.J. Maxx head-on

Next month, Macy’s will open the first of its Backstage outlet/discount stores that are squarely aimed at winning back customers that have defected to rivals like T.J. Maxx, but also to keep pace with competitors like Nordstrom which are aggressively opening their own discount chains.

Macy’s CEO Terry Lundgren admitted in June that he wasopposed for years to the retailer taking the off-price plunge, and it remains to be seen whether the market needs a new entrant, even one with Macy’s pedigree.

3) Beefing up its e-commerce

Looking to remain an e-commerce leader, Macy’s is testing out same-day delivery in more cities now and keeps pushing its other tech initiatives like smart fitting rooms.

4) Expanding its Bluemercury beauty retail chain

Macy’s keep expanding the Bluemercury chain of beauty stores it bought last year, with a view to bringing in new products to its stores (and compete with Penney’s Sephora stores, along with Kohl’s improved beauty sections) but also benefiting from that brand’s popularity. It is adding 10 locations and will reach 76 in all by year-end.

5) Raising money from its real estate

Macy’s is under a ton of pressure from activist shareholders to raise billions of dollars from its real estate, including its iconic Manhattan store. While the company is studying it seriously, it did announce plans to sell its downtown Brooklyn store to real estate developer Tishman Speyer, but lease back a few floors.

With Macy’s core department store business in a long slump, it remains to be seen how much longer the retailer can resist investor entreaties to get cash from more such assets.

Big Bucks: Retail’s Top Earners


Retail management may be well-paid, but on average their compensation falls slightly below what top executives earn in other sectors.

Still, the WWD list of Retail’s Top 25 Highest Paid Executives from U.S. publicly traded firms reveals that from a pay perspective, life in the C-suite can be sweet.

The top 25 included chief executive officers, chairmen, presidents, and executive vice presidents who collectively earned $347 million in 2014, with the top 10 earners bringing in nearly $200 million in total. Sixteen of the top 25 executives earned more than $10 million last year. Taking the top spot was Carol Meyrowitz, ceo of The TJX Cos. Inc. with $28.7 million in total 2014 compensation. Brian Cornell, chairman and ceo of Target Corp., took the number-two spot with a close $28.2 million. And L Brands Inc.’s Les Wexner was third with earnings of $24.1 million.

J.C. Penney Co. Inc.’s Marvin Ellison, president and ceo-designee, was next on the list with total compensation of $19.6 million while Wal-Mart’s Gregory Foran, executive vice president, took the number five position with $19.5 million. Pay amounts and titles were for the most recent fiscal year reported to the Securities and Exchange Commission.

On average, the top 25 retail executives earned $13.9 million, which is below the national average of $16.3 million as tallied by the Economic Policy Institute, which notes that since 1978 ceo pay has risen “997 percent, a rise almost double stock market growth.”

Executive pay packages vary between retailers, but generally include equity, base pay and a performance payout. On that last note, shareholder value is the key metric. “Today’s executives are being measured more by the value they create for the company’s owners than by simply getting the job done,” said Tyler Ridgeway, director of human capital resources at Kreischer Miller.

And as economic conditions shift, so do the performance metrics. In a recent report and corporate survey from Meridian Compensation Partners LLC, Jerrold Rosema, consultant at the firm, said 60 percent of companies polled have already “set their annual incentive performance goals higher in 2015 than in 2014, indicating increased expectations as the broader economy continues its recovery.” Given current conditions of overall apparel spending, some companies may even lower performance goals. Either way, though, performance incentives are often much larger than base salaries.

TJX for example, sets a $1.5 million base salary for Meyrowitz — and the rest of the ceo’s $28.7 million pay package is incentive- and equity-based. The retailer also has different performance metrics for each of its retail brands. According to the company’s proxy filing, the long-term cash incentives divisional weighting for Marmaxx is 68.5 percent with a cumulative, three-year performance target of $6.9 billion in adjusted net earnings. The company’s other three brands have weightings of 10.5 percent each. In other words, if the retailer meets the earnings goals over the three-year period, Meyrowitz and the executive team are awarded their incentives.

“Adjusted pre-tax income over a multiyear period was considered by the [executive compensation committee] to be an appropriate metric to use as a basis for plan targets to motivate and reward long-term performance, as it is a core business metric used across our company to plan long-term growth, manage our divisions and evaluate our long-term performance,” TJX said in its proxy statement adding that the divisional weightings and targets “were challenging, but reasonably achievable and that using the weighted combination of performance of our main divisions helps to promote our team-based approach to achieving our goals.”

Another important trend in executive pay includes “say on pay,” which requires companies to allow shareholders to vote on executive compensation. The requirement was passed under the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Although there’s been little analysis on if or how “say on pay” exactly influences executive pay packages, one thing is clear: few companies fail to pass the measures. According to research from compensation consulting firm Semler Brossy Consulting Group, only about 3 percent of U.S. companies that had votes on “say on pay” failed to pass it.

Other noteworthy issues include the impact of mergers and acquisitions. At Men’s Wearhouse, for example, the compensation committee issued equity awards and a special bonus to executives in the fall of 2014 rather than during the normally scheduled “annual grant process in 2015,” the retailer noted in its proxy.

The company said the “accelerated issuance of equity awards and the special one-time cash bonus” to its top executives was done “in recognition of the outstanding efforts of senior management in connection with the successful conclusion of the Jos. A. Bank transaction.” As a result, Men’s Wearhouse ceo Douglas Ewert watched his total compensation package rise 167 percent.

Bottom line: Retail executive pay winners are those who deliver consistently strong profits as well as those who can navigate a successful merger. Increasing shareholder value is critical, and everything else is just chump change.