Macy’s Chief Executive Jeff Gennette sees prices of overstocked items falling soon. “Customers are about to get some amazing deals on products that were hot during the pandemic,” says Gennette, who has run the biggest U.S. department-store chain since 2017.
Markdowns on excess inventory of everything from sweatpants to home goods could pinch retailers’ profit margins, however. This year, consumers changed their shopping habits faster than they expected, whether it was for work, travel, or dining out. “In a lot of cases, they’re visiting our stores again to see and touch products,’’ Gennette adds while seated in a dark paneled conference room above Macy’s flagship store in Manhattan.
He is the CEO of the company at 61 years old and he wants to give new life to brick-and mortar stores that are under threat from fast fashion retailers online, discount chains, and other competitors. His solution? Forge firmer ties between Macy’s virtual and physical settings. “We are focused on building a comprehensive omnichannel ecosystem,” Gennette explains.
His iconic employer, launched in 1858, today includes luxury Bloomingdale’s, discount outlets mainly inside Macy’s department stores, and smaller off-mall stores with extra digital services. “The second we add those off-mall stores,” Gennette observes, “the digital business in those ZIP codes goes up astronomically.”
Macy’s hired Gennette as an executive trainee in 1983 after the English literature major graduated from Stanford. From 1983 to 2013, he worked at Macy’s, with the exception of a short stint as a manager for an FAO Schwartz store. He developed a reputation for spotting trends as he steadily advanced, becoming Macy’s president in 2014. Gennette believes that being openly gay in leadership at a Fortune 500 firm has had a significant impact on his management style.
TIME recently spoke with Macy’s top boss about e-commerce’s rosy outlook, increased personalization of brick-and-mortar shopping, and his “authentic self” approach to leadership.
This interview was edited and condensed for clarity.
Why do we still need department stores today? How can they thrive in an omnichannel environment that encourages both digital and in-store retail shopping?
America’s omnichannel customer will be a strong force in the future. This is resulting in healthy brick-and–mortar businesses and brick-and–mortar customers who are more frequent buyers and more lucrative.
In five years, seamless communication between brick-and-mortar, an app and ecommerce websites will be possible. It’s going to happen super quickly and can be tailored to each individual. A one-to-one relationship is where omnichannel is going by anticipating customers’ needs at that moment.
Customers in the cocoon of the pandemic went back to their local stores. Customers want to feel the products. For online shopping, size is an issue. Younger generations are more likely to visit stores. You can find them toys, engagement rings, or a suit for job interviews. We’re making sure our future is highly relevant for all demographics.
Brick-and-mortar shopping isn’t for everyone. You will need to make a lot more investments and manage the tradeoffs. Within malls, we’ve got great real estate. We’ve just got to make our store locations relevant. Customers’ expectations continue to evolve. It is impossible to deny the interplay of digital and physical. You have to have both channels—and potentially the metaverse in the future.
COVID-19 accelerated Americans’ shift to shopping online. Is there more to e-commerce in the future?
It’s going to expand further, but never to a point where stores are irrelevant. It is going to continue to be vital that people can connect with each other in an actual physical place.
In fiscal 2010, digital commerce represented 5% of Macy’s net sales. By fiscal 2021, it represented 35%—or about $8.6 billion. Is it possible to reach the $10 billion annual goal of selling goods online?
We initially thought we’d get there by the end of 2023. But the timing is probably going to be off by a year, with more business going to stores this year because we’re in a different stage of the pandemic—more of an endemic.
How much of your net annual sales will be generated by e-commerce in 2027?
40%-plus. Stores will continue to make up more than half of overall sales over the next ten years. My job is to make sure the experience Macy’s customers have in brick-and-mortar stores meets their expectations and the way they want to shop. The store must be able to accommodate multiple shopping needs for one customer. For all these trips, you need to plan.
What obstacles must you overcome to complete Macy’s transformation into a digital led retailer with a substantial physical presence?
The expansion of the off-mall market is a major goal. About 60% of American brick-and-mortar business is done off mall, where Macy’s now has got a very, very shallow footprint. We’re in the pilot stage of making a small store format work there. Our first off-mall store opened just over a year ago. This year, there are more. The rate of new customers coming to Market by Macy’s—one of our off-mall concepts—is higher than full-line stores in markets they serve.
Many personal stylists can be hired to offer in-store and virtual appointments, as well as tailor-made suggestions. Is personalized shopping the next big thing?
The bigger point is how to have a shopping experience that meets customers’ needs in that moment. Most people are aware of what they need when they go into a store. They don’t want to wait. This transaction should be done quickly. Other customers want a fitting room and a knowledgeable Macy’s colleague. They’re booking appointments for a more fulsome shopping experience. We’re working through the technology. We’re training all our colleagues to be ready.
With a huge selection of content and brands, we help you bring out the best in yourself and your family. It’s possible to do this digitally. Doing that in a physical setting has been more difficult, but one we’ve set out to accomplish.
You unveil the first of 400 Toys “R” Us shops inside Macy’s locations this month, with the rest opening by October. Geoffrey the Giraffe greets you. There will be areas for children to play with Legos, dolls and other toys. What’s your rationale for this significant move? Should rival U.S. chains also revamp handle customers’ in-store experiences?
A more engaging experience for toys is something we can uniquely provide that other department stores either aren’t aspiring to do or won’t be able to do. The category of toys was a very under-represented one in retail experiential. Go down one of our competitor’s main aisles. There isn’t a place where a kid can play with the goods.
Toys “R” Us was a unique opportunity for us to create a department store toy experience at scale. We’re putting great capital against it. The shops will attract customers because they are a favorite place for their children. We brought the Toys “R” Us brand online last year. Many of those online customers are new to Macy’s, and 75% are now buying something else. It’s an opportunity to seed behavior. Retailers face a challenge: How can you use digital assets that customers feel comfortable using and integrate them into the physical shop experience? You give them delight by exposing them to new brands and services they weren’t thinking they wanted when they came in.
Amid soaring inflation, is Macy’s raising as well as cutting prices?
The price increases we make are very carefully controlled. Each customer is equipped with a price checker that allows them to see prices from any location. You’ve got to be super careful about raising prices for basic commodities like a T-shirt. It’s much easier to put price increases into trending categories. For some fashion items, like a dress or a man’s suit, you’re going to see higher prices.
You often talk about coming out as a gay man soon after you joined Macy’s. What has your employer benefited from you bringing your true self to work?
I was able to make the choice early in my career to speak out and be authentic. However, this was likely to limit my potential to grow. Retail didn’t have any gay CEO examples. I happened to be at Macy’s California, then one of the most diverse companies and very supportive of the gay community. They kept saying, ‘You can go to the next level.’ Yet when I was the only gay person in a room of senior leaders, I always felt like an outsider. My perspective would be appreciated? My perspective grew higher and it became more important for me seek out opinions from others. They might feel their opinion wouldn’t be welcome because of their diversity. They feel more at ease expressing themselves. That is what I do on every team I manage and lead. What I have experienced, I now preach.
Did encouraging others to share their true selves at work, and to speak honestly during meetings help you become a better leader
A key component to creating an inclusive environment is equity. The executive team can be described as a stadium. Who’s on the playing field, making the calls, and driving strategy? If your diverse populations are on the sidelines, you’re not as effective. You have to have an inclusive environment where everybody feels like ‘I’m showing up with all my ideas and experiences.’ Until everyone feels valued, you’re not going to maximize the potential of your brand that’s serving the most diverse population this country has ever had.
What makes CEOs at other companies feel so authentic?
Everyone else has the right to see you as your true self. You also have the chance to make a difference and build trust. That’s one of the secret sauces of our culture I’m quite passionate about. The authentic self idea is a litmus test of how you maximize your colleagues’ full potential. The sky’s the limit when you get that done.
You’re the guiding hand behind Mission Every One, Macy’s new social purpose platform. The company aims to invest $5Billion in diverse areas, including companies with different owners. Your personal experience and involvement in the project are reflected.
As important is Mission Every One, it’s as vital as my gay life and my work. All of us should have our lives celebrated. We must also make Macy’s a much bigger tent, representative of communities we serve.
Because you love words, you studied English literature. You now enjoy Scrabble daily. Are more boards choosing CEOs with English undergraduate degrees?
Being an English Lit major has helped me to devise a strategy that is feasible. But when I was coming through college, my worried mother asked, ‘What’s your career going to be when you’re majoring in English?’ I didn’t worry. The faculty club was my college expense. I managed it. Commission sales was great for me. And I can manage people. I decided, ‘Let’s do that in retail.’ I have enjoyed retail so much. After almost 40 years, I still can’t wait to tackle opportunities to serve customers every day. You should do what you’re passionate about.
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