Ken Pilot interviews Terry Lundgren for this flight of The Retail Pilot - Leaders & Legends.

Terry Lundgren served for 14 years as CEO of Macy’s, Inc., operator of Macy’s, Bloomingdale’s, Bluemercury and one of the largest retail ecommerce businesses in America. He retired from Macy’s, Inc. in January 2018 after serving for 10 months as the company’s Executive Chairman. Prior to becoming CEO of the company in February 2003 and Chairman and CEO in January 2004, Lundgren had been President and Chief Merchandising Officer since May 1997. 

He is the founder of the Terry J. Lundgren Center for Retail at the University of Arizona where he hosts an annual conference for retail industry leaders and students interested in a career in retail and related industries.

Lundgren currently serves on the boards of The Procter & Gamble Company, New DataNetwork, and the Economic Club of New York. He is a former board member of Kraft Foods Inc. the Federal Reserve Bank of New York, Carnegie Hall and has participated in numerous charitable and civic efforts. He has served as co-chairman of the Partnership for New York City and the American Heart Association CEO Roundtable, and as chairman of the National Retail Federation (twice), National Minority Supplier Development Council, and the American Society of Corporate Executives. Lundgren also currently serves as an Executive In Residence at Columbia Business School.

Key Takeaways from Ken's conversation with Terry include:

Terry Lundgren's Career Journey: Terry Lundgren started his retail career at Bullocks Department Store, which is now Macy's, and worked his way up to become the CEO of Neiman Marcus at the age of 37. Later, he played a key role in the acquisition and transformation of Federated Department Stores into Macy's Inc.

Mentorship and Influential Figures: Alan Questrom, a prominent figure in the retail industry, was a significant mentor for Terry Lundgren. Questrom's guidance and influence played a crucial role in Lundgren's career decisions, including taking a lower-paying job at Bullocks, which eventually led to his successful career.

Strategic Acquisitions at Macy's: Lundgren orchestrated major acquisitions at Macy's, including the purchase of Marshall Field and the acquisition of May Company. These strategic moves were aimed at expanding Macy's into a national brand and increasing its market presence.

E-commerce Initiatives and Early Adoption: Lundgren recognized the potential of e-commerce early on and supported the development of online platforms at Macy's, leveraging the expertise of teams in Silicon Valley. Despite challenges, including the dot-com bust in 2000, Macy's continued to invest in e-commerce, establishing a significant lead over competitors.

Challenges Facing the Retail Industry Today: Lundgren identifies three major challenges for retailers:

• Overcapacity of Physical Retail Space: There is an excess of physical retail space, and the industry needs to adapt by reducing store numbers.
• Potential Consumer Spending Slowdown: With a potential decline in consumer spending, especially among middle and lower-income households, retailers may face economic headwinds.
• Department Store Positioning: Department stores need to differentiate themselves to stay relevant. Lundgren advises a focus on offering unique products and enhancing the shopping experience to give consumers a reason to choose Macy's over other options.

Department Stores' Future: Terry Lundgren believes that department stores will continue to exist in the future. He emphasizes the importance of adapting to the changing retail landscape by providing differentiated reasons for customers to choose one department store over another.

Merchandising Strategy: Lundgren highlights the significance of uniqueness in assortment and in-store experience. He suggests that the best merchants will understand consumer expectations and deliver products and experiences that differentiate them from competitors.

Collaboration with Brands: Lundgren shares examples of successful collaborations with brands, such as obtaining exclusivity with Tommy Hilfiger. He suggests that aligning with popular brands can attract customers and drive sales of other products within the store.

Shop-in-Shop Model: The discussion touches upon the shop-in-shop model, where department stores collaborate with brands or retailers to create dedicated spaces within the store. Lundgren sees this as an opportunity, especially if the partnering brand can manage and operate the space more effectively than the department store itself.

Technology in Retail: Lundgren discusses the impact of technology on the retail industry, including the use of RFID for inventory management and the potential of AI and generative AI in enhancing various aspects of the business. He emphasizes the importance of utilizing technology to improve inventory turnover and reduce markdowns.